Bayelsa derivation revenue may trigger crisis
By Bassey Udo


October 18, 2010 11:19PM
print email




A constitutional crisis looms as concession granted Bayelsa State to receive extra derivation revenue for nine mega offshore fields may trigger legal agitations from other oil producing states in the federation.


The Bayelsa State government, in a letter dated February 16 to the then acting president, Goodluck Jonathan, had requested approval for the attribution of nine oil fields to assuage negative impact of the delimitation of maritime boundaries of littoral states by the National Boundary Commission (NBC) in the wake of the promulgation of the Offshore/Onshore Dichotomy Abrogation Act 2004.


Timipre Sylva, the governor, who signed the letter, listed the oil fields, which included some of the country’s biggest deep offshore oil concessions, like the Agbami, operated by Chevron, with proven oil reserve of over 770 million barrels; Bonga, operated by Shell, with proven reserves of over 1.5 billion barrels; and Akpo, operated by Total, with proven oil reserves of over 630 million barrels.

Others include Chota oil field, with 60 million barrels reserve by ConocoPhillips; N’Golo oil field, 100 million barrels reserve by Elf Petroleum Nigeria; Nnwa Doro oil field, by Statoil; and Aparo by Chevron.

Mr. Sylva said the delimitation has put Bayelsa State in a disadvantaged position in the allocation of revenue since 2004. He drew attention to the impact of ecological damage to the state’s coastline, pointing out that the exercise did not attribute the oil fields and wells to the littoral zone of the state, “despite the huge security challenges, increasing environmental and health concerns, and the state’s massive contributions to the amnesty programme.”


The presidential concession would make Bayelsa State the highest derivation revenue earner among the oil producing states in the country.

However, following the approval of President Goodluck Jonathan on August 31, the other littoral states are poised to equally demand their share of derivation revenue based on the delimitation of their location beyond the 200-metre isobath of their seaward boundaries.


Available data for the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC) on the revised 13 percent derivation indices for July, obtained at the weekend, based on the concession, put total oil production for Bayelsa State at 15,995,773 barrels, ahead of Rivers (13,317,840 barrels), Akwa Ibom (12,796,954 barrels), and Delta (11,163,493 barrels).

Prior to the concession and subsequent revision of the volume of oil production figures attributable to each state, Akwa Ibom topped, with 13,905,432 barrels, followed by Rivers (12,636,795 barrels), Delta (11,163,493 barrels), and Bayelsa (10,313,368 barrels).

Legal breach

The concession to Bayelsa State to enable it earn derivation revenue from oil wells lying beyond the 200-metre isobath, according to some lawyers, is in breach of the Offshore/Onshore Dichotomy Abrogation Act 2004 in the application of the 13 percent derivation principle.


Innocent Ogboru, a Port Harcourt-based legal practitioner, said the decision may lead to agitations and court actions by other states, like Lagos, which also has oil wells located beyond the 200-metre isobath in waters within their boundaries.

“The new twist in the calculation of oil derivation revenue will reduce the amount of net revenue available to the Federation Account for distribution to the three tiers of government, consisting the 36 states of the federation and the 774 local government councils, as well as the Federal Capital Territory (FCT), after the deduction of derivation payable to oil producing states,” Mr. Ogboru said.

The 2003 interpretation of the Supreme Court judgment in the resource control suit instituted against the Federal Government over the implementation of the offshore/onshore dichotomy, which ended the controversy, did not include revenues from oil wells outside the statutorily allowed 200-metre isobath as part of derivation calculation

http://234next.com/csp/cms/sites/Next/Money/5631884-146/bayelsa_derivation_revenue_may_trigger_crisis.csp



Is this the beginning of resource control?

It is.

udezue:

It is.

waiting for other states in the same position as bayelsa to make their claim

How the USA does it!

If we want to copy make we copy well
Background

While inland states have historically shared 50 percent of all revenues generated from royalties and bids for onshore oil and natural gas production with the federal government, states producing offshore oil and gas beyond the first three miles of federal waters off of their shores have not. However, this has since changed.

Enacted on December 20, 2006, The Gulf of Mexico Energy Security Act (GOMESA) created revenue sharing provisions for several oil and natural gas producing states while increasing access to oil and natural gas supplies in the Gulf of Mexico (Gulf). The revenue sharing provisions allocated a share of oil and natural gas revenues to Alabama, Louisiana, Mississipi and Texas for directly supporting offshore activities and onshore infrastructure.

From 2007 through 2016, the four Gulf oil and gas producing states will share 37.5 percent of revenues from new leases in the 0.5 million acres in the Eastern Gulf and the 5.8 million acres in the Central Gulf. After 2016, they will share 37.5 percent of revenues from all Gulf leases issued after December 2006.

Importance of revenue sharing for local governments, states and consumers
Revenue sharing from production on federal waters is critical, as it significantly benefits local governments, promotes national economic interests and generates additional federal revenues by increasing state and local participation. Such sharing facilitates a closer partnership among federal, state, and local agencies. Individual states are also afforded additional opportunities to dedicate funds to vital coastal areas and projects, such as coastal conservation, restoration and hurricane protection. In fact, Louisiana has directed that all monies derived from offshore revenue sharing go to coastal protection, wetland mitigation efforts and hurricane protection measures.

Other states have recently expressed a desire to receive the same benefits from oil and gas production off of their coasts, similar to those received by the Gulf states. Several coastal states, such as Virginia, South Carolina and Georgia, have expressed interest in understanding more about their available offshore resources and the royalty revenues that could be derived if development were to occur.
(Modify) (Quote) (Report)

How the USA does it!

If we want to copy make we copy well
Background

While inland states have historically shared 50 percent of all revenues generated from royalties and bids for onshore oil and natural gas production with the federal government, states producing offshore oil and gas beyond the first three miles of federal waters off of their shores have not. However, this has since changed.

Enacted on December 20, 2006, The Gulf of Mexico Energy Security Act (GOMESA) created revenue sharing provisions for several oil and natural gas producing states while increasing access to oil and natural gas supplies in the Gulf of Mexico (Gulf). The revenue sharing provisions allocated a share of oil and natural gas revenues to Alabama, Louisiana, Mississipi and Texas for directly supporting offshore activities and onshore infrastructure.

From 2007 through 2016, the four Gulf oil and gas producing states will share 37.5 percent of revenues from new leases in the 0.5 million acres in the Eastern Gulf and the 5.8 million acres in the Central Gulf. After 2016, they will share 37.5 percent of revenues from all Gulf leases issued after December 2006.

Importance of revenue sharing for local governments, states and consumers
Revenue sharing from production on federal waters is critical, as it significantly benefits local governments, promotes national economic interests and generates additional federal revenues by increasing state and local participation. Such sharing facilitates a closer partnership among federal, state, and local agencies. Individual states are also afforded additional opportunities to dedicate funds to vital coastal areas and projects, such as coastal conservation, restoration and hurricane protection. In fact, Louisiana has directed that all monies derived from offshore revenue sharing go to coastal protection, wetland mitigation efforts and hurricane protection measures.

Other states have recently expressed a desire to receive the same benefits from oil and gas production off of their coasts, similar to those received by the Gulf states. Several coastal states, such as Virginia, South Carolina and Georgia, have expressed interest in understanding more about their available offshore resources and the royalty revenues that could be derived if development were to occur.
(Modify) (Quote) (Report)