23 oil blocks failed to produce crude –FG

No fewer than 23 oil blocks managed by both international and local oil companies, which are under crude oil Production Sharing Contracts with the Nigerian National Petroleum Company Limited, failed to produce crude or were inactive, the Federal Government has said.

It disclosed this in the latest Oil and Gas Industry Report for 2021 released by the Nigeria Extractive Industries Transparency Initiative, an agency of the Federal Government. It stated that the blocks failed to produce crude in the year under review.

PSC is an arrangement or contract where the contracted oil company undertakes to fund operations to explore, develop and produce petroleum within a concession area, under an Oil Prospecting License and for an agreed number of years.

If the effort is successful, the company will be subject to pay Petroleum Profit Tax, royalty and other bonuses/levies to the government. The company is entitled to recover its costs, in-kind, through what is known as ‘Cost Oil’.

The company also pays PPT and royalty in-kind, through the NNPC’s arrangement of lifting of crude oil and gas for tax, royalty and share of profit oil (usually shared in a predetermined ratio), for sale and remittance to designated accounts.

The account could be a Federal Inland Revenue Service (tax) account or DPR (now NUPRC) account (royalty), while proceeds from the sale of profit oil are remitted directly to the Federation Account.

PSC frees the government from financial burden since the company bears the cost of exploration and production.