President Mohammadu Buhari, on 28 September 2020, presented the Petroleum Industry Bill 2020 (PIB) to the National Assembly for consideration. The PIB aims to strengthen the governing institutions, establish a strong regulatory framework, ensure transparency and accountability, promote exploration & exploitation of oil resources and foster sustainable development in Nigeria’s oil and gas industry.
The PIB was first introduced in December 2008 and has undergone several amendments, including a split which was done during the 8th National Assembly. At the time, the PIB was split into four namely Petroleum Industry Governance Bill (PIGB), Petroleum Industry Administration Bill (PIAB), Petroleum Industry Fiscal Bill (PIFB) and Petroleum Host Community Bill (PHCB). The PIGB was approved by the National Assembly but did not receive presidential assent and was returned to the National Assembly for further consideration.
The 2020 version of the PIB contains provisions that will:
- Replace the Nigeria National Petroleum Commission (NNPC) with NNPC Limited
- Create separate regulatory authorities for upstream, midstream and downstream operations
- Reduce the royalty rate from 10% to 7.5% for offshore fields producing not more than 15,000 barrels per day
- Increase the benchmark threshold of crude oil price for charging royalty from $35/barrel to $50/barrel
- Make gas flaring penalties non-tax deductible in order to disincentivize gas flaring. This objective is in line with the Nigerian Gas Flare Commercialization Program which promotes flare gas capture for commercial purposes
We will continue to monitor developments as the 2020 PIB goes through the legislative process. In the meantime, you can read our earlier tax alert on PIB here.