The Senate at its plenary session on Wednesday, 2 October 2019, resolved to amend the Production Sharing Contract (PSC) Act, 2004 in its effort to recover revenues accruable to the Federal Government and increase the revenue base available to fund subsequent budgets.
Leading the debate on the motion titled “Urgent Need to Review and Recover Additional Revenues Accruable to the Government of the Federation from Production Contracts pursuant to Section 16 of the Deep Offshore and Inland Basin Production Sharing Contract Act and Amend the Extant Act”, Sen. Ifeanyi Ubah (YPP: Anambra) stated that the PSC is a contractual arrangement for petroleum exploration and production where the State engages contractors to provide technical and financial services for operations in return for an agreed share.
He also cited Section 16 of the PSC Act, 2004 which provides that:
“Where the price of crude oil exceeds US $20 per barrel, the PSC Act will be reviewed to ensure that the share of the Federal Government of Nigeria (FGN) in the additional revenue is adjusted to the extent that the PSCs shall be economically beneficial to the FGN”
Sen. Ubah noted that although the PSC Act 2004 allows for periodic review of its provisions to ensure that the Federal government derives maximum and equitable benefits, failure to amend the said Act had resulted in the loss of revenues amounting to the sum of $21billion. He further informed lawmakers that the PSC Act is subject to review when the following conditions occur:
- When the price of crude oil exceeds US $20 per barrel;
- After 15 years of the Act’s commencement date which was in 1993 (26 years ago) following which the first review should have been in 2008; and
- Every 5 years thereafter.
The lawmaker also expressed concern that the consequences of past failures to amend relevant provisions of the Act had led to inequitable terms of oil production sharing and significantly lower revenue contributions for the country.
The Senate also mandated its Committees on Petroleum Resources (Upstream), Finance and Judiciary, Human Rights and Legal Matters to investigate the reasons why past Assemblies had failed to review salient provisions of the PSC Act.
