By Adedapo Adesanya
A cabal of oil and gas investment giants in Nigeria has proposed the removal of hydrocarbon tax on oil production in the revised Petroleum Industry Bill (PIB).
This call was made by the Chief Executive Officer of Total Exploration and Production Nigeria Limited, Mr Mike Sangstar, who doubles as the chairman of the Oil Producers Trade Section (OPTS) of the Lagos Chambers of Commerce and Industry (LCCI).
Speaking at a public hearing on the bill at the National Assembly, the Total chief noted that the removal of the levy was a necessity as the provision in the intended legislation would mean companies would still be subject to Company Income Tax (CIT).
Making his case for the oil big boys, including Total, Chevron, Exxon Mobil and Shell, he said the bill failed to address the key challenges facing gas development in Nigeria such as inadequate midstream infrastructure, regulated gas pricing, huge and long outstanding debts, thereby potentially jeopardising the realisation of government’s aspirations for the domestic gas sector.
He suggested that the bill should provide a clear path for transitioning to free market-based pricing, not add additional compliance conditions on domestic gas delivery obligations as a precondition for export gas supply and allow pre-existing contracts and agreements to run their course.
The bill, according to Mr Sangster, does not clearly preserve the terms of existing investments.
“OPTS recognises the government’s right to change laws. However, to maintain Nigeria’s reputation amongst investors, it is important for the PIB to explicitly preserve base businesses and rights for existing Joint Venture licenses and leases and Production Sharing Contracts, which form the basis for future growth.
“Operators should be allowed to retain the entirety of their lease areas and new terms should apply only to new contracts, licenses and leases,” he said.
Business Post had reported that PIB had suffered setbacks for about 20 years. The bill proposes the scrapping of the Nigerian National Petroleum Corporation (NNPC) and the Petroleum Product Pricing Regulatory Agency (PPPRA).
It proposes the replacement of these bodies with the creation of the Nigerian National Petroleum Company Limited as well as the establishment of the Nigerian Upstream Regulatory Commission (NURC) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA).