The PIB is an omnibus legislation which seeks to regulate all activities in the Nigerian oil and gas industry.
When passed into law, it will repeal the existing laws, which govern the industry, particularly the Petroleum Act of 1969, as amended, the Petroleum Profit Tax Act of 1990, as amended and the Nigerian National Petroleum Corporation Act of 1977.
The benefits which the country hopes to realise from the implementation of the PIB include potential increase in the country’s share of the revenue accruable to the FGN from crude oil production, increase in the participation of Nigerians in the industry through the enforcement of the Nigerian Content provisions and the realignment and integration of the various functions and departments in the NNPC, DPR and Ministry of Petroleum Resources. The PIB also hopes to achieve the enforcement of international best practices in the Nigerian oil and gas industry, amongst others.
To the oil producing companies, the potential benefits include removal of the restriction on capital allowances claimable against profit in any particular tax year and the reduction in the petroleum profit tax (PPT) rate from 85% to a combined rate of 80% for joint venture operations (30% CIT and 50% Nigerian Hydrocarbon Tax). There is also the general production allowance to be given to operators in small oil field, depending on their level of production.
Indigenous Oil Companies Bill
The Bill is currently being considered by the Nigerian National Assembly. The objective of the Bill is to provide a structure around the operations of indigenous oil producing companies (IOPCs) in the Nigerian oil and gas industry. The key provisions of the current version of the Bill include the following:
The Bill defines an IOPC as “a company incorporated under the laws of the Federal Government of Nigeria for the purpose of exploration for/and production of crude oil and natural gas, of which 60% or more of its shares are beneficially owned by citizens of Nigeria and/or associations of such citizens”
- The fiscal terms of the Bill will only be applicable to petroleum operations of an IOPC whose aggregate production is not more than 50,000 barrels per day (50 TBD)
- IOPCs shall have priority in the allocation of all OPLs that revert to the FGN as a result of revocation, relinquishment, cancellation, expiration or termination of such licenses or leases pursuant to the Petroleum Act or by any reversion of such licenses or leases by operation of any other enactment
- Participation by the FGN shall not be applicable to petroleum operations carried out by an IOPC whose aggregate production from petroleum operations is not more than 50 TBD, notwithstanding the provisions of the Back –in Rights Regulations
- Determination and payment of petroleum profit tax shall be in accordance with the PPTA, 1959 (as amended), provided that the tax rate applicable to IOPCs shall be 60%
- IOPCs shall pay signature bonus in local currency and shall be given twice the time allotted to non-indigenous companies to pay their signature bonus.