NNRC: Nigeria’s Earnings from Oil PSC, Lowest in the World

SEATTLE (Oil Monster): The fraction of oil monies accruable to Nigeria from Production Sharing Contracts (PSCs) related agreements it has with International Oil Companies (IOCs) has remained the lowest among other oil producing jurisdictions with same PSC arrangements, the Nigeria Natural Resource Charter (NNRC), has disclosed.

NNRC, which is a Nigerian version of a global initiative designed to help governments and societies effectively harness the opportunities created by their natural resources, also explained in a recent report that royalties from deep-water oil production in Nigeria are still zero per cent.

It explained in the policy brief entitled “improving the management of resource revenues for sustainable development,” that Nigeria has poorly managed its oil revenues, while the government do not want to review laws such as the Deep Offshore and Production Sharing Act of 1993, to allow the country take more from oil production within these arrangements.
According to the report, even the Excess Crude Account (ECA), a fiscal buffer established in 2004, had been poorly managed such that as at 2018, it had less than $2 billion left in it.

It noted that the present fiscal regime for sharing revenues from joint venture arrangements between the government and oil companies was equally archaic, complex and opaque, thereby limiting the revenues accrued to the government.

Highlighting that low returns from oil and gas investments minimise the level of interventions the government can undertake to improve the lives of Nigerians, the report noted that Nigeria has lost an estimated $18 billion to obsolete oil and gas laws she has kept.

“One example of such law is the Deep Offshore and Production Sharing Act 1993. A major section of the Act gives incentives for deep off shore drilling to oil companies such that those drilling beyond 1000 meters paid zero per cent royalty until such as time as the price of crude went beyond $20. While the $20 benchmark has been crossed since 1993, the federal government has failed to activate this clause resulting in substantial loss of revenue.

The NNRC said it was important for Nigeria to quickly pass the Petroleum Industry Fiscal Bill (PIFB), which was expected to enhance the effectiveness of oil and gas laws in responding to changing global and local dynamics.

It also stated that while Nigeria tended to be extravagant in its expenditure during oil boom cycles, the optimal way to utilise the opportunities from resource endowment would be to deploy the resource revenues for present needs without compromising the needs of the future generation.
In addition, it said that natural resources are non-renewable resources and saving revenue from extraction will ensure that society effectively transit to a sustainable revenue source and eventually diversify away from oil.

Courtesy: www.thisdaylive.com