Key provisions in Nigeria’s long-sought oil overhaul


Lagos — Nigerian legislators sent a sweeping oil industry overhaul bill, in the works for 20 years, to President Muhammadu Buhari for his signature last week. The president is expected to sign it.

The package sweetened terms for oil majors but included provisions that could foster resentment in oil-producing communities. Below is an outline of some key provisions.

ROYALTIES AND TAXES

Oil majors successfully pressed for several changes, arguing that Nigeria, Africa’s largest oil exporter must become more competitive to attract a shrinking amount of fossil fuel development money.

The package would:

* Reduce oil royalty rates by 2.5-3.5% from the original proposal, for onshore, shallow water and deepwater oil production.

* Remove additional hydrocarbon taxes of 5%-10% on deepwater licences and lower the hydrocarbon taxes for onshore and shallow water licenses. Producing companies also pay a 30% corporate tax.

* Lower production-based royalties for natural gas and natural gas liquids to 5% from the current 7%, and to 2.5% if the gas is used in Nigeria.

FUEL RULES

The bill would remove price controls on gasoline and boost fuel-quality standards to 50 ppm sulphur – changes long-sought by campaigners against pollution and for fiscal responsibility.

It would also add fuel-import licence requirements, with only those with Nigerian oil refining licences or international oil trading experience eligible.

Volumes would be based on production capacity or market share.

Some experts said it would limit competition and could give an effective monopoly to the Dangote Group, which is building a 650,000 bpd oil refinery.

FRONTIER VS OIL COMMUNITIES

The Southern Governors Forum and oil-producing communities decried provisions dedicating money to developing “frontier” oilfields, which are concentrated in northern Nigeria, and sought more money for their communities.

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* The final bill would direct 30% of NNPC Limited’s oil and gas profit to developing frontier oilfields.

* It would earmark 3% of annual operating expenditure of companies to existing oil-producing communities, up from 2.5% in the original proposal. The communities had sought 10%.

Observers worry the bill could trigger unrest in the turbulent Niger Delta, which produces the bulk of Nigeria’s oil.

THE FUTURE OF STATE OIL

Despite a push to make state oil company NNPC publicly traded, to improve transparency and fundraising abilities, share sales would have to be specifically approved by the government, under the bill.

* NNPC would become a limited liability company, with shares held by the ministries of petroleum and finance and its board appointed by the president.

* The two ministries would determine which assets and liabilities would be transferred to NNPC Limited, with the remainder transferred to the government.

  • Reuters (Reporting By Libby George; Editing by Pravin Char)



This article was originally posted at sweetcrudereports.com

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