International energy companies operating in Nigeria have said that proposals in Nigeria’s Petroleum Industry Bill will deter investment in new offshore projects.
“Our review of the Petroleum Industry Bill shows that deepwater provisions do not provide a favourable environment for future investments and for the launching of new projects,” Mike Sangster, managing director of Total SE’s Nigeria unit, was quoted as telling lawmakers at a hearing in Abuja.
To boost new investment, the proposed law should grant deepwater oil projects full royalty relief for the first five years of production or a graduated royalty program, said Sangster, speaking on behalf of the Oil Producers Trade Section, a group of 30 producers including Total, Royal Dutch Shell Plc, Exxon Mobil Corp., Chevron Corp. and Eni SpA, which he chairs.
The bill aims to streamline how Nigeria’s energy assets are operated and funded. First presented in parliament in 2008, progress in passing the bill was held up by political wrangling and objections from international oil companies that say the government is demanding an excessive increase in revenues.
Nigeria, Africa’s top oil producer, is facing growing competition for new investments. Nigeria was able to attract only $3 billion, or 4%, out of the $70 billion committed on new projects in Africa between 2015 and 2019, Sangster said.
In a joint presentation, the OPTS urged lawmakers to remove a proposed hydrocarbon tax as producers will still be subject to companies income tax.
In relation to gas, “the PIB should provide a clear path for transitioning to a free market-based pricing, not add additional compliance conditions on domestic gas delivery obligations as a precondition for export gas supply,” Sangster said.
The producers also worry the proposals don’t explicitly preserve the terms of existing oil investments.
“We recognize the government’s right to change laws but the PIB must explicitly preserve rights” for all existing oil leases, Sangster said. “Operators should be allowed to retain the entirety of their lease areas and new terms should apply to new contracts, licenses and leases.”
The persistent failure to pass the bill “has been a major drag” on the oil and gas sector, Ahmad Lawan, president of Nigeria’s Senate, said on Jan. 25 as he opened two days of public hearings on the proposed legislation. The delays have harmed the country’s ability to “attract both local and foreign capital” at a time of greater competition with other resource-rich nations, he said.