Dr. Ibe Kachikwu, Minister of State for Petroleum Resources, has revealed that the federal government has begun renegotiating Production Sharing Contracts (PSC) on deep offshore oil blocks with Royal Dutch Shell.
According to This Day, A report yesterday by Financial Times quoted Kachikwu as saying that Shell’s current PSC would expire in 2023, while the PSCs of other international oil companies (IOCs) would expire in 2028.
Speaking on the commencement of renegotiation between the two parties, Kachikwu said the old agreements favored the foreign companies, giving them as much as 80 percent of the oil that was produced after costs, known as profit oil, against the 20 percent for the federal government.
He said: “That is a non-starter; it’s got to be better. We’ll be looking to better terms than the previous (production-sharing contracts). We would like to get better packages.
“At the time of renewal, you have an opportunity to review it, and we’ll be looking at it in terms of have you recovered your investment, have you made money out of it?”
Kachikwu said the Nigeria National Petroleum Corporation (NNPC), had already entered renegotiations with Shell, which in 2023 will be the first company to see its PSC expire. Others will expire by 2028.
“The Shell model, when they finish, will then be the basis of what we do with all other PSC contractors,” he added.
The new PSC terms will affect Shell’s final investment decision (FID) on developing the new $10 billion Bonga South West deepwater project, for which it issued a tender for contractors in February.