PENGASSAN faults 30% oil revenue claim, demands review of Petroleum Industry Act
The President of the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), Festus Osifo, has dismissed claims that 30 per cent of oil revenue under production sharing contracts is being directly deducted from the gross earnings of the Nigerian National Petroleum Company Limited.
Speaking during a televised interview, Osifo argued that the public narrative surrounding the Federal Government’s recent executive directive on oil revenue remittance does not accurately reflect the fiscal structure embedded in Nigeria’s petroleum contracts.
According to him, the 30 per cent figure repeatedly cited in policy discussions is not calculated from total crude oil revenue, but from what remains after multiple statutory deductions.
At the centre of the debate is the Presidential Executive Order to Safeguard Federation Oil and Gas Revenues and Provide Regulatory Clarity, 2026, signed by President Bola Tinubu on February 18.
The directive mandates that royalty oil, tax oil, profit oil, profit gas and other upstream earnings be paid directly into the Federation Account Allocation Committee, effectively removing the retention authority previously exercised by Nigerian National Petroleum Company Limited (NNPC Ltd).
Revenue structure under scrutiny
Osifo explained that under production sharing contracts (PSCs), revenue flows follow a layered deduction process before profit oil is determined.
First, royalties are paid. Next, taxes are deducted. Cost recovery—covering operational and capital expenditures incurred by contractors—follows. Only after these layers are accounted for does what is termed “profit oil” or “profit gas” emerge.
It is from this profit oil component, he stressed, that the 30 per cent management fee and frontier exploration allocation provided for under the Petroleum Industry Act (PIA) is calculated.
“In effect, when all the statutory deductions are made, the 30 per cent being referenced amounts to roughly two per cent of total PSC revenue,” Osifo stated, arguing that the framing of the policy debate has created a misleading impression that nearly a third of gross oil earnings is withheld.
Industry analysts note that PSC arrangements are designed to balance risk-sharing between the state and contractors. Cost recovery mechanisms allow operators to recoup investments before profits are split. As such, the profit oil base is significantly smaller than headline revenue figures.
Operational and labour implications
Beyond technical clarifications, PENGASSAN warned that stripping NNPC Ltd of the retained portion without legislative amendment could disrupt operational stability.
Osifo noted that the retained earnings contribute to funding salary obligations, administrative costs, and other corporate commitments within the national oil company.
He questioned how NNPC Ltd would meet recurrent expenditures if the executive order is implemented without transitional financial arrangements.
“If these funds are removed abruptly, there must be clarity on alternative funding mechanisms,” he said, cautioning that workforce morale and project execution could be affected.
The union also raised concerns about regulatory certainty. According to Osifo, international investors closely monitor the predictability of fiscal regimes. Sudden policy adjustments, particularly those perceived as overriding existing legislation, could influence risk assessments in Nigeria’s upstream sector.
Nigeria has been seeking to attract fresh capital into exploration and production following years of underinvestment and declining output. Stakeholders fear that legal ambiguities could complicate ongoing negotiations and bid processes.
Call for legislative pathway
Central to PENGASSAN’s position is the argument that any modification to the PIA must pass through the National Assembly. Osifo maintained that executive orders cannot override statutory provisions enacted by lawmakers.
He urged the President to constitute a review panel comprising industry operators, labour representatives, regulators and fiscal experts to evaluate the strengths and weaknesses of the PIA.
The outcome of such a review, he suggested, should be formal amendments submitted to parliament for debate and approval.
“There is no law that is perfect,” Osifo said. “But the proper approach is legislative refinement, not unilateral executive alteration.”
Legal scholars observing the dispute note that the PIA was enacted to provide long-term regulatory clarity after decades of reform attempts. Any perceived circumvention of its provisions, they argue, may raise constitutional questions and prompt judicial interpretation.
Federation revenue and fiscal pressures
Supporters of the executive order contend that direct remittance of upstream revenues to the Federation Account could enhance transparency and boost allocations to federal, state and local governments. With public finances strained by subsidy reforms, exchange rate volatility and debt servicing obligations, revenue optimisation remains a policy priority.
However, critics caution that reforms must strike a balance between fiscal consolidation and sector sustainability. If operational funding gaps emerge within NNPC Ltd, the broader oil and gas ecosystem could experience knock-on effects, including delayed projects and reduced production efficiency.
Energy economists suggest that a comprehensive fiscal impact assessment would clarify the net effect of the policy shift. Such analysis would weigh potential gains in federation inflows against possible disruptions to upstream investment planning.
Investor confidence and policy stability
Osifo underscored that investor sentiment is sensitive to regulatory signals. “If the international community and investors lose confidence in Nigeria, it has consequences,” he warned.
Nigeria’s oil sector competes globally for capital, particularly as energy transition dynamics reshape investment portfolios. Stable legal frameworks and predictable fiscal terms are often cited as decisive factors in capital allocation decisions.
As debates intensify, the coming weeks may determine whether the executive directive proceeds unchanged or evolves into a broader legislative engagement process.
For PENGASSAN, the priority remains safeguarding both workers’ interests and the integrity of the petroleum governance framework.
The unfolding discussion underscores a larger policy dilemma: how to maximise public revenue from hydrocarbons while maintaining institutional stability and investor trust.
Whether through executive recalibration or parliamentary amendment, the resolution of this dispute will likely shape Nigeria’s oil and gas trajectory in the years ahead.
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