The Nigerian government has vowed to recover over $62 billion it claims as arrears of profits due it from 1998 under the production sharing contracts (PSCs) between the Nigerian National Petroleum Corporation (NNPC) and its joint venture partners.
The international oil companies have taken the matter before the Federal High Court in Lagos and are denying any liability.
The six international oil companies with joint operating agreements with the NNPC include Shell Petroleum Development Company, Mobil Producing Nigeria Unlimited and Chevron Nigeria Limited.
The others are Nigeria Agip Oil Company, TotalElf Nigeria and Pan Ocean Oil Company.
Under the terms of the 1993 PSC, the NNPC and the joint venture partners would review their profits sharing formula once crude oil prices rise above $20 per barrel.
But the Attorney-General of the Federation and Minister of Justice, Abubakar Malami, said this review has not taken place since October 1998 when oil prices rose above the stated threshold.
Recently, the government decided to trigger the review and demanded huge arrears of profits. But the joint venture partners have been reluctant to pay or adjust the profit-sharing formula in their various operating agreements.
Mr Malami was unable to say exactly how much Nigeria is claiming from the oil majors but he estimated the amount in excess of $62 billion.
Claims and counter-claims
Since the claim by the Nigerian government, the six JV partners with the NNPC have filed a suit at the Federal High Court in Lagos to contest the allegations of violation of their PSCs and indebtedness.
However, Mr Malami told PREMIUM TIMES in Abuja on Saturday that the government has since filed a counter application.
“Regardless of the jurisdiction you look at, the case is about the rule of law and compliance with the prevailing laws; about rights and entitlements as they relate to the contract between the parties,” the minister said.
The six joint operating agreements
Apart from Shell, which holds 55 per cent equity in Shell/NNPC joint venture, the other five control at least 60 per cent of the interests in the shares.
In 2014, crude oil prices at the international market averaged $100 per barrel.
The minister said the IOCs told the court they were not liable to the payment because Nigeria made no formal attempt to activate the PSCs review clause after crude oil prices rose above $20 per barrel.
But Mr Malami said government filed a counterclaim that the activation was automatic.
“The concern of the IOCs is about the establishment of their respective rights. A case has been established about the right of the government to enforce its laws. If indeed there exists such a right, then the remedy must naturally follow.
“What matters is the reconciliation of the figures. The government went to court for the purpose of ascertaining the liability and the validity of the calculations of the claims,” he said.
Claim a matter of right
On the argument that government may have slept on its right by not enforcing the review of the PSCs immediately crude oil price rose above $20 per barrel, Mr Malami said it does not matter when the government decided to seek the enforcement of its laws.
READ ALSO: How do the Saudi attacks affect Nigeria?
He said as far as the PSC was concerned, it remained a function of law to activate the review at any time, so long as the law remained “valid, subsisting, applicable and enforceable.”
“The fact that government did not take immediate steps to demand the review and payment does not invalidate its action now to make a claim of right, provided the claim of right is rooted in law.
“As far as the Nigerian government is concerned, it is a function of law as to whether the review is automatic or not. The liability and responsibility of right are mutual and operative.
“The parties are in court to interpret if the review of the PSC was automatic, or whether the Nigerian government slept on its right by not activating the right to review the sharing formula when it became due.
“That is a function of judicial interpretation. That is why the parties are in court. The existence or otherwise of liability as far as PSC agreement is concerned is a function of law and the parties are in court to determine as a function of law,” he said.
Government not targetting foreign investors
On the timing of the claims, Mr Malami said insinuations that the government was targeting and squeezing foreign companies for funds to pull the country out of poor fiscal condition was lacking in substance.
He said apart from the IOCs, the government was still pursuing its agenda to recover looted asset from individuals and groups at home.
On the impact of the claims on investment in the country, he said the government was conscious of its obligations to promote good investment climate with regards to the prevailing laws and their enforcement.
He said despite the ongoing court action, the parties have continued to meet, engage and discuss, saying he was optimistic the engagements would eventually translate to settlement or full-blown negotiation process.
On alleged threats by the IOCs to withhold decisions on further investments in Nigeria until the matter is resolved, the Minister said the government was not worried about any backlash by way of negative business sentiment.
He said the action will instead create a win-win situation for all parties.
Support PREMIUM TIMES' journalism of integrity and credibility
Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.
For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.
By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.
TEXT AD: To advertise here . Call Willie +2347088095401...