The federal government of Nigeria has began preliminary talks with international oil companies to settle a dispute over revenue.
The government, citing a 2018 Supreme Court ruling, says it’s entitled to $62 billion from the companies after they failed to comply with a 1993 law that hands the state a greater share of income when oil exceeds $20/bbl. The companies are challenging the claim.
“We have opened up a process of engagement between the parties,” Justice Minister Abubakar Malami told Bloomberg weekend.
“Whether those discussions will eventually translate to settlement, whether it will translate to opening up of a full-blown negotiation process, is what we wait to see.”
President Muhammadu Buhari is trying to bolster government funds after crude output and prices dropped. Nigeria relies on oil for at least two-thirds of state revenue and more than 90 per cent of foreign-currency income.
Most of Nigeria’s crude is pumped by Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp., Total SA and Eni SpA, who operate joint ventures with state-owned Nigerian National Petroleum Corp.
Under production-sharing legislation, the companies agreed to fund the development of deepwater oil fields on the basis that they would share profit with the government after recovering their costs. Crude was selling at $9.50/bbl when the law became effective 26 years ago, and is now trading above $60 in London.