Nigerian gov’t demands $62 billion dollars from big oil companies for past profits

Buhari
President Muhammadu Buhari

Nigeria is seeking to recover as much as $62 billion
from international oil companies, using a 2018 Supreme Court ruling that
enables the state to increase its share of income from production-sharing
contracts.

On October 17, 2018, the Supreme Court delivered a
Consent Judgment which mandates the Federal Government to increase its share of
revenue under oil Production Sharing Contracts (PSC) whenever the price of
crude oil exceeds $20 per barrel in line with Section 16 (1) of the Deep
Offshore Inland Basin Production Sharing Contract Act (DOIBPSCA).

However, the Federal Government has not adjusted the
revenue accruable to the Federation over the years despite the fluctuating
increase in the price of crude oil beyond $20 per barrel.

The proposal comes as President Muhammadu Buhari
tries to bolster revenue after a drop in the output and price of oil which is
Nigeria’s main export.

The government says energy companies failed to
comply with a 1993 contract-law requirement that the state receive a greater
share of revenue when the oil price exceeds $20 per barrel, according to a
document prepared by the attorney-general’s office and the Justice Ministry.

While the government hasn’t said how it will recover
the money, it has said it wants to negotiate with the companies.

Under the production-sharing contract law, companies
including Royal Dutch Shell Plc, ExxonMobil Corp., Chevron Corp., Total SA and
Eni SpA agreed to fund the exploration and production of deep-offshore oil
fields on the basis that they would share profit with the government after
recovering their costs.

When the law came into effect 26 years ago, crude
was selling for $9.50 per barrel. The oil companies currently take 80% of the
profit from these deep-offshore fields, while the government receives 20%,
according to the document. Oil traded at $58.29 a barrel on the London-based
ICE Futures Europe Exchange.

Source: Bloomberg

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