NIGERIAN PETROLEUM REGULATIONS AND FISCAL TERMS CSLD

Transcription

1 NIGERIAN PETROLEUM REGULATIONS AND FISCAL TERMS

2 OUTLINE OF PAPER LEGISLATIVE ENVIRONMENT TYPES OF LICENCES/LEASES KEY FEATURES OF UPSTREAM JOINT VENTURE AGREEMENTS KEY FEATURES OF PSC KEY FEATURES OF GDA BACK IN RIGHTS REGULATION FISCAL REGIME

3 LEGISLATIVE ENVIRONMENT Sophisticated 80 Legislation affect Petroleum Industry in Nigeria CONCESSION REGIME PETROLEUM ACT 1969 (CAP P10 LFN 2004) All Petroleum (Oil & Gas) In Situ as Belonging To The Federal Government of NIGERIA All Licenses And Leases For Concessions Issued By The Minister Of Petroleum Resources Defines Types of Licenses Issued Defines Regulatory Regime 12 key legislations listed in guidelines All awardees need to studies these carefully

4 TYPES OF LICENCES & LEASES OIL PROSPECTING LICENCES (OPL) Grants Exclusive Rights To Prospect for Petroleum In Acreage DURATION Shall not exceed Five Years ( 3 +2) For Onshore & Shallow Water 10 Years ( 5+5)For Deep Offshore & Inland Basin (Decree No. 9 Of 1999) Deep offshore means any water depth beyond 200metres Inland Basin means any of the following Basins Anambra, Benin, Benue, Chad, Gongola, Sokoto and such other basins as may be determined from time to time by the Minister Holder may carry away and dispose of petroleum won during prospecting operations, subject to fulfillment of obligations imposed under the Act.

5 TYPES OF LICENCES & LEASES-3 OIL MINING LEASE (OML) May only be granted to the holder of an OPL who has Satisfied all the conditions imposed on the licence or under the Act, or Discovered oil in commercial quantities Duration 20 years Exclusive Right to search for, win, work, carry away and dispose of Petroleum Licence or lease may only be granted to: A citizen of Nigeria or A company incorporated in Nigeria under the CAMA Ten years after the grant of an OML, one-half of the area of the lease shall be relinquished

6 REVOCATION OF LICENCE/LEASE The Minister may revoke an OPL or OML if in his opinion the licencee/leasee: Is not conducting operations continuously and in a vigorous manner and in accordance with good oilfield practice; or Has failed to comply with any provisions of the Act or any regulations thereunder; or Fails to pay due rent or royalties whether or not demanded for by the Minister Failed to furnish such reports on his operations as the Minister may lawfully require

7 POWER OF THE MINISTER UNDER THE ACT The Minister under the Act: Has access to the areas covered by the licence/lease for the purpose of inspecting operations conducted therein and enforcing the provisions of the Act. May suspend operations in any oil field where in his opinion the Act has been contravened Must give prior necessary approval before the assignment of a licence/lease or any power thereunder. Most of these powers have been delegated to the DPR.

8 DISPUTE RESOLUTION Where by any provision of the Act a dispute arises, it is to be settled by recourse to Arbitration in accordance with the laws of Nigeria. S. 41 of 1 st Schedule to Pet Act requires Disputes arising from OPLs and OMLs granted under Act to be settled by Arbitration All NNPC Petroleum Development Agreements therefore have provisions for Settlement of Arbitration under Nigerian Arbitration Act

9 Upstream Petroleum Development Arrangement-1 Prior to 1973 Only concessions all owned by Foreign Multinationals Payment of Petroleum Profit Tax & Royalty To Govt Participation Agreements Initial Entry By GOVT In 70s GOVT Acquired Participating Interest In Existing Producing OMLS Undivided interest in OPLs/OMLs, fixed immoveable assets, development, production, transportation storage export facilities

10 Upstream Petroleum Development Arrangement-2 Joint Operating Agreements Production Sharing Contracts Service Contracts New Service Contract 2000 Capacity Building NNPC Operator Within Five Years

11 PRODUCTION SHARING CONTRACTS (PSC) 1 Deep Water PSCs: 1993 Version Shell (SNEPCO) Bonga, Statoil 2000 / 2001 Version ChevronTexaco, Exxon Mobil, SNEPCo, Phillips, Agip, NPDC, Petrobras, Four Indigenous coys. NPDC / NNPC Subsidiary executing JOA with multinationals as PSC contractor to NNPC in deepwater 2005 Bidding Round Bidding will be based on modified form of 2000 PSC

12 PSC 2 Concession solely owned by NNPC Contractor bears all costs - such costs will not be reimbursed if no find is made in the acreage. If oil is found Cost is recoverable with crude oil referred to as cost oil which reimburses contractor for Capex and Opex Profit Oil: balance after deduction of tax oil and cost oil, shared between Government and contractor in agreed proportions. However Tax Oil is lifted by Government to cover actual tax and royalty obligations.

13 PSC-3 NNPC is holder of licence Contractor provides all funds Automatic termination of contract if oil not discovered within OPL period If oil discovered in commercial quantities, need for conversion from OPL to OML and Contractor begins to receive Cost Oil as reimbursement for funding done Measure of control and supervision by NNPC

14 Improved Provisions of PSC 1999 to date Strengthen Provisions on training and employment of Nigerians Operator obliged to submit to NNPC detailed program for recruitment and training of Nigerians in order to achieve targets set by parties Operator obliged to employ Nigerians in all non specialized positions For specialised positions operator can employ non Nigerians only if qualified Nigerians not available Specified Nigerianization provided to ensure that within 10 years from effective date of contract minimum numbers of Nigerians in operating Companies shall reach 80% in Managerial and 85% in other professional positions Agreement emphasized provisions of the Law that no Nigerian shall be disengaged without the prior written approval of the Ministry of Petroleum Resources

15 Improved Provisions of PSC 1999 to date-2 Introduced provisions for negotiations in the event of changes in law. Clarified provisions to ensure no interest charges allowed for contractor or external funding in PSC In order to ensure transparency in the build up of costs, inserted provisions to oblige Contractor to provide NNPC with all its economic data and recently to bid for all affiliate services above $250, Improved profit split for NNPC/ Govt. Introduced more provisions on local content materials and people

16 TERMS OF PSC Duration: Initial term is 30 years, consisting of 10 years exploration period and 20 years term of OML derived from OPL NNPC s obligation to obtain a renewal of each OML as and when due and if granted, the contract will further continue for a term equal to the renewal period at the option of either party. Exclusion of Areas: Before the end of 10 years, 50% of area will be excluded from the contract area Area to be agreed by the parties and shall not include any part corresponding to the surface areas of any field in which crude oil has been discovered in commercial quantities.

17 TERMS OF PSC Appoints awardee as contractor to NNPC for Petroleum Operations for OPL and grants Contractor exclusive rights to conduct Petroleum Operations in acreage Grants Contractor right to conduct Petroleum Operations- incl financing and technical All with prior approval of NNPC

18 TERMS OF PSC-2 Work Programmes and Expenditure: Mgt Comm. established by the parties for directing matters concerning petroleum operations and Work Programmes Members of Management Committee 10-5 NNPC: 5 Contractor; Chair NNPC Contractor required at least 3 months prior to the beginning of each year to prepare and submit to the Mgt Comm a work programme and budget for the forth coming year. Mgt Comm. to review and approve Work programme in accordance with the provisions of the contract

19 Terms of PSC Available crude Oil Allocated:- Royalty Oil/ Production charge Cost Oil Profit Oil Tax Oil

20 Terms of PSC Signature Bonus Bid to be paid within 30 days of execution of PSC PSC must be executed within 30 days of award Production Bonus 2 million dollars at 50 Million barrels; 2 Million dollars at 100 Million barrels Signature Bonus/ Production Bonus not recoverable against cost Oil

21 Key features of GDA 1. Purpose of Gas Development Provide for development of gas discoveries in contract areas covered by PSCs with NNPC 2. PSC FOR OIL - Because OPL belongs to NNPC all gas discoveries belong to NNPC - Clause on gas provides: - If gas is discovered in commercial quantity accidentally or upon investigation of commercial gas potential of acreage then - Contractor produces proposals for commercial development of gas for NNPC approval - Upon NNPC approval contractor can undertake commercial development by way of separate agreement -

22 PROPOSAL FOR GAS DEVELOPMENT UNDER PSC Development Plan Budget & work program must show commercially attractive project for - Contractor - NNPC/Government Must also show market and financiability Must be commercially attractive without need for additional incentives Current fiscal regime applicable

23 GAS DEVELOPMENT AGREEMENT Contractor provides funds for appraisal, development and production of gas Contractor recovers investment through allocation of gas production cost gas Contractor has right to market its own cost gas and its profit gas Tax gas and NNPC Profit gas to be marketed by NNPC

24 GDA (CONTD) - Tax gas allocated to NNPC in such quantum as will generate enough revenue to pay tax liability for contractor and NNPC - Ring Fencing investment in gas can only be recovered from gas produced and cannot be consolidated against oil income

25 FISCAL REGIME Companies Income Tax Act Petroleum Profits Tax Act Memorandum of Understanding Deep Off-shore and Inland Basin Decree

26 Companies Income Tax Act Provides for taxation of Nigerian companies Although S.19 exempts companies engaged in petroleum operations, the Service Contract Arrangement is taxed under the CITA

27 Petroleum Profits Tax Act 1958 Referred to as Government take Deals with mode of ascertaining assessable tax, chargeable tax, preparation and delivery of accounts and particulars, collection, recovery of tax Taxable profits are those directly resulting from the companies petroleum operations for the period Deduction of expenses and other outgoings that are wholly/ necessarily incurred within or outside Nigeria for the purposes of petroleum operations.

28 Summary of Fiscal Terms Taxes Variable taxes are applicable for the different terrain, as follows: Terrain Onshore/Shallow offshore First five years (producing companies) 85% First five years (new comers) 65.75% Subsequent years (all companies) 85% Deep offshore and frontier basins: Flat rate 50%

29 DEEP OFFSHORE INLAND BASIN DECREE PPTA rate has been reduced from the existing 85% to 50% flat rate of chargeable profits 50% flat rate investment tax allowance for qualifying capital expenditure incurred wholly for the purposes of the petroleum operations. Graduated royalty rate of 12%, 8%, 4%, 0% for production with certain water depths Recovery of operating costs in US$

30 Summary of fiscal terms Royalties The rates are graduated as follows: Area Rate onshore 20.0% from 100 metres 18.5% from 101 to 200 metres water depth 16.5% from 201 to 500 metres depth 12% from 501 to 800 metres depth 8% from 801 to 1000 metres depth 4% Beyond 1000 metres depth 0% Inland Basins 10% Supplementary Royalty 801 to 1000 metres 4% Above 1000 metres 8%

31 Summary Fiscal Terms (c) Investment Tax Allowance Land operation 5% Offshore depth < 100m 10% Offshore from 100m to 200m 15% Deep offshore (water depth greater than 200m) 50% Inland Basin 50%

32 Fiscal regime for Gas Totally different regime At the moment in the process of amendment in the form of a draft Gas Fiscal Reform Bill being considered by Govt.

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