The Nigerian Senate recently passed the Deep Offshore and Inland Basin Production Sharing Contract Act 2004 (Amendment) Bill, 2019 (the Bill).
The Bill which will amend the provisions of the Deep Offshore and Inland Basin Production Sharing Contract Act 2004 (DOIBPSCA or the Act), when passed by the House of Representatives, and after the President’s assent, aims to shore up Nigeria’s revenue earnings.
DOIBPSCA regulates the operations of oil and gas companies operating under production sharing contracts (PSCs) in the Deep Offshore and Inland Basin. The Act gives effect to certain incentives (such as lower royalty and tax rates etc.) granted to oil and gas companies operating under PSCs in the Deep Offshore and Inland Basin areas of Nigeria.
It would be recalled that the President, during the 2020 budget presentation to the National Assembly noted that amendment of DOIBPSCA is one of the priorities of the Federal Government of Nigeria (FGN), as it has the capacity to generate additional revenue of at least $500million which will aid FGN in achieving the proposed 2020 budgeted revenue.
The key proposed amendments to the Act as contained in the Bill include the following:
While the proposed amendment would increase government oil revenue, it is likely to increase the cost of oil and gas companies operating under PSC arrangements in Nigeria. It would, therefore, be interesting to see the position of the House of Representatives on the proposed amendments to the Act.
In the meantime, we advise all stakeholders to review the proposed amendments in the Bill in more details, in order to ensure that all relevant and crucial issues are raised and addressed before the Bill is enacted.