27th September, 2012
Nigeria’s Minister of Petroleum Resources and Chairperson of the Board of the Nigerian National Petroleum Corporation (NNPC), Mrs. Diezani Alison-Madueke, on Wednesday in New York responded to the criticisms by multinational oil companies of some provisions in the Petroleum Industry Bill currently awaiting passage by the National Assembly.
The multinational oil companies led by Shell Petroleum Development Company have criticised the fiscal regime in the Bill which they said will serve as deterrent to investments, especially in deepwater and dry gas projects in the industry.
The complaints of the oil majors are that the fiscal terms as related to taxes and royalties are too favourable to the Nigerian government and in the long run, will be a disincentive to investment in the sector.
“As it stands now,the PIB will render all deepwater projects and all dry gas projects non-viable”, Mutiu Summonu, Managing Director Shell Nigeria said at a Stakeholders’ Forum on PIB in Lagos some days ago.
But throwing more light on why the Federal Government is proposing a review of the fiscal terms in the Production Sharing Contracts for deep water fields in the draft PIB at the 3rd 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 level of 61 percent to a new figure of 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 take to about 73 percent 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 explained.
She added that 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.
The novel 1993 PSC agreement was based on $20 per barrel price for crude oil real time but records indicate that since the start of production in the PSC fields crude prices have been on the upward swing thus the consensus to have a review of the terms.
The Petroleum 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 strong support base for the complete activation of the Gas Master Plan.
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.
It also proposes lower rates on condensate from large fields as well as ultra-deep water fields.
Alison-Madueke called on investors the across the world to embrace the various business opportunities which the oil reform law has on offer.
The high level investment round table with theme: Nigeria-Africa’s Frontier in the Global Economy, was declared open by President Goodluck Jonathan with former British Prime Minister, Tony Blair, and erstwhile US Secretary of State, Dr. Condoleezza Rice, as special guests.
Also present were Mrs. Ngozi Okonjo-Iweala, Minister of Finance and Coordinating Minister of the Economy; Dr. Olusegun Aganga, Minister of Trade and Investment; Governor Godswill Akpabio of Akwa Ibom State; Governor Gabriel Suswan of Benue State; Alhaji Aliko Dangote and Jim Ovia among other dignitaries as well as some prominent Nigerians in the Diaspora.
Earlier in his presentation, Mr. Blair commended the Federal Government for recent initiatives embarked upon to ensure that the Nigerian economy is open to sustainable growth and effective foreign participation.
This view was also echoed by Dr. Rice who called on Nigerians all over the World to support the transformational strides of the current administration.