Draft Petroleum Industry Bill Reduces Exploration Taxes for Foreign Energy Company
The newly revised petroleum industry draft bill recently approved by the Federal Executive Council and ready for submission to the National Assembly reduced taxes to be paid by producers after energy companies opposed initial proposals as too high.
The Petroleum Industry Bill, which was approved by the Cabinet on July 11 for presentation to the Parliament, proposes 50 percent tax for onshore and shallow fields and 20 percent for deepwater fields, according to a copy of the bill obtained by Bloomberg. The original proposals were for 85 percent and 50 percent respectively.
A fiscal framework was “developed to make the industry more investment friendly and make it more profitable for investors,” Petroleum Minister Diezani Alison-Madueke said on July 11. At a time when more African countries are becoming oil producers, Nigeria needed to take measures to attract investors and remain competitive, she said.
According to Bloomberg, The bill, which seeks to reform the way the oil industry of Africa’s top producer is regulated and funded, was first introduced to the parliament more than three years ago. Lawmakers were unable to pass it before the end of the last legislative session in May 2011. Energy companies including Shell, Chevron Exxon Mobil Corp, Total SA and ENI Spa said in a joint presentation to lawmakers in 2009 that the proposed tax increases would make exploration “uneconomical.” They pump more than 90 percent of the country’s oil through ventures with state-owned Nigerian National Petroleum Corp, Bloomberg said.
Under the new bill, energy companies will be required to remit 10 percent of their profits to a fund to help develop communities in the oil region and curb sabotage bred by resentment to ecological damage from oil activities.