BY: IFEANYI IZEZE<\/p>\n
Truth be told, whether the source of the idea and\/or packaging of it was
\nsuspect or not, is very inconsequential. That the National Assembly set
\nout or clinically collaborated to amend the rogue-packaged Deep Offshore
\n(and Inland Basin Production Sharing Contract) Act of 1993 despite
\nmassive pressures and lobbies by the foreign multinational oil companies
\ndeserves some commendations. If for nothing, the passage of the
\nAmendment is an indication that our National Assembly, if they want to
\nbe sincere or rather mischievous, can muzzle enough willpower to help
\nNigeria do things differently as a nation of serious-minded people.<\/p>\n
All the talk about who engineered or facilitated the amendment is very
\nunnecessary in my view. After all it was the military dictatorship that
\npackaged and signed the original unpatriotic version of this Act and if
\nit takes another dictator or his agent (s) now in democratic
\ndispensation to correct the mistake, well and fine. Like the former
\nAmerican President, George Bush Jnr said: \u201cWhether we bring our
\nenemies to justice or we take justice to them, somehow justice will be
\ndone (as it\u2019s being done now).\u201d<\/p>\n
Now that our lawmakers have taken what could rightly be described as the
\nfirst step towards correcting the obvious aberrations enshrined in the
\nDeep Offshore Act, it is not just enough to relax and start jubilating
\nat this stage; a more serious step towards redressing the injustice
\nstill needs to be canvassed.<\/p>\n
We should ask all the upstream operators that have been producing in
\nthat arena to pay us reparations to cover the cumulative revenues the
\nnation lost over the years due to the highhandedness of the foreign
\noperators and their collaborators in power and in the NNPC.<\/p>\n
Though the Amended Act has modified the royalty rate payable to the
\nfederal government by the Operating companies from zero to 50 percent in
\nrespect of offshore acreages beyond 1000 meters in water depth, the
\nfederal government should go a step further by sitting down with the
\nIOCs to work out the cumulative revenue denied the nation over the
\nperiod that the initial holiday expired. In addition to the commencement
\nof the payment of the 50 percent royalty to the federal government, we
\nshould ask for reimbursement of the denied or rather stolen revenue
\nwithin the period in question.<\/p>\n
This is necessary because even the old Act made provisions for periodic
\nreviews and had some sections that clearly stipulated what should be
\ndone in terms of reworking the taxes and royalties payable to the
\nfederal government whenever crude oil prices appreciates and it is over
\n15 years when last the Nigerian premium crude grade sold for $20 per
\nbarrel. Nigerian crude passed the $20 per barrel peg since late 2002 but
\nthese foreign oil companies criminally refused to accept any changes to
\ntheir zero-royalty template for production in the nation\u2019s deep
\noffshore.<\/p>\n
It was not enough for the IOCs to wholly blame the government for not
\nreviewing the terms of agreement when the need arose as even the old
\nFramework which they were operating under stated what was expected even
\nfrom the operators themselves.<\/p>\n
It should be recalled that The Decree rightly cited as the Deep Offshore
\nand Inland Basin Production Sharing Contracts Decree No 9 of 1999 was
\namended to Decree No 26 of 1999 and signed into law in Abuja on the 23rd
\nof March 1999 by the then Head of State, General Abdulsalami Abubakar
\nbut was deemed to have come into force on 1st January, 1993.<\/p>\n
According to Section 5(1) of the Act, the payment of royalty in respect
\nof the Deep Offshore Production Sharing Contracts shall be graduated as
\nfollows: \u201cIn areas from 201 to 500 metres water depth- 12percent; From
\n501 to 800 metres water depth-8 percent; From 801 to 1000 metres water
\ndepth-4 percent; In areas in excess of 1000 metres depth- 0 (zero)
\npercent. The royalty rate payable under the Production Sharing Contracts
\nin the Inland Basin shall be 10 per cent.\u201d<\/p>\n
For example, despite oil price rising slightly above $100 per barrel
\nbetween 2010 and 2014, the foreign operators and their collaborators in
\nand around government and the NNPC worked to ensure the nation did not
\nrake-in more revenues by reviewing the Act and it has been established
\nby experts that the failure to do so caused Nigeria to lose about $21
\nbillion dollars (Twenty One Billion Dollars) of extra revenue.<\/p>\n
Section 16(1) of the 1993 Act stipulates that: _\u201cThe provisions of
\nthis Act shall be subject to review to ensure that if the price of crude
\noil at any time exceeds $ 20 per barrel, in real terms, the share of the
\ngovernment of the Federation in the additional revenue shall be adjusted
\nunder the production sharing contracts to such extent that the
\nproduction sharing contracts shall be economically beneficial to the
\ngovernment of the Federation.\u201d _<\/p>\n
Also, Sub-section 2 of the Act further states that: _\u201cNotwithstanding
\nthe provisions of subsection (1) of this section, the provisions of this
\nAct shall be liable to review after a period of fifteen years from the
\ndate of commencement and every five years thereafter.\u201d ___<\/p>\n
What this means is that the provisions of the Act ought to be amended in
\nsuch a way as to be economically beneficial to the nation whenever the
\nprice of crude oil in real terms exceeds $20 dollar per barrel as
\nclearly stipulated in the fiscal terms of the Production Sharing
\narrangements.<\/p>\n
Although the fiscal terms enshrined in the Act have long been due for
\nreview, since crude oil price soared above $20 for more than fifteen
\nyears, the operators made sure Nigeria did not benefit a dime from the
\nproduced oil from that arena. And it is unexplainable why successive
\ngovernments could not muster enough political will or rather willpower
\nto be honest to treat the matter as of urgent national importance.<\/p>\n
So this latest Amendment is only complying with the requirement of
\nperiodic review of the original Act by amending Section 16 of the Act
\nwhich stipulates a periodic review to guarantee economic benefits from
\nadditional revenues to the Federal Government of Nigeria from deep
\noffshore acreages underpinned by Production Sharing Contracts (PSCs). It
\nis good we are bringing our laws particularly the tax and royalty
\nregimes to comply with something near today\u2019s realities at least.<\/p>\n
Agreed that it was the ignorance of the military junta administrations
\nand the dire need to encourage upstream investments in the nation\u2019s
\ndeep offshore acreages which was considered extremely risky at the time,
\nthat informed the lopsided packaging of the original Deep Offshore Act
\nwith the intention of providing fiscal incentives in the then hostile
\narena, but that was not an excuse for the operators to block all efforts
\nto review some sections of the law as was originally slated.<\/p>\n
The federal government should be reminded that there is need for urgency
\nin enforcing this issue of reimbursement and comment of payment of the
\nnew royalty regime because when the Petroleum Industry Fiscal Bill
\n(PIFB), is signed into law, the entire incentives that is coming into
\neffect now with the Amended Deep Offshore Act would be totally
\nextinguished. So our gain from this amendment may just be short-term.<\/p>\n
Let\u2019s not make any mistakes about it, these same IOCs that placed
\nthemselves as stumbling blocks to the passage of the PIB or fragments of
\nit into legal frameworks for the nation\u2019s oil sector will definitely
\ndo everything possible to facilitate its speedy passage if they would
\nmake more money off Nigeria by bringing the PIB into effect rather than
\npaying the new royalty regime in our offshore arena.<\/p>\n
More so, the Federal Government should watch out for legal fireworks to
\ncontend the Amendments to the operating Act. It will be a costly mistake
\nto think that the league of foreign operators in our deep offshore would
\nfold their hands and allow the government slice-off a big chunk of their
\nprivilege. Does anybody trust our Judiciary not to work with the oil
\ncompanies to give unfavourable judgement to Nigeria knowing what our
\nCourts have become?<\/p>\n
This challenge should be taken up seriously by the federal government,
\ncivil society organisations and even concerned private citizens so we as
\na nation of people can seek redress from the culprit foreign operators
\nin our deep offshore arenas. God bless Nigeria!<\/p>\n