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Senate Investigates Alleged Loss of N1.2tn Oil Revenue to SINOPEC-Addax Deal

Senate Investigates Alleged Loss of N1.2tn Oil Revenue to SINOPEC-Addax Deal

The Senate has commenced investigation into the allegedbreach of the 2000/2001 the federal government’s FiscalIncentive Package Conditions by SINOPEC-ADDAX, following fears in some quarters that Nigeria may have lost over N1.2 trillion in oil revenue due to improper execution of the deal by the company.

The disclosure was made yesterday in Calabar by the Vice Chairman of the Senate Committee on Petroleum, Senator Gershom Bassey, who also raised the alarm that Nigeria stood the risk of losing an additional $750 million from abandonment/decommissioning liability at the expiration of SINOPEC-ADDAX stay in the country by 2022.

Bassey, who issued a press statement to this effect, said based on a motion he sponsored drawing the attention of thefederal government to the possible loss of such humongous revenue, the Senate has mandated the Senate Committee on Petroleum Upstream and Senate Committee on Gas to investigate and makerecommendations with regards to the 2000/2001 Fiscal IncentivePackage and other federal government’s agreements with Sinopec-Addax Petroleum Company.

Bassey, who is the representative of the Cross River South senatorial district in the National Assembly, said the investigating committees have been mandated to ascertain the level of the company’s compliance with these agreementsand make recommendations.

Bassey stated that in 2000/2001 the Federal Government of Nigeria had provided a Fiscal IncentivePackage to Addax Petroleum Company that saw the reduction of the company’s Petroleum Profit Tax from 85 per cent in the 1998 Production Sharing Contract (PSC) to 60 per cent in the 2001 FiscalIncentive Package and the company’s share of oil lifting increase from about 45 per cent to 56 per cent.

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Addax Petroleum followed through by investing to grow production from about 10,000bopb in 2000 to over 100,000bopb by 2008.

He said from the purchase of Addax by Sinopec in 2009, the assets have witnessed significant production decline due to poor investment decisions making production levels to fall presently to approximately 30,000bopb with no developed gas.

The lawmaker stated that “Sinopec Addax, despite holding a 100 per cent Production Sharing Contract(PSC) with oil miningleases OML-123, OML-124, OML-126, has 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 per year by the Nigerian Government…OML-137 is non-producing because the oil firm breached the Fiscal IncentivePackage by neglecting to invest in that asset resulting in huge oil revenue loss to Nigerian.”

Bassey alleged that given “the lack of any demonstration by Sinopec-Addax to stay in Nigeria because of the company’s unwillingness to purchase an office building and its refusal to invest for production growth, it is shocking that NNPC continues to honour the elapsed gentleman’s agreement that made Sinopec Addax to operate these assets and lift 70 per cent of thecrude oil they are producing resulting in a huge annual revenue loss to Nigerian government.”

He further alleged, “That in 2016 the process of Value For Money (VFM) audit of $1.37 billion of cost 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.”

Continuing, Bassey said, “Since the initiation of the VFM audit in 2016, Sinopec Addax Petroleum has continued to enjoy oil over lift and have frustrated the process of conclusion of the audit to allow for the equitable and accurate determination of lifting.

“The Covid-19 Pandemic has negatively impacted on our economy and has thrown Nigeria into debt meanwhile the federal government has over N1.2trillion of its oil revenue lying with Sinopec-Addax Petroleum Company and it will be leaving an abandonment/decommissioning liability cost of about $750 million at the expiration of their stay in Nigeria come 2022.”

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