23 Oil Blocks Fail To Produce Crude – FG

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

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 said that the listed blocks failed to produce oil in the year under review

The arrangement that established some of these blocks is known as PSC which is a system 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.

In the case of a successful effort, the company will be subject to paying 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.

The report showed that there were also six inactive blocks, bringing the total number of both inactive oil blocks and those that did not produce crude during the review period to 26.

Some of the PSC contractors that did not produce crude from selected blocks included Esso E&P, Nigerian Agip Exploration, Shell Nigeria Exploration and Production Company, Texaco Nigeria Outer Shelf Limited, Star Deep Water Petroleum Limited, Statoil Nigeria Limited.

Others included Newcross Petroleum Limited, Sahara Energy Exploration and Production Limited, Conoil Producing Limited, Continental Oil and Gas Limited, Enageed Resources Limited, Nig-Del United OIl Company Limited, Sterling Oil Exploration and Energy Production Company Limited, among others.