Will DOIBPSC law boost national revenue?-
By Hon Abdullahi Mahmud Gaya
Nigeria hosts the world’s 10th largest petroleum reserve at about 25 billion barrels with gas reserve of 166 Trillion Standard Cubic Feet (TSCF).
It is indisputable that Nigeria with the largest reserve in Africa has significant untapped hydrocarbon potential available to advance her economic goal.
Now with the Act passed into law, Production Sharing Contract will witness significant improvement to the nation’s economy. It is no longer news that President Muhammadu Buhari has assented to the Deep Offshore and Inland Basin Production Sharing Contract (DOIBPSCA) into law.
It will be recalled that the Deep Offshore and Inland Basin Production Sharing Contract Act, enacted as a decree in 1993 (DOIBPSCA or the Act), provides the legislative framework guiding Nigeria’s deep offshore oil production, covering acreages greater than 200 meters in water depth.
With Deep Offshore and Inland Basin Production Sharing Contract law into force, the International Oil Companies (IOCs) have nothing to fear as the National Assembly ensures a level playing field that would take their concerns and suggestions into consideration.
It may interest citizens to know that Nigeria receives $268million only before assenting Deep Offshore (and Inland Basin Production Sharing Contract (DOIBPSCA) Act into law.
Production Sharing Contracts Act Cap. D3. LFN 2004 spelt out the conditions under which the PSCs should be reviewed.
The provisions of the Act stipulates that the law shall be subject to review to ensure that if the price of crude oil at any time exceeds $20 per barrel, the share of the revenue to the Nigerian government shall be adjusted under the PSC.
The amended sections (Section 16 of the Act) stipulates a periodic review to guarantee economic benefits from additional revenues to the Federal Government of Nigeria from deep offshore acreages underpinned by Production Sharing Contracts (PSCs).
Now under the new law before assented, the bill National Assembly also inserted a new Section 17 that read, “The minister (of petroleum resources) shall cause the corporation (Nigerian National Petroleum Corporation) to call for a review of production sharing contracts every eight years.
A new Section 18 also criminalized any abuse of the law and prescribed punishments. Any person who fails to comply with any obligation imposed by any provision of the bill commits an offence and is liable on conviction to a fine not below N500,000,000 or an imprisonment for a period not (more or less: not indicated) than five years or both.
It may interest the public to recall that crude oil price between 2008 and 2014 was at its highest levels. But Nigeria has not being maximizing the opportunity to cream off the additional revenues thus losing billion dollars of extra revenue.
Despite the price being at its peak level, this singular Act was delayed in the past 25 years and denied Nigeria billions of dollars while allowing the oil majors to reap significant profits.
With the law into effect Deep Offshore and Inland Basin Production Sharing Contract (DOIBPSCA) will be economically beneficial to the government of the federation.
By means of the PSC becoming law in the country, billions of dollars will land into national coffers to fund public infrastructure and essential social services instead of finding residence in the balance sheets of the oil firms.
This is not attempt to deprive the International Oil Companies (IOCs).
The Federal Government of Nigeria wants the firms to make a just profit for their efforts; however, they have been receiving a surplus at the expense of our minimal developmental needs this is not ideal.
The operated oil companies are Nigeria’s long term business partners and PSC law have no interest in denigrating them; but the law seeks fair equitable relationship government and International Oil Companies (IOCs).
With the amendment, the revenue generation for the federation in the Production Sharing Contracts (PSC) arrangement in the oil and gas industry would witness significant improvement.
As part of this witness significant improvement, Nigeria will generate an estimated $500 million in additional revenues for the FG in 2020, and over $1.5 billion from 2021 at the prevailing oil price at $55 per barrel and that Nigeria would rake in $2 billion if oil price rises to $60per barrel since it’s become an applicable law in the country.
Gaya is the Chairman House Committee on Downstream (Petroleum) and wrote in from House of Representatives, Abuja.