Author: Adeoye Adefulu

• Seeking amendments to various provisions of the PIAB and the PHICB
• State governments should be involved in the administration of the host communities
• Operating companies should have their headquarters in the states of operations

• PHICB
  • Obligations to establish trust should not be by the oil companies
  • What happens when there is more than one company operating in a host community?
  • The obligation to establish the trusts should be placed on the community
  • NPRC should have the power to determine which communities fall within their areas of operations
  • Consider including local government authorities
  • Oil companies should not appoint the board of trustees
  • Bill is silent on the composition of the board of trustees
  • Increase contributions to 5%
  • Contributions should not be deductible
  • Disbursement procedures to be clarified
  • No reference to environmental protection

IPPG Chairman

• Pleased with clarity in the bill
• PIFB
  • PIT – onshore and shallow water tax should be the same
  • Re-examine the fiscal terms for gas development
  • Assessment of royalties includes elements that cannot be controlled by producers
  • Production allowances should be available to all players
  • Cost efficiency factor should not measure costs that are outside the control of the producers. Should exclude statutory charges, CHA
  • APIT trigger price should be US$ 80
  • Exploration requires incentives to grow Nigeria’s reserves
  • Lease rental appears to be arbitrary
  • Existing frontier basins need to be grandfathered into the Bills
  • Pass the Bill now
•  PHICB
  • Definition of Host and Impacted Community needs to be tightened up
  • Timelines for the establishment of the trust should be revised

 

Public Hearing commenced at 10:28 with presentations from OPTS and its members

OPTS Chairman

• PIFB
  • JV oil will grow

• • Sanctity of contract generally observed

• • Deep offshore royalties significantly increased

• • Exclusion from production allowances does not incentivize the production of oil or gas in deep water

• • The sales of gas to the domestic market

• • Multiple levels of ring-fencing may inhibit simplicity of implementation and may be a source of dispute

• • Excessive powers of the Commission – the setting of rents, metering points

 

• PHICB
  • Excessive financial burden on OPTS members in view of all the taxes and levies imposed on the industry

• • Does not take into account the CSR obligations to communities outside

• • Recommendation that the contribution should be deducted from current contributions to NDDC

• • The bill as proposed imposes significant administrative burden

• • No clear definition of Host and Impacted Communities – Bill should set clear guidelines

• • Disputes to be resolved by the Commission – state governments should be accorded a role in disputes resolution

 

MD Exxon Mobil

• PIFB
  • JV gas projects will be negatively impacted
  • Small and medium-sized deepwater developments will remain stranded

MD Chevron

• PIFB
  • Lack of incentives for deepwater fields – only 4% in the current portfolio as opposed to 49% under the existing fiscal terms
  • Small and medium-sized deepwater fields will be stranded – specific terms based on field size should be proposed
• PHICB
  • Definition of Host and Impacted Communities ambiguous

 

• 6 frontier basins should be specifically designated
• OPLs located in water depths greater than 2000 metres in the Niger Dela be identified and designated as Frontier Areas
• Grant exception for indigenous frontier operators from 5% flat royalty rate and windfall clawback of 0.05% per dollar above $60 oil price
• 10 year royalty holidays for frontier basins should be placed in the law rather than granted at the discretion of the Commission
• assessable tax for frontier operators to be a flat rate of 30%
• allow indigenous operators in frontier basis to recover all of the signature bonuses and reduction of the production bonuses payable for frontier leases

PIFB

• multiple tax rates will encourage aggressive tax planning – harmonise tax rates
• APIT – should be scrapped and windfall profits should be derived from Royalty and based on increases in price
• some sections would impose on the sovereignty of Nigeria

NUPENG & PENGASSAN jointly made a presentation to the House of Reps

• PIFB
  • Production Allowances would lead to downsizing
  • Removal of AGFA would significantly impact the development of gas projects
  • Power of the Commission to determine measurement points are excessive
  • Gas to power projects should be designated as strategic
• PIAB
  • Excessive powers of the Commission
  • Power of the president to direct the award of a license should be removed
  • the Nigerian Nuclear Regulatory Authority should have been included in the Bill

• On Host Community Fund
• 5% insufficient…it should be 10% equity participation including a 5% contribution from the government
• host communities to be granted the right to incorporate a National Host Communities Development Trust
• Gas flare penalties to be paid to the Host Communities
• Pipeline surveillance contracts to be awarded to Host Communities

• Gas flaring – the provisions on gas flaring seem excessively punitive
• Domestic Supply Obligations – should not apply to crude oil or gas
• Abandonment Fund – the provisions on abandonment should be flexible to allow different organisations evolve mechanisms appropriate for their organisation.
• Delineation of sectors – existing operations to be grandfathered
• Acreage relinquishment – too aggressive and only 50% of acreage be relinquished
• Powers of the Commission – may prove excessive