Nigerian Senate to Probe `Irregular’ Oil Lease Renewals

LAGOS (Capital Markets in Africa) – Nigeria’s Senate said it would probe the renewal process of energy leases undertaken by the oil minister and the Department of Petroleum Resources, in search of anomalies that could cost the government more than $10 billion in lost revenue.

The Minister of State for Petroleum Resources Ibe Kachikwu and the DPR are renewing the “leases of companies that have brazenly and illegally refused to pay royalties,” lawmakers said in a motion passed Wednesday.

This is “capable of denying government revenue in excess of $10 billion as a result of illegal discounts and rebates,” they said.

A spokesman for Kachikwu declined to comment. DPR couldn’t be immediately reached for comments

Nigeria, Africa’s biggest oil producer, pumped 1.61 million barrels a day in June, according to data compiled by Bloomberg. International energy companies including Royal Dutch Shell Plc, Chevron Corp., Exxon Mobil Corp.,Total SA and Eni SpA operate leases to explore and produce oil through joint ventures with the state oil company NNPC. They pump the bulk of Nigeria’s crude.

Nigeria oil lease renewals are based on the percentage of crude values left in reserves, and with renewal fees tax deductible, the government stands to gain little, according to Gail Anderson, research director at Wood Mackenzie in Edinburgh.

“If these renewals are held up by the Senate, then that is likely to hold up investments, which in itself would harm government revenues,” she said. “Producers would be reluctant to invest because of the risks that goal posts might shift.”

Source: Bloomberg Business News