Nigeria Demands US$62 billion from Oil Majors
Nigeria is seeking to recover as much as US$62 billion from international oil companies, using a 2018 Supreme Court ruling the state says enables it to increase its share of income from production-sharing contracts.
The proposal comes as President Muhammadu Buhari tries to bolster revenue after a drop in the output and price of oil, Nigeria’s main export.
It has previously targeted foreign companies, fining mobile operator MTN Group Ltd almost US$1 billion for failing to disconnect undocumented SIM-card users, and suing firms including JPMorgan Chase & Company in a corruption scandal.
In the latest plan, the government says energy companies failed to comply with a 1993 contract-law requirement which the state receive a greater share of revenue when the oil price exceeds US$20 per barrel, according to a document prepared by the attorney-general’s office and the Justice Ministry.
The document, seen by Bloomberg, was verified by the ministry.
While the government hasn’t said how it will recover the money, it has said it wants to negotiate with the companies. In its battle with MTN, the fine imposed on the company was negotiated down from an initial penalty of US$5.2 billion.
Nigerian presidency spokesman Garba Shehu did not answer three phone calls or respond to a text message requesting comment.
Under the production-sharing contract law, companies including Royal Dutch Shell Plc, ExxonMobil Corporation, Chevron Corporation, Total SA and Eni SpA agreed to fund the exploration and production of deep-offshore oil fields on the basis that they would share profit with the government after recovering their costs.
When the law came into effect 26 years ago, crude was selling for US$9.50 per barrel. The oil companies currently take 80% of the profit from these deep-offshore fields, while the government receives 20%, according to the document.
Oil traded at $58.29 a barrel on the London-based ICE Futures Europe Exchange.
Most of Nigeria’s crude is pumped by the five oil companies, which operate joint ventures and partnerships with the state-owned Nigerian National Petroleum Corporation.
Representatives of the oil companies met Justice Minister Abubakar Malami on the 3rd October in the capital, Abuja, according to two people familiar with the discussions who asked not to be identified because the meeting was not public.
Mr Malami told them that while no hostility is intended toward investors, the government will ensure all the country’s laws are respected, the people said.
Ruling Challenged
Oil companies including Shell have gone to the Federal High Court to challenge the government’s claim that they owe the state any money, arguing that the Supreme Court ruling does not allow the government to collect arrears.
They also contend that because the companies weren’t party to the 2018 case, they should not be subject to the ruling.
“We do not agree with the legal basis for the claim that we owe outstanding revenues,” Shell’s Nigerian unit said.
Chevron spokesman Ray Fohr said the company does not comment on matters before the court. Its units in Nigeria “comply with all applicable laws and regulations,” he said.
Exxon and Total declined to comment, while Eni officials did not immediately respond to requests for comment.
The Supreme Court ruling followed a lawsuit by states in Nigeria’s oil-producing region seeking interpretation of the nation’s production-sharing law. The states argued that they were not receiving their full due. The court ruled in their favour and asked the attorney general and justice minister to take steps to recover the outstanding revenue.
The 1993 law required that its provisions be reviewed after 15 years and subsequently every five years.
The attorney-general’s office insists that the provision for a higher share of revenue does not require legislative action to take effect, according to the document.
“Instead it imposes a duty on the oil companies and contracting parties, being NNPC, to by themselves review the sharing formula,” the ministry said.
Source: Rigzone