Page 4 - AfrOil Week 41 2019

AfrOil COMMENTARY AfrOil
Nigeria has invoked a 1993 law that provides for revisiting profit-sharing arrangements when oil prices top $20 per barrel (Photo: Total)
Nigeria heads for a $62bn fight (and a smaller settlement) with IOCs
Cash-strapped Abuja has invoked a 1993 law and a 2018 Supreme Court ruling to demand payment of purportedly lost revenues
WHAT:
Nigeria’s Justice Ministry and attorney general say oil companies may owe as much as $62bn.
WHY:
Abuja is probably trying to find new ways to drum up badly needed revenue.
WHAT NEXT:
The IOCs are likely to negotiate a settlement, but smaller operators may suffer and potential investors may hesitate to enter Nigeria.
NIGERIA’S government appears to be heading for a fight with several major international oil companies (IOCs).
Earlier this month, Nigeria’s Justice Ministry confirmed reports that it had teamed up with the attorney general’s office in a bid to seek compen- sation from IOCs for up to $62bn in purportedly lost revenues. It said that the agencies were tak- ingactioninlinewithacontractlawdatingback to 1993 that allows the federal government to negotiate for a larger share of oil revenues when- ever crude prices exceed $20 per barrel. It also invoked a 2018 ruling from Nigeria’s Supreme Court as the basis for this move.
It was not clear as of press time whether the ministry and the attorney general’s office had made a formal claim or filed suit. Bloomberg reported on October 9 that the government agencies had prepared a document outlining Abuja’s arguments and were seeking to negoti- ate with IOCs. Then on October 14 it said that preliminary talks were under way.
IOC opposition
Thus far, four of the five largest investors in Nigeria’s oil sector – Chevron (US), Eni (Italy),
ExxonMobil (US) and Total (France) – have mostly declined to comment on reports of the $62bn claim.
By contrast, Royal Dutch Shell (UK-Neth- erlands) has come out swinging. In response to a query from Bloomberg, the multi-national’s Nigeria unit said: “We do not agree with the legal basis for the claim that we owe outstanding revenues.”
The news agency further reported that Shell was ready to take the matter up with Nige- ria’s Federal High Court. The company has contended that the 2018 verdict cited in the government document does not apply, partly because the ruling does not cover the collection of arrears and partly because it was not a party to that specific lawsuit, which was initiated by several states in Nigeria’s main oil-producing region, it noted on October 10.
Settlement push
Nigerian authorities have not responded directly
to Shell’s comments. Nevertheless, Justice Min-
ister Abubakar Malami has said Abuja hopes the negotiations will help keep the lines of commu- nication open with IOCs. 
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w w w . N E W S B A S E . c o m Week 41 16•October•2019