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Senate to Review Law on Oil Production Sharing Contract

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The Senate has mandated its Committee on Petroleum Resources Upstream to come up with a bill on amendment of the Inland Basin Production Sharing Contract (PSC) Act.
This followed the adoption of a motion by Sen. Ifeanyi Ubah, (YPP Anambra) and 30 others at Wednesday’s plenary.
The motion was on the urgent need to review Production Sharing Contract (PSC) in line with section 16 of the deep offshore and inland Basin Production Sharing Contract Act CAP D3 LFN 2004 and amend the extant Act.


Moving the motion, Ubah said the committee on petroleum resources upstream had been inundated with petitions and complaints on the PSC.
He said Federal Government over the years had lost billions of dollars in potentially accruable revenue due to non-review and amendment of the salient provisions of the PSC Act.
He said in spite of huge contributions of the PSC to total oil production, the contributions of revenue per barrel of PSC for federal government’s take had been significantly low.

This, he said was because of the inherent inequitable terms in the PSC and failure to review the salient provisions of the act.
According to him, PSC Act provides that where the price of crude oil exceeds 20 dollars per barrel, the Act will be reviewed to ensure that federal government share in the additional revenue is adjusted.
He also said that the act provided that it may be reviewed after 15 years from the date of its enactment in 1993 and every five years thereafter.
According to him, the non- review of the Act over the years had led to loss of 21 billion dollars to Nigeria.
He said Nigeria stand to gain additional N30 billion monthly if the Act is reviewed and amended.
This, Ubah said would boost the nation’s revenue profile.
Contributing, Sen. George Sekibo, (PDP-Rivers), said the PSC was an additional opportunity for Nigeria to make money, adding that there was an urgent need to review the Act.
He said cabals in the oil sector were frustrating attempts to review the Act over the years.
Other senators, who supported the review, were Stella Oduah, Rochas Okorocha, Adamu Alerio, Gabriel Suswam among others.
The senate in its resolution also mandated its committee on petroleum resources upstream to investigate reasons for failure to review the Act over the years.
In his ruling, President of the Senate, Dr Ahmad Lawan said the bill for the review of the Act would be presented for second reading in the next legislative day.
He urged the senate to give the PSC amendment bill expeditious debate and passage when presented.
He maintained that the bill if passed would help the country to generate fund to support execution of the budget.
The News Agency of Nigeria (NAN), reports that PSC is a contractual arrangement for petroleum exploration and production.
This is whereby the state as owner of the petroleum engages a contractor to provide technical and financial services for exploration and production operations with agreed share in profit after payment of royalty, cost and tax.
The contractual agreements were offered by the federal government in 1991 leasing round and its terms codified into legislation.
Nigeria presently has seven oil fields from the 1993 PSCs.(NAN)
KC/AMM/ABI

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Breaking: Reps Raise Crack Team to Probe Oil Subsidy Regime Under Buhari

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By Ubong Ukpong, Abuja

The House of Representatives yesterday, raised a crack adhoc committee, to Probe the petroleum Products subsidy Regime in the last five years, from 2017 to 2021

The committee was given eight weeks to carryout this investigation and report back to the House for further legislative action.

The decision was sequel to a motion on the “Need to Investigate the Petroleum Products Subsidy Regime in Nigeria from 2017 to 2021”, brought before the Honda by Hon.

Sergius Ose Ogun.

The lawmaker had said that his motion was informed by section 88 (1) and (2) of the Constitution of the Federal Republic of Nigeria (As Amended) , which empowered the National Assembly to conduct investigations into the activities of any authority executing 

or administering laws made by the National Assembly;.

He also noted that Section 32 of the Petroleum Industry Act, 2021 saddled the Petroleum Midstream and 

Downstream Regulatory Authority with the task of regulating and monitoring technical and commercial 

midstream and downstream petroleum operations in Nigeria.

Ogun informed the House that as of 2002, the NNPC’s purchase of crude oil at international market prices stood at 445,000 barrels per day in order to enable it to provide petroleum products for local consumption.

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He was concerned that as at 2002, the installed capacity of Nigeria’s local refineries stood at 445,000 barrels per 

day, however, their capacity utilization began to nosedive and eventually fell completely to zero due to the 

ineffectiveness and alleged corruption of critical stakeholders in the value chain.

The lawmaker said he was aware that due to the decline in the production capacity of the refineries, NNPC found it more convenient to export domestic crude in exchange for petroleum products on trade by barter basis described as Direct Sales Direct Purchase (DSDP) arrangement.

He said he was further aware that component costs in the petroleum products subsidy value chain claimed by the NNPC was highly over-bloated while the transfer pump price per litre used by the NNPC in relation to PPMC was 

underquoted as N123-N128 instead of N162-N165 and this fraudulent under-reporting of N37-N39 per 

litre translates into over 70 billion naira a month or 840 billion naira a year.

The legislator worried that the consumption rate of Premium Motor Spirit (PMS) was 40million to 45million litres per day, however, the NNPC used 65 million to 100 million litres per day to determine subsidy as discoverable 

from NNPC’s monthly reports to the Federal Allocation Committee (FAAC).

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He also worried that the subsidy regime has been unscrupulously used by the NNPC and other critical 

stakeholders to subvert the nation’s crude oil revenue to the tune of over 10 billion US dollars, with records 

showing that as at 2021, over 7 billion US dollars in over 120 million barrels have been so diverted.

The lawmaker was disturbed that “there exists evidence that subsidy amounts are being duplicated, thus subsidy is charged against petroleum products sales in the books of NNPC as well as against crude oil revenue in the books 

of NAPIMS to the tune of over N2 trillion.”

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Oil & Gas

Wabote Tasks Security Agencies on Enforcement of Nigerian Content in Oil and Gas Sector

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From Tayese Mike, Yenagoa

The Nigerian Content Development and Monitoring Board (NCDMB) has tasked security agencies in the country to intensify their efforts in the enforcement of the Nigerian Content in the oil and gas sector in other to boost the local participation in the sector.

Executive Secretary of the board, Engr Simbi Wabote, stated this during a sensitization workshop for law enforcement agencies on the approach to Nigerian Content enforcement in the oil and gas industry yesterday in Yenagoa.

He explained that the workshop becomes imperative to sustain the achievements made by the board in boosting indigenous participation in the oil and gas industry.

He said it was significant to enlighten stakeholders on how to encourage the indigenous participation in the oil and gas sector.

“With the results we have been able to achieved in boosting indigenous participation in the oil and gas industry, it is pertinent to enlighten law enforcement agent on how to enforce the NOGIC act.

“We have custom, EFCC, ICPC, DSS, and these are all law agents that all have a role to play as we implement the NOGIC act, that is why we schedule the workshop,” he said.

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Head, Legal Services of NCDMB, Barrister Naboth Onyesoh, said the essence of the workshop was to bring in relevant stakeholders to support local content in the implementation and enforcement of the Nigerian Content act.

The workshop is part of the national economic agenda gear towards employment, creating industrialization, ensuring capital retention in the country and so many other activities revolving around the oil and gas industry.

Representatives of the security operatives from Nigerian Army, Customs, police, EFCC, ICPC, DSS, and several others attended the workshop.

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Nigerian Refineries Not Working, Kyari Cries out.

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Mr Mele Kyari, the Group Managing Director of the Nigerian National Petroleum Company (NNPC) Ltd has revealed there is no single refinery that is functional at the moment in the country.

Kyari disclosed this when he appeared before the House of Representatives Joint Committee on Petroleum Resources (Downstream) on Tuesday in Abuja.

The committee is investigating the increase in prices of diesel and cooking gas.

Kyari said that the country’s refineries were not working at the moment, adding that the situation was regretable but the NNPC was doing something to bring the refineries back to work.

According to him, the refineries will not come back tomorrow, there is a process going on. “We have decided to do a quick fix for Warri refinery.”

He said that no one could guarantee the security of petroleum supply, adding that countries were preserving excess volume that they had in their kitty.

“The world has never seen this kind of uncertainty, today countries are stockpiling products. Shortly before COVID-19 the world was already facing shortfall of 3 million barrels of supply of oil,” he said.

He said that there had been no control to manage the energy crisis across the world, stressing that ” to guarantee energy security means you just make product available at anytime and by any cost.”

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The GMD also disclosed that over 200 illegal refineries were being operated across the country.

He said that the solution was to restore crude oil production, adding that there was a massive intervention that was ongoing and by the end of July “we will restore production to a level that is reasonable.

“Many European countries are asking for rationing gas, they are asking people to alternate their air conditioning. Today, countries are toying with subsidy because prices are so high because they don’t think they can manage inflation associated with it.”

Mr Farouk Ahmed, the Chief Executive Officer of the Nigerian Midstream and Downstream Petroleum, said that the current geopolitical crisis in Ukraine and Russia had resulted in the increase of petroleum product.

He added that  this was because Russia was one of the major producer, adding that the war had affected petroleum products and it also affected all nations across the world and Nigeria was not an exemption.

He said that the landing cost of petroleum product was also a factor, adding that the high cost was not limited to Nigeria.

“We need to see what can be done to alleviate the suffering of the people. If our refineries are back on stream and make foreign exchange available at the official rate of N400 per dollar.

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“And if our refineries come back we can then get a reprieve. We also need to address the issue of vandalism.

Abdullahi Gaya, Chairman, House Committee on Downstream, noted that Nigeria had refining capacity but because none were functioning it led the country to her sorry state.

He said that there was need to find solution to the high cost of diesel and cooking gas in a bid to cushion the effect on the generality of Nigerians.

Some of the lawmakers who spoke, noted that Kyari and Ahmed expressed helpless situation.

“You have just presented a hopeless situation, you have the responsibility to proffer solution. If there is no solution then why are we here.

The lawmakers said that they were particularly concerned about the plight of Nigerians, as many of them collect a minimum wage of N30,000.

They noted that Nigeria may have to go the way of other nation by subsidising cooking gas.(NAN) 

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