Connect with us

NEWS

How FG’s strategy to recovery $62bn oil revenue failed

Published

on

Kabir Akingbolu says Abubakar Malami topnaija.ng

Federal Government, through the Attorney General of the Federation and Minister of Justice, Mr Abubakar Malami (SAN), may have beaten a retreat from its fight to recover an estimated $62bn in accrued revenues from some international oil majors, TopNaija reports.

 

Before the withdrawal, the AGF had argued that the revenue accrued because successive administrations neglected key aspects of the Production Sharing Contracts between the Federal Government and the IOCs, bordering mainly on the sharing formula between the government and the IOCs.

Malami recently stated that the expected funds had been earmarked for major ongoing infrastructural projects in the country, including the Lagos-Ibadan Expressway, Kano-Abuja Expressway and the Second Niger-Bridge. Going by the Central Bank of Nigeria’s current official exchange rate of N379 to $1 as of Friday, the $62bn at stake amounts to about N23.5tn.

The Federal Government had alleged that Shell Nigeria Exploration and Production Company Limited, the Nigerian arm of the global IOC, was responsible for $13.5bn of the total revenues denied Nigeria.

During the week, correspondences between Malami and Shell that gave insight into the squabble, government’s recovery efforts and Nigeria’s about-turn.

 

On March 13, 2020, Malami wrote to Shell and appealed to the oil and gas giant to withdraw its suit and arbitration proceedings instituted against the Federal Government for demanding the company’s share of the $62bn.

The AGF then asked the oil company to engage with regulatory agencies “to remedy any possible lapses over the implementation of the Production Sharing Contracts in Nigeria and possible negotiation on terms of payment.”

Meanwhile, in its reply to the AGF, Shell’s Managing Director, Bayo Ojulari, in a letter dated May 11, 2020 and signed by him, received by the AGF’s office on May 13, 2020, indicated that the dispute was “created by the Federal Government’s demand for alleged outstanding revenue from OML 118”, but that it “has now been resolved by the withdrawal of the FGN’s demand as effected by your referenced letter.”

The five-paragraphed letter however glossed over the said negotiation plan without giving it any mention.

Oil-bearing Akwa Ibom, Bayelsa and Rivers states had in 2016 instituted a suit at the Supreme Court against the AGF, contending that the Federal Government had been short-changed of its supposed share of oil revenue under the Production Sharing Contracts for the period between 2003 and 2015.

According to them, the huge loss suffered by the Federal Government was due to the failure of successive Ministers of Petroleum Resources for over 15 years to kick-start the re-adjustment of the sharing formula (the PSC), which was 60 per cent share of oil profits to the Federal Government and 40 per cent to the oil companies.

The three states argued that this violated the provision of section 16(1) of the Deep Offshore and Inland Basin Production Sharing Contracts Act.

The AGF did not oppose the suit as he subsequently entered into an agreement with the three states leading to their filing of terms settlement at the Supreme Court on April 6, 2018.

By virtue of the agreement between the three states and the Federal Government, the AGF was to work with the three states to immediately set up a body and the necessary mechanism for recovery of the lost revenue since August 2003.

A seven-man panel of the apex court led by then Chief Justice of Nigeria, Justice Walter Onnoghen (retd), adopted the terms of settlement and delivered it as a consent judgment on October 17, 2018.

The apex court in the judgment ordered the Federal Government to immediately commence steps to recover all revenues lost to oil exploration and exploitation companies due to wrong profit sharing formula termed as the Production Sharing Contracts since August 2003.

Achieve Straight-A(s) in WAEC, NECO, JAMB & more-Download ExamblyApp now FREE!

Join Us On Telegram | Promote Your Music