NIGERIA is looking to retrieve $62bn from international oil companies that have explored crude in the country since 1958 claiming that the government deserves an increased share of the revenue that is generated from their operations.
Way back in 1958, Nigeria began the commercial sale of crude oil when she exported her first cargo of petroleum which came from the Oloibiri well in modern day Bayelsa State in the Niger Delta. However, Nigeria’s crude oil is explored in conjunction with multinationals who have joint partnerships with the Nigerian National Petroleum Corporation (NNPC), meaning that on average, the country gets no more than 50% of the revenue that accrues from the industry at the very maximum.
In, 2018 the Nigerian Supreme Court ruled that the state has the right to increase its share of income from production-sharing contracts and the government will now seek o cash in on this. According to the Nigerian government, energy companies failed to comply with a 1993 contract-law requirement that the state receive a greater share of revenue when the global oil price exceeds $20 per barrel.
Under the production-sharing contract law, companies including Royal Dutch Shell, ExxonMobil, Chevron, Total and Eni, 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 but the oil companies currently take 80% of the profit from these deep-offshore fields, while the government receives just 20%.
With crude oil currently trading at about $58.29 a barrel, the Nigerian government is now keen to recover the difference. Most of Nigeria’s crude is pumped by five oil companies, which operate joint ventures and partnerships with the state-owned NNPC. Representatives of the oil companies met justice minister Abubakar Malami October 3 last year, where he told them that while no hostility is intended toward investors, the government will ensure all of Nigeria’s laws are respected.
However, these oil companies have gone to the federal high court to challenge the government’s claim that they owe the state any money. They argue that the Supreme Court ruling does not allow the government to collect arrears and contend that because they were not party to the 2018 case, they should not be subject to the ruling.
A Shell spokesman said: “We do not agree with the legal basis for the claim that we owe outstanding revenues.”
This 1993 She Supreme Court ruling followed a lawsuit by states in Nigeria’s oil-producing region seeking interpretation of the nation’s production-sharing law. They states argued that they were not receiving their full due and the court ruled in their favour, asking the attorney-general and justice minister to take steps to recover the outstanding revenue.
According to the 1993 law, its provisions have to be reviewed after 15 years and subsequently every five years. However, the attorney-general’s office insists that the provision for a higher share of revenue does not require legislative action to take effect, as all it does is impose a duty on the oil companies and contracting parties like the NNPC, to by themselves review the sharing formula.
