Oil Deals: The marriages between ExxonMobil, Chevron, Shell, and Nigeria, and the loss of $16 billion

The Nigeria Extractive Industries Transparency Initiative (NEITI) has revealed that Nigeria lost $16 billion in between 2008 and 2017 due to non-review of the Production Sharing Contracts (PSCs), signed with oil companies in 1993.

This was contained in a report recently released by NEITI tagged “The Steep Cost of Inaction”.

NEITI reviewed the contracts, with help from Open Oil, a Berlin-based extractive sector transparency group, revealing that the losses could be up to $28 billion if, after the review, the federation were allowed to share profit from two additional licenses.

The oil fields and companies under scrutiny include Abo (OML 125): operated by Eni; Agbami-Ekoli (OML 127 & OML 128): operated by Chevron; Akpo & Egina (OML 130): operated by Total and South Atlantic Petroleum; and Bonga (OML 118): operated by Shell.

ExxonMobil Crude Refining Others, it said are Erha (OML 133): operated by ExxonMobil; Okwori & Nda (OML 126): operated by Addax; and Usan (OML 133): operated by ExxonMobil.

Calling for an urgent review of the PSCs to curb the revenue loss, NEITI noted that the review was particularly important for Nigeria because oil production from PSCs had surpassed production from Joint Ventures with PSCs now contributing the largest share to federation revenue.

“Between 1998 and 2005, total production by PSC companies was below 100 million barrels per year while JV companies produced over 650 million barrels per year.

“By 2017, total production by PSC companies was 305.800 million barrels, which was 44.32 per cent of total production.

“Total production by JV companies was 212.850 million barrels, representing 30.84 per cent of total production.” It said.
NEITI explained that Deep Offshore and Inland Basin Production Sharing Contracts provided for a review of the terms on two conditions.

“The first review was to be triggered if oil prices exceeded 20 dollars per barrel.

“Section 16 (1) of the Deep Offshore and Inland Basin Production Sharing Contracts specifies that: The provisions of the Act shall be subject to review to ensure that if the price of crude oil at any time exceeds 20 dollars per barrel, real terms, the share of the Government of the Federation in the additional revenue shall be adjusted under the Production Sharing Contracts to such extent that the Production Sharing Contracts shall be economically beneficial to the Government of the Federation.”

This clause implies that the review should have been done as far back as 2004 when oil prices exceeded the 20 dollars per barrel mark.

However, according to the judgement of the Supreme Court in October 2018, the Attorney General of the Federation has been mandated to “work together with the governments of Akwa Ibom, Rivers and Bayelsa States to recover all lost revenues accruable to the Federation with effect from the respective times when the price of crude oil exceeded $20 per barrel.”
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