In a new Executive order, President Bola Tinubu has directed the Nigerian National Petroleum Corporation Limited (NNPCL) to stop the suspension of the collection of the Frontier Exploration Fund.
He also directed the suspension of the payment of 30 per cent management fee on profit oil and profit gas revenues to NNPC Limited.
The President further directed the suspension of the payment of the Gas Flare Penalty into the Midstream and Downstream Gas Infrastructure Fund.
Tinubu gave the directive in a presidential executive order to safeguard federation oil and gas revenues and provide regulatory clarity.
The President acknowledged that the Petroleum Industry Act, 2021 was enacted with the broad objective of reforming the oil and gas sector for the purpose of ensuring transparency, efficiency, and accountability in the management of the petroleum resources of the nation and providing increased revenue for the Governments of the Federation.
He, however, lamented that the current fiscal architecture under the Petroleum Industry Act has created opaque and structural channels through which substantial revenues of the Federation are diverted away from the Federation Account, notably at a time of mounting fiscal pressures and difficulties in the implementation of federal and States’ budgets.
Tinubu pointed out that these deductions are inconsistent with the provisions of the 1999 Constitution as amended and unconstitutionally expropriate funds at the expense of the Federation which funds are otherwise due to the Federation Account for the benefit of all Nigerians.
The President noted that despite the relatively stable production levels and market prices, the Federation has continued to experience a sustained decline in net oil revenue inflows, thereby depriving the governments of the federation of the funds to deliver essential public services to the citizens of Nigeria.
He observed that the continuing decline in oil revenue inflows is largely attributable to the various off-budget allocations and deductions which are embedded in the Petroleum Industry Act as management fees and other sundry Funds.
Tinubu said these fees and Funds are hugely duplicative and far exceed global benchmarks and thresholds, with the result that more than two-thirds of potential remittances are effectively diverted away from the Federation Account.
He emphasised that issues of fragmented oversights, misalignment of governance responsibilities, and other regulatory impediments continue to hamper and undermine the realisation of the set objectives under the Petroleum Industry Act (PIA) and impact on remittances to the Federation Account;
He said: “Conscious of the need to reduce and correct inefficiencies and wastages in the management of oil and gas resources by eliminating all observed fiscal leakages, as well as any administrative, operational and regulatory impediments to growth within the sector (“Regulatory Directives”), without compromising standards.
“Now therefore, pursuant to the powers conferred on me under section 3(1), (4) and (5) of the Petroleum Industry Act, 2021, and section 5 of the Constitution of the Federal Republic of Nigeria, 1999 (as altered), I, Bola Ahmed Tinubu, GCFR, President, Federal Republic of Nigeria, hereby order and make the following fiscal and regulatory directives
“NNPC Limited shall suspend the collection and management of the the 30 per cent of the profit oil and gas allocated to the Frontier Exploration Fund collection of the Frontier (FEF) managed by the Commission.
“NNPC Limited shall ensure that the 30 per cent profit oil and gas from Fund production sharing, profit sharing and risk service contracts currently earmarked for the FEF is henceforth transferred to the Federation Account.
“The payment to NNPC Limited of the 30 per cent on profit oil and suspension profit gas revenues due to the Federation for the management of production of the sharing, profit sharing, and risk service contracts is suspended with payment 000 per cent immediate effect management.
“NNPC Limited shall henceforth transfer all profit oil and profit gas fee on profit oil and profit revenues it received as concessionaire/government representative in production gas revenues sharing, profit sharing and risk service contracts, to the Federation Account to NNPC
“All operators/contractors of oil and gas assets held under production sharing contract shall, from the date of this Order, pay over the Royalty Oil, Tax Oil, Profit Oil, and Profit Gas and any other interest howsoever described which is due to the Government of the Federation directly and engross to the Federation Account. Limited
“The Commission shall from the date of this Order, pay the suspension proceeds from all penalties imposed on operators for flaring gas, into the of the Federation Account and cease payment of such proceeds into the Midstream and Downstream Gas Infrastructure Fund (MDGIF) payment of the Gas.
“All expenditure from the MDGIF shall be conducted in line with Penalty into the extant public procurement laws, policies and regulations Midstream and Downstream Gas Infrastructure Fund.
“ The Commission shall serve as the interface with licensees Constitution and lessees in respect of integrated operations where upstream and midstream of a Joint petroleum operations are fully combined Project Team to execute.
“The Commission and the Authority shall within two weeks of the integrated coming into force of this Order, constitute a Joint Project Team responsible for technical regulation of integrated operations petroleum operations.”