The Federal Government is planning to clear the N2.7tn owed to gas companies with royalties. The Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, Gbenga Komolafe, disclosed this Thursday during a Zoom meeting organised by the Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, in commemoration of Ekpo’s second year in office.
Royalties are payments made to the Federal Government by oil and gas companies for the extraction of resources from the assets allocated to them. These payments are typically a percentage of the revenue generated from selling the extracted oil and gas.
With the new arrangement, gas companies that are owed by the government for gas supplied to power plants would be sorted through the gas royalties they are supposed to pay to the government.
Komolafe, who was represented by an official of the commission, Dennis Anyanwu, said the NUPRC is playing a critical role alongside other stakeholders to address the legacy debt. Since the majority of the companies owed pay royalties as gas producers, Komolafe said discussions are ongoing about how to extinguish the debt through royalty credits.
“On the issue of legacy power debt, I would like to say that the commission is playing a critical role in conjunction with other stakeholders. One of the solutions that has been canvassed is the extinguishment of the legacy debt through royalty credits. You might note that most of the companies that are owed are gas producers; they pay royalties on gas. So, some of the discussions have been, can such debts be extinguished on the basis of royalty credits that they have?” he asked.
The NUPRC boss added that the regulator, as the agency supervising production and royalty payments, is providing guidance to the government on how to implement the idea without disrupting government revenue flow.
“The commission is providing guidance to the authorities, both to the Decade of Gas and to the minister, on how such a mechanism can be implemented in a manner that is not going to disrupt the industry or even the revenue flow to the government.
“So, being the entity that is charged with the assessment of royalty and the assessment of production, we provide the necessary data and the necessary guidance to address those issues relating to royalty payment and extinguishment of the gas-to-power debt through royalty payment,” Komolafe disclosed.
Reacting, the Chairman of Renaissance Africa Energy, Layi Fatona, lauded the promise of the government to allow the utilisation of royalty credits to settle legacy gas-to-power debt, saying, “It’s bold and very clear in what the intention is.”
However, Fatima charged the commission to ensure the timely implementation of the plan. “The timeliness of implementation is very important and key for each and every one of the nimble operators. And that’s something that I would like to ask the regulator to help in facilitating its implementation,” Fatona stated.
In June, companies producing gas and selling to electricity generation companies called on the Federal Government to address the legacy debt owed to them. The companies under the aegis of the Independent Petroleum Producers Group made the plea during a meeting with the gas minister, Ekpo.
