Indications have emerged that a letter written by a human rights activist and Senior Advocate of Nigeria (SAN), Mr. to the Minister of State for Petroleum Resources, Dr. Ibe Kachikwu, when he was the Group Managing Director of Nigerian National Petroleum Corporation (NNPC), exposed Nigeria’s huge losses in the Production Sharing Contracts (PSCs) signed with the international oil companies (IOCs) on the deep offshore oil fields.
In a letter dated August 5, 2015 written by Femi Falana to Kachikwu when he was the group managing director of the NNPC, the constitutional lawyer had called on the National Assembly to repeal the provision of the PSCs, which stipulates that royalty on crude oil production in water depths exceeding 1,000 metres is zero.
Falana’s letter titled “Re: Deep Offshore and Inland Basin Production Sharing Contracts Act,” which was obtained by THISDAY, also recalled how the military administration of Abdulsalami Abubakar in 1999 enacted “the Deep Offshore and Inland Sharing Contracts Act Decree in order to give effect to certain fiscal incentives for the oil and gas companies operating in the Deep Offshore and Inland Basin under production sharing contracts between the Nigerian National Petroleum Corporation (NNPC) and other companies holding oil prospective licences or mining licences and various petroleum exploration and production companies”. Falana noted that by virtue of section 5 of the Act, the payment of royalty in respect of the Deep Offshore production sharing contracts shall range from 4 to 12 per cent while no royalty shall be paid whatsoever in areas in excess of 1000 metres depth.
According to him, since a large quantity of the oil and gas produced by Nigeria is located beyond 1000 metres depth, the multinational oil companies have taken advantage of the Act to avoid the payment of royalties to the Federation Account.
“Thus, the fiscal incentives given to the oil companies have led to the loss of several billions of dollars by the Federal Government. As the existence of the obnoxious law can no longer be justified the National Assembly ought to repeal or amend it by taking advantage of section 16 thereof which provides for a review “after a period of fifteen years from the commencement and every five years thereafter,” Falana said.
“In view of the fact that the 15-year period of non-payment of royalty expired last year, for the Nigerian National Petroleum Corporation collect royalties from the oil companies, the National Assembly should amend section 5 of the Act by deleting the section which provides for zero per cent royalty “in areas of 1000 metres.
“If the National Assembly fails to discharge its constitutional duty in the circumstance we shall not hesitate to file an application for mandamus at the Federal High Court with a view to ensuring compliance with the law forthwith,” Falana added.
THISDAY’s investigation revealed that on receipt of the letter, Kachikwu was said to have directed that the NNPC’s Secretary/Legal adviser, Mr. Chidi Momah should discuss with constitutional lawyer on the matter.
Kachikwu was also said to have spoken totally in agreement with the position of Falana and also directed that a legal opinion be sought internally to enable him respond to the issue. (Thisday)
So what was the “catch?” What did Mr. Ibe Kachukwu had to gain or what was he offered to sign such a deal in the first place? Exactly, how much did they pay him?
Cash Ezimako