Senate probes N1. 2tn oil revenue loss

By Andy Asemota

The Senate has set up an ad hoc committee to probe alleged over N1. 2 trillion oil revenue loss to Federal Government resulting from alleged breach of 2000/2001 Fiscal Incentive Package Conditions by SINOPEC ADDAX Petroleum.

The Upper Chamber at its plenary presided over by the Senate president, Ahmed Lawan, mandated the committee to scrutinize the packages and other Federal Government agreement with SINPOPEC ADDAX with a view to ascertaining the level of the company’s compliance with the agreements, make recommendations and report within four weeks.

Senator Henry Gorshom Bassey (PDP, Cross River South), who sponsored the motion, noted that the Federal Government in 2000/2001 reportedly provided a Fiscal Incentive Package to ADDAX Petroleum Company that saw the reduction of the company’s Petroleum Profit Tax from 85% to the 1998 Production Sharing Contract (PSC) to 60% in the 2001 Fiscal Incentive  Package and the company’s share of oil lifting increase from 45% to 56%.

He stated further that ADDAX Petroleum followed through by investing to grow production from about 10,000bopb to 2000 to over 100,000bopb by 2008, adding that Sinopec purchased the Addax Petroleum Nigerian Production Sharing Contract in 2009 and allow the assets to witness significant production decline due to poor investment decisions making  production and fall in production levels to about 30,000bopb with no developed gas.

The senator claimed that SINOPEC ADDAX despite holding a 100% production sharing contract with oil mining leases OML-123, OML-124, OML- 126 refused to stick to its end of the bargain to continue investing in the operated assets leading to a revenue loss of about 3. 35 billion dollars per year by the Nigerian government.

He said OML-137 is not producing because SINOPEC ADDAX has breached the Fiscal Incentive Package by neglecting to invest in that asset resulting in huge oil revenue loss to Nigeria.

Bassey further alleged that in 2016, the process of Value For Money (VFM) audit of 1. 37 billion dollars of oil that had been lifted by Addax Petroleum from 2007 to 2014 was initiated with the understanding that it would take three months to conclude but since the initiation of the VFM, SINPOEC ADDAX Petroleum had continued to enjoy oil over lift and frustrated the process of conclusion of the audit to allow for the equitable and accurate determination of lifting.

He expressed concern that with COVID-19 pandemic having negative Impact on the nation’s economy and throwing Nigeria into debt, the government has over N1. 2 trillion of its oil revenue lying with SINOPEC ADDAX Petroleum that would also be leaving an “abandonment /decommissioning liability cost of about 750 million dollars at the expiration of their stay in Nigeria come 2022.