The Nigerian government and international oil companies are trying to find a common ground on a dispute over oil revenues, which is dithering on account of the steady fall in oil prices. Also, oil companies in the country have lost some of their age old clients like India, which started importing oil from the US.
A Supreme Court decision of 2018 had entitled the government to take US$62 billion from companies after the companies failed to comply with a 1993 law that gives the state a larger share of revenues when oil prices exceeds US $20 a barrel. Such agreements are very common in the oil sector because of the high cost of exploration and cost towards laying of infrastructure network. However, the companies have questioned this line of argument by the government. In the given time, the government has started a process of engagement with the oil companies. The Justice ministry hopes that the little initiative commenced now would lead to opening up of a full-blown negotiation process.
When the decision to work together with private companies came into effect some 26 years ago, crude oil was selling at less than US$ 10 a barrel. Now it is trading at US$ 60 a barrel in London. Also, under the production sharing legislation, companies agreed to finance the development of deepwater oil fields on the assumption that they would share the benefits with the government after recovering their costs. At least two-thirds of Nigeria’s revenue and 90% of its foreign exchange is coming from oil. It is natural that the government would seek to have greater control of th oil sector, which in recent times is showing sluggishness on account of the volatility of the commodity précis including oil.
