By Chioma Iruke
Group Managing Director of the Nigerian National Petroleum Corporation (NNPC) Mele Kyari, says the 3 percent operating expense allocated to host communities in the recently assented Petroleum Industry Act 2021, is more than the 30 percent profit share for oil exploration in the ‘frontier basins’.
According to Kyari, 30 percent profit share for oil exploration in the ‘frontier basins’ is about $400 million per annum, but the 3 percent operating cost to accrue to host communities is about $500 million annually.
The NNPC GMD stated this on Tuesday when he featured as a guest on NTA’s ‘Good Morning Nigeria’ breakfast show.
He also said the Host Communities Fund would be within the control of the host communities, and would not be managed by the NNPC.
“The resources are coming from the host communities, it should go back to benefit them,” Kyari noted.
Recall that President Muhammadu Buhari had signed the Petroleum Industry Bill (PIB) 2021 into law last week Monday, ending about 20 years of legislative stalemate of the bill. Now known as the PIA, the legislation would regulate all aspects of the oil sector.
Speaking on Tuesday, the NNPC GMD blamed the grievances of some people in the Niger Delta on a misunderstanding of what constitutes 3 percent operating expense and what constitutes 30 percent profit share.
“For instance, when you say 30 per cent profit oil and gas from NNPC shares or from PSC, it is a very small number. The percentages appear very outrageous but 30 per cent of what? Nobody has sat down to look at it. When you say profit oil 30 per cent, it probably comes down to less than $400 million per annum.
“But when you come to the host communities, you have three per cent of our operating expense. We spent about $16 billion in fiscal 2020 in our operating expense across the industry. So when you take three per cent of that number it comes above $500 million far above the budget of NDDC.
“You can see that those percentages don’t reflect the realities that we are trying to achieve by this. And for profit oil, there are lots of uncertainties around it because if you don’t make profit it is zero but you must spend money to do operating expense.
“We are very sure that provisions that are meant for host communities will be implemented and delivered,” he said
By assenting to the bill, the president approved at least 30 per cent of the profit to be generated by the proposed NNPC to go to the exploration of oil in ‘frontier basins’, according to Section 9 of the PIB.
The PIB also makes provision for the establishment of a Nigerian Upstream Regulatory Commission which will be responsible for the technical and commercial regulation of upstream petroleum operations and also promote the exploration of frontier basins in Nigeria.
The frontier basins include Chad Basin, Gongola Basin, Sokoto Basin, Dahomey Basin, Bida Basin, Benue Trough, Anambra Basin, amongst others.
At the moment, crude oil is obtained from eight states in the Niger Delta region which include: Abia, Akwa Ibom, Bayelsa, Delta, Edo, Imo, Ondo and Rivers States.
