‘9 oil wells’ award to Bayelsa illegal

President Goodluck Jonathan

President Goodluck Jonathan acted illegally by granting a special concession to his native Bayelsa State to earn more from 13 percent derivation enjoyed by mineral producing states, sources in the Revenue Mobilization Allocation and Fiscal Commission (RMAFC) told Daily Trust yesterday.

“What the President did was wrong and unconstitutional because before any concession can be granted, you need to amend the On-shore/Off-shore Dichotomy Abrogation Act 2004 and it is only the National Assembly that can do that,” a source in RMAFC told Daily Trust.

“By implication, the concession gives Bayelsa 6 percent and this will deprive some non-oil producing states of revenue,” another source said.

On August 31, a Presidential concession on derivation was granted to Bayelsa to earn more oil revenue following a petition to the President by the state governor, Chief Timipre Sylva on February 16, alleging denial of revenue to his state.

Analysts said such move was a breach of the derivation principle by President Goodluck which will make Bayelsa the richest oil state in the country.

The concession allows Bayelsa to receive extra derivation revenue for offshore on the nine oil wells located beyond the 200-metre isobaths on grounds of ecological damage to the state from the operation of those oil wells.

The concession was granted because of “the environmental impact of the activities of oil exploitation as well as the security implications borne by the operations of the exploration companies (operating the nine oil wells) deal devastating effect on Bayelsa State.”

Based on the concession and the revised 13 per cent derivation indices for July, Bayelsa State is ahead of others with 15,995,773 bbls. It is followed by Rivers State (13,317,840 bbls), Akwa Ibom State (12,796,954 bbls) and Delta (11,163,493 bbls).

Akwa Ibom had the highest before the concession and subsequent revision of the volume of oil production to each state. This was followed by Rivers State, 12,636,795 bbls; Delta State, 11,163,493 and Bayelsa State, 10,313,368 bbls.

An oil industry source told Daily Trust that such concession could trigger a spate of court actions and constitutional crisis. He said the exclusive concession to Bayelsa State to enable it to earn more derivation revenue is in breach of the Act of the National Assembly that abrogated the offshore-onshore dichotomy in the application of the 13 per cent derivation principle.

He said this could lead to agitation and court action by other states such as Lagos which also have oil wells located beyond the 200-metre isobaths in waters within their boundaries.

If the concession is implemented, net revenue that would be available to the Federation Account for distribution to the three tiers of governments would be reduced.

Revenues from oil wells outside the statutorily allowed 200-metre isobaths did not form part of derivation calculation in the law that ended the onshore-offshore dichotomy. Such revenues were pooled and shared to all the federating units based on the prescribed revenue formula.