PENGASSAN Disputes FG’s 30% Oil Revenue Deduction Claim, Seeks PIA Review

The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, Festus Osifo, has questioned the explanation given for the Federal Government’s recent executive order on oil revenue, saying the claim of a 30 per cent deduction from production sharing contract earnings is not accurate.

He spoke on Friday during a television interview while reacting to the directive signed by President Bola Tinubu on February 18.

Osifo explained that revenue from production sharing contracts does not go straight to profit. According to him, royalties, taxes and cost recovery are first removed before arriving at what is known as profit oil or profit gas.

He said the 30 per cent in question is taken from this profit portion and not from total earnings. Based on this structure, he stated that the actual value of the deduction is closer to about two per cent of total revenue from the contracts.

He warned that removing that portion of funds could affect the operations of the Nigerian National Petroleum Company Limited. He said the money forms part of what the company uses to pay salaries and meet other internal obligations.

He also noted that similar deductions affecting the midstream and downstream arms could create financial strain within the company.

Beyond the company’s finances, Osifo said uncertainty in the regulatory environment could affect investor confidence. He cautioned that actions seen as inconsistent with existing laws may discourage foreign investors from committing funds to Nigeria’s oil and gas sector.

The executive order directs that royalty oil, tax oil, profit oil, profit gas and other upstream earnings be paid directly into the Federation Account Allocation Committee.

It also removes the NNPC’s authority to retain a 30 per cent management fee and frontier exploration fund as provided under the Petroleum Industry Act.

Osifo argued that an executive order should not override a law passed by the National Assembly. He called on the President to withdraw the directive and instead initiate a formal review of the Petroleum Industry Act.

According to him, if changes are needed, they should be proposed to lawmakers after consultations with stakeholders, including labour unions and industry operators.

He maintained that laws can be amended through proper legislative processes and said this approach would provide clarity and stability for the oil and gas sector.