Page 4 - AfrOil Week 44 2019

AfrOil COMMENTARY AfrOil
Nigeria amends deepwater contract law
Buhari approves legislation replacing disputed provisions with flat royalty rates
WHAT:
Nigeria’s president has endorsed amendments to the Deep Offshore and Inland Basin Production Sharing Contract Act.
WHY:
The legislation is an at- tempt to forestall the lost opportunities represented by Abuja’s $62bn claim on IOCs.
WHAT NEXT:
The amendments may discourage investment in new offshore projects by making them less profitable projects in the near term.
NIGERIAN President Muhammadu Buhari has endorsed amendments to the law governing production-sharing contracts (PSCs) for deep- water projects and inland basin sites. The law was originally passed on March 23, 1999, and made retroactive to January 1, 1993.
In a post on Twitter, Buhari confirmed that he had signed the legislation and said he hoped the new amendments would help establish a new stream of revenue for the state. “This afternoon I assented to the Bill amending the Deep Offshore and Inland Basin Production Sharing Contract Act. This is a landmark moment for Nigeria; let me use this opportunity to thank the National Assembly for the co-operation that produced this long-overdue amendment,” he wrote.
He continued: “You will recall that in my 2020 Budget Presentation Speech before the National Assembly in October, I highlighted the need to urgently review the fiscal terms for deep offshore oil fields, to reflect current realities and to ensure increased government revenues. Now, a month later, we have together with the 9th National Assembly made history with the passage and the signing of the amended bill into law. We will continue to work together to deliver on all our promises to ensure inclusive growth and enhance the welfare of all Nigerians.”
Collection efforts
Buhari did not approve the amendments in a vacuum. Rather, he did so in the context of an ongoing effort to claim up to $62bn in purport- edly lost revenues.
Earlier this year, Nigeria’s government reminded several major international oil com- panies (IOCs) of certain provisions of the Deep Offshore and Inland Basin Production Sharing Contract Act. Specifically, it noted that the legis- lation allowed the federal government to nego- tiate for a larger share of oil revenues whenever crude prices moved above $20 per barrel. It invoked a 2018 ruling from Nigeria’s Supreme Court as the basis for its move and sought to begin negotiating settlements to its claims.
Some of the IOCs involved have assented to negotiations and are still in talks with Abuja. By contrast, Royal Dutch Shell (UK/Netherlands)
has indicated that it is ready to take the matter
up with Nigeria’s Federal High Court. The mul- ti-national has contended that the 2018 verdict
cited by the government does not apply, partly because the ruling does not cover the collection
of arrears and partly because it was not a party
to that specific lawsuit, which was initiated by several states in Nigeria’s main oil-producing region. 
Nigerian President Muhammadu Buhari signed the amendments into law on November 4 (Photo: Politoscope)
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w w w . N E W S B A S E . c o m Week 44 06•November•2019