The current oil production sharing formula with Nigeria’s Joint Venture Companies is not favourable to the country, Speaker of the House Representatives, Hon. Yakubu Dogara has said.
Dogara made the remark on Tuesday at the opening ceremony of a public hearing by the Hon. Victor Nwokolo- headed House Committee on Petroleum Resources (Up Stream) on a bill for and Act to amend the deep offshore and inland basin production sharing Act, CAP D3 2004.
According to him, the passage of the proposed amendment bill is over-due.
He said the formula used has, no doubt, become unrealistic and not favourable to the country.
“This makes the passage of this Amendment Bill not only imperative but over-due,” he noted, adding the oil sector is the main stay of economy.
The bill under consideration, he said, “is aimed at ensuring higher earnings to government from off-shore operations”.
“In this era of economic doldrums in the country, the passage of this bill and its promulgation into law will help to shore up our earnings from oil, cushion the economic hardship and ameliorate our burden of Budget deficit.
“The production sharing contracts were made as far back as 1993. The formula used has, no doubt, become unrealistic and not favourable to the country.
“This makes the passage of this Amendment Bill not only imperative but over-due.
“It is a bill that promotes equity and fairness between the government and our Joint Venture Companies.
“The need for equity and fairness in the business environment cannot be over-emphasised. In this regard I want to implore our Joint Venture operators to always cooperate with the government in ensuring transparency in the oil sector,” he said.
The Chairman House Committee on Petroleum Resources (Upstream), Victor Nwokolo, said the hearing is as a result of the resolution of the House of Representatives on April 24, 2019.
According to him, the committee is working to improve the socio-economic well-being of Nigerians.
The Oil Producers Trade Section (OPTS) in its submission before the committee expressed concerns about the Deep Offshore and Inland Basin Production Sharing Contracts (Amendment) Bill, 2018 (PSC Amendment Bill), which introduces a royalty rate of 50 percent on revenues above $20/bbl (1993 real terms, translating to $35lbbl in 2019) in addition to existing water-depth based royalties.
The body said, “This would be in addition to already existing statutory obligations in form of taxes, fees, levies, tariffs, and NNPC profit oil.”
It warned the Bill, if passed, will increase government revenue in the short-term but will diminish economic viability of deep water projects, which would stall deep water investments in Nigeria and negatively impact production, federal revenue, local jobs and the national economy.
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