Month: May 2018

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

• Aggressive relinquishment – post-production license too aggressive and should be limited to 50% of acreage
• Dormant fields – concerns around the “retroactive” provisions regarding dormant fields and a recommendation that it should only apply after the passage of the Bill;
• Domestic crude supply obligation – there should be no DCSO and crude purchase in the domestic market should be commercially negotiated;
• Segregation of the operating sectors – delineation of the sectors should take into account existing investments and should only apply to new investments;
• Gas flaring provisions are too penal and will not achieve the intended goal of ending flaring;
• Excessive power of the Commission – the powers of the Commission are excessive in some areas
• Total MD fully supportive of the efforts to eliminate gas flaring through the various projects which they have recently commissioned. They are however concerned about the punitive nature of the Bill’s provisions and would recommend the encouragement of the development of infrastructure to bring gas to the market. He also recommended that safety and emergency flaring be removed from the punitive provisions.
• Chevron MD concerned about the provisions relating to the delineation of the sectors by the Commission.
• Exxon Mobil MD raised concerns around acreage management.  The length of term of the exploration period of 5 years is too short and should be increased to 7 years. The provisions relating to dormant fields should apply to fields discovered after  the passage of the bill. The provisions relating to post-production acreage relinquishment too aggressive.
• NAOC MD concerned about the excessive powers of the Commission. In particular the power to impose penalties. Concerned about tariff methodology and worried about alleged lack of consultation. Penalties do not appear to take into account the severity of the infringement.