Nigeria’s $104.5b three-year oil earnings favour IOCs
The Nigeria Extractive Industries Transparency Initiative (NEITI) has declared that the old agreement used in computation of revenues to be shared between the government and oil companies is no longer acceptable, calling for urgent review.Despite the fact that the country earned $104.484 billion from oil between 2015 and 2017, NEITI said the loopholes in the Deep Offshore and Inland Basin Production Sharing Agreement (PSC) between Nigeria and oil companies crippled the nation’s total share to $35.893 billion against the oil majors who earned about $68.591 billion.
NEITI said the revenue losses to the federation by the use of the old agreement was not acceptable, insisting on review as the contract now accounts for about 50 per cent of the country’s total oil production and major source of revenues.
According to the agency, the delay or failure to review and renew the agreement means that payment of royalty on oil production under PSCs would not be made while computation of taxes would be based on the old rates.The group said, in a report released yesterday, that though the pact signed in 1993 provides for “ a review of the terms when prices of oil crosses $20 in real term and a review of the terms 15 years after operation of the agreement and five years subsequently”, Nigeria was yet to adhere to the provision though the price stood at around $74 bpd yesterday.
The report, which reviewed three years of NNPC’s financial and operations reports, noted that crude oil production under the PSCs has since overtaken production under the Joint Venture (JV) arrangements.A careful look shows that PSCs accounted for 44.8 per cent of total oil production while the JVs contributed 31.35 per cent.A historical analysis of this development by NEITI shows that JV companies accounted for over 97 percent of production in 1998 while PSCs contributed only 0.50 percent. This trend continued until 2012 when PSCs accounted for 37.58 percent while JVs contributed 36.91 per cent.
From the publication in 2013, PSCs contributed 39.22 per cent while JVs contributed 36.65 per cent; 2014, PSCs 40.10 per cent and JVs 32.10 per cent; 2015, PSCs 41.45 per cent and JVs 31.99 per cent. In 2017, the contributions stood at PSCs 44.32 per cent and 30.85 per cent. The NEITI occasional paper further explained: “Other companies, comprising Nigerian Petroleum Development Company (NPDC), Alternative Financing (AF), and Independent/Marginal Fields contributed 2.39 per cent to total production in 1998, and by 2017, this had risen to 24.83 per cent. This figure clearly shows the changing structure of oil production in Nigeria, where PSCs (which contributed a mere 0.5 per cent to total production 20 years ago) have dramatically overtaken JVs (which contributed 97 per cent total production 20 years ago)”.
Between 2015 and 2017, Nigeria produced 2.126 billion barrels of crude oil and condensate, the report said.“Production was highest in 2015 with 775.6million barrels produced. It was lowest in 2016 with 661.1million barrels produced, while production in 2017 was 690 million barrels. The 2016 was a difficult year for oil production because production was shut in a number of oil terminals,” the report noted.
On lifting of crude oil, the NNPC monthly financial and operations report disclosed that “international oil companies (IOCs) lifted more crude oil than the government. Total lifting of crude oil and condensates was 2.135 billion barrels. Of this sum, IOCs and Independents lifted a total of 1.367 billion barrels, while government’s lifting by NNPC was 721.16 million barrels. This means that the operators lifted 64.01 per cent of total crude lifting’s, while government through NNPC lifted 33.76 per cent. In monetary terms, total government lifting of oil amounted to $35.893 billion while the figure for IOCs and Independents was $68.591 billion.”
The NNPC report further disclosed that refineries received 15.15 per cent of total domestic crude lifting out of which 41.32 percent was utilized under the Direct Sale Direct Purchase (DSDP) programme of NNPC.On refineries and domestic crude utilization, the report disclosed that for the three years under review, Nigeria’s refineries recorded an average capacity utilization of 12.26 per cent. A further breakdown shows that Kaduna refinery had the lowest capacity utilization of 9 percent while Warri and Port Harcourt refineries recorded 9.73 per cent and 15.4 percent.
One striking feature of the NNPC financial operations report is the disclosure that the corporation lost N547billion in its operation between 2015 and 2017. Out of this amount, the NNPC corporate headquarters recorded the highest revenue loss to the tune of N336.268billion. On the contrary, the report revealed that the Nigeria Gas Company made a huge profit of N141.324billion.