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20 Jan

OIL AND GAS 2.3A REVENUE ALLOCATION

REVENUE ALLOCATION.

From Section 162 of the 1999 constitution we can see that revenue is any income or return accruing to or derived by the government of the federation from any source. Revenue here is the income accruing from the oil and gas industry to the government. Revenue allocation therefore entails how the government shares this income.

Note Section 162 of the 1999 Constitution which mandates the government to maintain a “Federation Account” into which revenue accruing to the FG is credited.

There are various factors which the government is to take into consideration in revenue allocation like; equality, population, land mass, derivation and so on.

The first thing to establish is that the ownership in oil is vested in the Federal Government[1]. This notwithstanding, the host communities and states (where the oil is found in)l usually seek to establish ownership or at least claim greater derivation interest. This attitude can be seen in Continental Shell Offshore Newfoundland[2] Re: Offshore Minerals Rights of British Columbia[3], United State V California[4], United States V Texas, United States V Maine[5] and a host of other cases.

In Nigeria[6] the dispute was brought to the fore in AG Federation V AG Abia and Others[7], where the littoral states contended that their territory extended offshore as far as the continental shelf. Therefore, they laid claim to natural resources derivable from their territorial waters (relying on Section 4 of the Allocation of Revenue (Federation Account) Act). This claim was rejected by the Supreme Court. Similarly, in South Atlantic Petroleum Ltd v. Minister of Petroleum Resources[8] the court held that petroleum resources in Nigeria are vested in the Federal Government. Although the littoral states were granted respite by the Offshore/Onshore Dichotomy Abolition Act 2004 was later passed to entitle the states to derivation interests in offshore resources located within 200 meters water depth.

 

 

[1] For example; Section 44(3) of the 1999 Constitution, Section 2 of the Petroleum Industry Bill (PIB), Section 1 Petroleum Act, Section 1 of the Minerals Act vest ownership of oil and gas including those in the territorial waters, continental shelf, and Exclusive Economic Zone in the Federal Government of Nigeria.

[2] [1984] S.C.R. 86.

[3] [1967] S.C.R. 792.

[4] 332 U.S 19 (1947)

[5] United States V Maine, 420 U.S. 515, 516-17 (1975).

[6] The Littoral States often rely on Section 1 of the Offshore Oil Revenue (Registration of Grants) Law, (which provides that registration of Oil Mining Licences for offshore areas shall be done in the concerned littoral state) Section 162(2) of the 1999 Constitution (entitling gas producing states to not less than 13% of the oil and gas revenue accruing to the federation account).

[7] [2002] 6 NWLR Pt. 764 542

[8] (2006) 10 CLRN 122

Isochukwu

Quite eccentric really

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