Government defends PIB content, rejects Shell’s claims


The Federal Government on Thursday rose in defence of the proposed increment of its share from deep offshore oil blocks production from 61 to 73 per cent as contained in the draft Petroleum Industry Bill, PIB, currently before the National Assembly.

Following the submission of the draft PIB by President Goodluck Jonathan to the National Assembly last July, multinational oil companies operating in the country have continued to criticise some aspects of the proposed law, which tends to impose increased fiscal and tax burdens on them.

Under the drafted PIB, all categories of oil companies are to pay a Nigerian Hydrocarbon Tax, of 50 per cent on profits from production in onshore and shallow water areas; 25 per cent tax from frontier acreages and deep offshore water areas; and a company income tax of 30 per cent.

The two-tier tax rate is line with government’s resolve to establish a progressive fiscal framework that would encourage further investment in the petroleum industry, while optimising revenues accruing to the government.

But, speaking at the stakeholders forum on the PIB organised by the Nigerian Extractive Industries Transparency Initiative last week in Lagos, Managing Director, Shell Nigeria, Mutiu Sunmonu, said the fiscal terms proposed in the new law are not only uncompetitive, but would stifle investments and make offshore oil and gas projects unviable.

However, the Minister of Petroleum Resources, Diezani Alison-Madueke, said government’s decision to propose a review of the fiscal terms in the Production Sharing Contracts, PSCs, for deep water fields from 61 to 73 per cent  in the draft PIB was informed by the need to make the country’s petroleum industry meet global realities.

“I like to state that the proposed increase of government take to about 73 per cent is not only competitive, but also considerate, when we look at the scale of other entities around the world, like Norway, Indonesia and even Angola, with even higher government takes,” the Minister said in her speech at the 3rd African Business Roundtable Nigeria Investment Summit in New York.

According to the minister, based on prevailing realities in the global oil industry, it was only natural to review the terms of the PSC to reflect the current trend, pointing out that the novel 1993 PSC agreement was based on crude oil price of $20 per barrel.

She said since the commencement of oil production in the PSC fields, crude oil prices have maintained a steady upward swing, necessitating the decision to review the fiscal terms.

“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 strong support base for the complete activation of the Gas Master Plan,” Mrs. Alison-Madueke said.

“Under the new arrangement, fiscal regime is anchored on royalty and tax, which is now predicated on production, as opposed to terrain and investment as was previously done.

“Royalty by production as outlined in the Bill is designed to capture the output of company as opposed to its location while creating a fair balance between small and big operators operating in the same terrain, thus giving operators the opportunity to make fair returns during field decline,” she added.

The minister, at the forum themed – Nigeria-Africa’s Frontier in the Global Economy, called on investors around the world to embrace the various business opportunities offered through the oil reform law.

The roundtable was declared open by President Goodluck Jonathan, with former British Prime Minister, Tony Blair, and former U.S. Secretary of State, Condoleezza Rice, as special guests.


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