For a number of years, a clamour for the review of the Government’s share of revenue under the Production Sharing Contracts (PSCs) between the various oil companies and the Nigerian National Petroleum Corporation has persisted due to the provisions of section 16 of the Deep Offshore and Inland Basin Production Sharing Contract Act (PSC Act). The Act provides that where the price of crude oil exceeds US$20 per barrel, it will be reviewed to ensure that the share of the Federal Government of Nigeria (FGN) in the additional revenue is adjusted to be economically beneficial to the FGN. The section also provides that in any event, the PSC Act may be reviewed after 15years from its commencement and every 5 years thereafter.
In late 2017, the Minister of State for Petroleum resources disclosed that the FGN was looking to amend the PSCs to ensure it achieves these objectives of the PSC Act. He also stated at the time that the FGN had lost about US$21 billion over a period of 20 years due to the failure to review the PSC Act as provided under section 16.
Separately, a pending lawsuit – Suit No. SC/964/2016 commenced in 2016 at the Supreme Court by the Attorneys-General of Akwa-Ibom, Bayelsa and Rivers States (as plaintiffs) against the Attorney-General of the Federation (as Defendant) sought to compel the FGN to review the PSC Act to recover arrears of revenue which would have accrued to the FGN over the years. The parties to the suit would later draw up terms of settlement dated 5 April 2018 which the Supreme Court on 17 October 2018, entered as the consent judgement in the suit.
Our commentary highlights the matters arising in respect of the now impending review of the PSC Act in the wake of the Supreme Court consent judgement.