International oil companies, which entered into Production Sharing Contracts (PSC) with the Federal Government more than two decades ago, are still enjoying the generous terms they got as talks of re-negotiation over the past few years have yet to materialise, The Punch reports.
According to various experts in the oil sector, the delay of the much-talked about re-negotiation of the terms of the 1993 Production Sharing Contracts between the Federal Government and international oil companies is not only depriving the federal government of additional oil revenue, but is also creating uncertainty in the nation’s oil and gas industry.
In September 2015, the then Group Managing Director of the NNPC, Dr. Ibe Kachikwu, said the corporation was set to revisit the fiscal terms of the existing PSCs entered into by the corporation with some IOCs with a view to seeking favourable benefits for Nigeria based on prevailing realities in the industry. But more than two years after, the contracts have yet to be re-negotiated. Kachikwu, now the Minister of State for Petroleum Resources, again lamented last month that the country had lost a lot of money to the PSCs.
Last week, the International Monetary Fund (IMF) said it supported the authorities’ objective to ensure that the government’s take from oil exploration is appropriate. “To that end, it welcomes the minimum royalty payment on all oil and gas production but notes that the proposed combination of price-based and production-based royalties is overly complicated and risks posing an unnecessary barrier to investment,” it stated.
