The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria, Festus Osifo, has faulted the public explanation surrounding the Federal Government’s recent oil revenue executive order.He argued that claims about a 30 per cent deduction from petroleum sharing contract revenue are misleading.Osifo, who spoke during an interview on Arise TV on Friday, said the figure being referenced does not represent gross revenue accruing to the Nigerian National Petroleum Company Limited.He explained that revenues from production sharing contracts are subject to several deductions before arriving at what is classified as profit oil or profit gas.
“When you get revenue from PSC, you have to make some deductibles. You deduct royalties. You deduct tax. You also deduct the cost of cost recovery. Once you have done that, you will now have what we call profit oil or profit gas. Then that is where you now deduct the 30 per cent,” he said.
According to him, when the deductions are properly accounted for, the 30 per cent being referenced translates to about two per cent of total revenue from the production sharing contracts.“In effect, that deduction is about two per cent of the revenue of the PLCs,” he added, maintaining that the explanation presented in the public domain did not accurately reflect the structure of the deductions.
Osifo warned that removing the affected portion of the revenue could have operational implications for NNPC Ltd, noting that the funds are used to meet salary obligations and other internal expenses.
“That two per cent is what NNPC uses to pay salaries and meet some of its obligations.The one you are also removing from the midstream and downstream, it is part of what they use in meeting their internal obligations. So as you are removing this, how are they going to pay salaries?” he queried.
Beyond the immediate impact on the company’s workforce, he cautioned that regulatory uncertainty could affect investor confidence in the sector.