Nigeria to Increase Share of Offshore Oil Profits

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Nigeria oil production e1335804120617 photo

Crude production facility in Nigeria

Nigeria’s Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, late Wednesday threw more light on why the Nigerian Government is proposing a review of the fiscal terms covering the Production Sharing Contracts (PSCs) for deep water fields in the draft Petroleum Industry Bill (PIB) currently before the National Assembly for consideration.

Speaking at the third Nigeria Investment Summit held in New York under the auspices of the African Business Roundtable, Alison-Madueke noted that the increase in government take in the deep offshore blocks from the current 61 per cent to 73 per cent was necessitated by prevailing realities in the global oil and gas industry.

“I like to state once again that the proposed increase of government’s take to about 73 per cent is not only competitive but considerate when we look at the scale of other entities around the world like Norway, Indonesia and even Angola with even higher government take,” the minister said.

Alison-Madueke added that based on the prevailing realities in the global oil industry, it was only natural to review the terms of the PSC to reflect the current trend.

The 1993 PSCs were based on $20 per barrel as the price of crude oil but since the start of production from the PSC fields, crude prices have risen multiple-fold, thus the need to review the terms.

The minister also stated that the new PIB provides for a refreshing fiscal regime, which has strong incentives for enhanced exploration of new frontiers, especially in the inland sedimentary basins as well as providing a strong support base for the complete activation of the Gas Master Plan.

Under the new arrangement, the fiscal regime is anchored on royalties and taxes, which will now be predicated on production as opposed to terrain and investment, as had obtained in the past.

Alison-Madueke called on investors across the world to embrace the various business opportunities that the oil reform law would offer.

The high level investment round table was declared open by President Goodluck Jonathan with former British Prime Minister Tony Blair and ex-US Secretary of State, Dr. Condoleezza Rice, as special guests.

Despite the minister’s explanation, international oil companies (IOCs) operating in the country continue to express reservations about the fiscal terms in the revised PIB.

Anglo-Dutch oil giant, Shell, which spoke out against some sections of the PIB on Wednesday, was joined by ExxonMobil Thursday.

ExxonMobil’s chief executive in Nigeria, Mark Ward, who also leads a grouping of oil majors operating in Nigeria, said industry players shared the view that the current bill jeopardises Nigeria’s bid to boost new investment and output.

“Quite frankly, the extremely large investments that are needed are seriously at risk under the proposed PIB terms,” he told a forum on the bill in Lagos.

If the bill passes without significant changes, “the government’s aspirations to grow the business and the industry will not be met,” he said.

Ward argued that the new bill could push the government’s take from oil revenue to above 90 per cent of all revenue.

“Nigeria is already one of the most onerous fiscal regimes and now the government wants to make it tougher? That is something we don’t understand,” Ward said.

Any hopes of expanding lucrative offshore production would be quashed if the bill passes unchanged, Ward said.

“For deep water, we’re done. There are no investments that can be supported under the current terms of the PIB,” he said.

Meanwhile, both chambers of the National Assembly have finished a first reading of the bill, paving the way for lawmakers to debate the long awaited legislation, Speaker, House of Representatives, Hon. Aminu Tambuwal, said.

According to reports, the lower house read the bill yesterday, Tambuwal said, while the Senate read it last week.

A previous draft never got through parliament, although this time the bill has the explicit backing from the president, who approved the latest draft in July.