International oil companies operating in Nigeria have expressed worries that proposals in the long-delayed oil industry law will deter investment in new offshore projects.
At least half of Nigeria’s total crude output is from offshore oilfields, helping to offset declining production from mature onshore assets. But recent discoveries have remained undeveloped in the face of regulatory and legislative uncertainty, according to Bloomberg report.
“Our review of the Petroleum Industry Bill shows that deepwater provisions do not provide a favorable environment for future investments and for the launching of new projects,” Mike Sangster, managing director of Total SE’s Nigeria unit, told lawmakers at a hearing in Abuja, the capital.
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 legislation that’s two decades in the making will 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 per cent out of the $70 billion spent 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.”