The Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) says it is fully in support of the proposed review of the Production Sharing Contracts (PSCs) approved by the Federal Executive Council (FEC) on Dec. 13.
It said this in a statement by the commission’s spokesperson, Mr Ibrahim Mohammed, on Wednesday in Abuja.
It said the commission viewed the move by the Federal Government as a welcome and commendable development.
The commission, which has the constitutional responsibility of monitoring revenue accruals into and disbursement from the Federation Account, has consistently called for the review of the contracts for the past seven years.
It added that the contracts had not been reviewed nine years after both conditions stipulated in the relevant provision of the Act had elapsed.
The situation led to the huge revenue loss of about 21 billion dollars in the last 20 years as recently revealed by the Minister of State for Petroleum Resources, Dr Ibe Kachikwu.
It said that Kachikwu recently announced that the government had approved steps to amend Section 17 of the Deep Offshore and Inland Basin Production Sharing Contracts Act, 1999.
The Act specifically provides that the 1993 PSCs should be reviewed, once the price of crude oil exceeds 20 dollars per barrel or 15 years after the contracts.
“To this end, the commission advised that government should take appropriate steps to ensure the review of these agreements with due diligence.
“Similarly, RMAFC recalls that in April, 2016, it drew the attention of government to the fact that three main contract types namely Joint Venture, Production Sharing and Service Contracts were in use in the Nigerian Oil and Gas Industry.
“Having carefully examined the fiscal terms of each contract and the associated revenue inflow into the federation account therefrom, the commission lamented that the PSCs as represented by the 1993 PSCs which should have been renegotiated as far back as 2008, has yet to be done.
“This, causes the federation revenue losses due to the unfavourable terms of the contracts.”
It also stated that related to the non-review of the PSCs was the low Petroleum Profit Tax (PPT) and Royalty Regime stipulated in the Act which are disadvantageous to the country, compared to what was obtainable in the Joint Venture Contracts (JVCs).
“The PPT in the 1993 PSCs is put at 50 per cent flat rate whereas in the JVCs it ranges from 85 per cent to 65 per cent.
The Royalty Rate in the PSCs ranges from zero per cent to eight per cent, depending on the water depth for the PSCs while in the JVCs, it ranges from shallow 18 per cent and onshore 20 per cent respectively,” it added.