Falana Tasks NASS On Repealing Zero-loyalty Law For Oil Companies


As many may not know, the Deep Offshore and Inland Basin Production Sharing Contracts Act allows companies extracting oil from 1000 metres offshore deep not to pay royalty to government. Lagos lawyer, Mr Femi Falana, SAN,  says this has to stop.

Falana has, therefore, called on the National Assembly to repeal the law, which was enacted ‎by the military in 1999 under the leadership of General Abdusalam Abubakar.

When the law passed, it was aimed at giving certain fiscal incentives to 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 prospecting licences or mining licences and various petroleum exploration and production companies.

Falana said 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 percent while no royalty shall be paid whatsoever in areas in excess of 1000 metres depth‎.

Falana said in a statement on Sunday that since a large quantity of oil produced by Nigeria was located beyond the 1,000 metres depth, the incentives given to the oil companies had led to loss of several billions of dollars.

“Since a large quantity of the oil produced by Nigeria is located beyond 1,000 metres depth, the muti-national oil companies have taken advantage of the Act to avoid the payment of royalties to the Federation Account.

“The fiscal incentives given to the oil companies have led to the loss of several billion 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.’

“In view of the fact that the 15-year period of non payment of royalty expired last year 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’,” Falana said.