25 December 2012, Sweetcrude, Abuja – The Minister of Petroleum resources, Mrs. Diezani Alison-Madueke says discussions are on-going with the International Oil Companies (lOC’s) operating in Nigeria to tighten the fiscal terms under the proposed Petroleum Industry Bill (PIB), currently before the National Assembly.
The Minister made the remark at a panel discussion on “PIB and the Future of Nigeria’s Oil Industry’’, in Abuja at the 18th Nigeria Economic Summit.
She noted that contrary to the view of the IOCs that the fiscal terms as contained in the PIB were harsh, they are fair.
According to her, Nigeria still remained one of the most attractive countries in terms of fiscal regime or ‘government take’, adding that the total ‘government take’ in the PIB, was 73 percent, up from 61 percent in current deals with the IOC’s.
She said the current deepwater terms were negotiated in 1993, when oil prices were just $20 a barrel and that section 16 of the Deep Offshore Act prescribes that changes be made to this particular fiscal regime to restore benefits to the government commensurate with increased oil prices, once oil prices have exceeded $20 per barrel in real terms.
According to her the Act also prescribes that changes be made 15 years after the commencement of the deep offshore act, and that Nigeria was not alone in the tightening of the fiscal terms.
She said the goal was to achieve a `fair balance between government and contractor share to ensure that risks do not outweigh rewards’.
She said the PIB introduced a price-based royalty for crude prices beyond 70 dollars per barrel, and all cost-based incentives have now been replaced with production-based incentives, because government revenues accrue from production and not from cost.
The Minister explained that the reforms in the PIB had been divided into two areas namely the fiscal and non-fiscal reforms, where the non-fiscal reforms relate to institutional and policy reorientation, while the fiscal reforms represent the `largest overhaul of government petroleum revenue system in the last four decades’.
She identified the central objectives of the fiscal reforms to include simplification of revenue collection by Government, capturing of windfall profits in the event of high oil prices as well as the collection of more revenue from large profitable fields in deep offshore waters.
According to the Minister gas fiscal terms are now fully integrated into the oil fiscal terms which is the first time, this has happened in Nigeria. The country has 187 trillion cubic feet of proven gas reserves.
In his remarks, Abiye Membere, the NNPC Group Executive Director, Exploration and Production said dialogue remain the panacea to addressing all grey areas in the PIB.
Also speaking, the Managing Director of Seplat Petroleum Development Company Mr. Austin Avuru cautioned against reducing the PIB discussions to fiscal issues such as `tax and royalty’.
“The cardinal point of the reforms is to make institutions more effective in the oil and gas sector in the interest of all,” he said.
He implored government to address key issues killing investment in the country.