Nigeria’s minister of state for petroleum resources, Timipre Sylva, has unveiled long-awaited changes to the tax terms governing oil exploration and production licences.
The minister said federal officials are “not unmindful that the industry players are of the view that the current level of taxation on onshore and shallow water operation is excessive”.
“Therefore, the proposed Petroleum Industry Bill (PIB) should include a significant lowering on these taxes for new investments and for existing operations,” Sylva said.
“Maximum fiscal environment”
Sylva announced that under the new law, which will soon begin undergoing a series of readings before the Nigerian House of Representatives and Senate, “Lowering of royalties is contemplated, particularly for low levels of production per field.”
He added: “It is therefore our hope that the future is more positive and attractive for the Nigerian petroleum industry after the passage of the PIB.”
The petroleum resources minister, who was speaking as a guest of the Nigerian Association of Petroleum Explorationists (NAPE), the largest grouping of oil industry technical personnel, said: “In the short term, the government will need a maximum fiscal environment to deal with the COVID-19 crisis.”
Sylva added: “We are proposing in the new law, a grandfathering,” which, in his view, “will preserve current government while also guaranteeing investors return. It also guarantees that investors can continue with existing operations while earning favourable returns.”
The proposed PIB framework shall, he said, “be based on core principles of clarity, dynamism, neutrality, open access and fiscal rules of general application”.
At the same time, investments in new equities “will be encouraged with attractive competitive terms in order to achieve economic growth. Investors in existing assets will be able to sign conversion contracts to obtain better terms for existing production and be able to explore and produce parts of the existing blocks under the new terms.
“Investors that also want to continue operating under current fiscal terms can elect to do so.”
The minister, who is also a former governor of the country’s third-largest oil producing state, Bayelsa, gave further details during the discourse. “Host communities will be adequately covered to foster sustainable prosperity within the communities,” Sylva said, “and provide direct social and economic benefits from petroleum operations to the host communities.”
Nana Abena Boakye-Boateng