Proposed Nigeria oil bill taxes are fair – minister

Taxes on deep offshore oil projects proposed by Nigeria are “competitive and considerate”, Nigeria Oil Minister, Diezani-Alison Madueke said, rejecting complaints by foreign oil majors that the levies are too high.

Shell Nigeria Managing Director, Mutiu Sunmonu warned last week that tax terms in a landmark Nigerian oil bill are so uncompetitive they risk rendering offshore oil and gas projects unviable, and could badly stifle investment.

Exxon, the second biggest offshore operator in Nigeria, has said it could not invest in more deepwater projects if the Petroleum Industry Bill (PIB) passes in its current form.

Petroleum Minister, Diezani-Alison Madueke

If Nigeria is to maintain current oil reserve levels and achieve ambitions of higher production, it will be dependent on offshore development because the onshore Niger-Delta has already been extensively explored over the last 50 years.

Both houses of Nigeria’s parliament have finished a first reading of a new draft of the bill meant to overhaul the oil industry in Nigeria, opening the way for lawmakers to debate the long awaited legislation.

The bill, which is meant to change everything from fiscal terms to the state oil firm, has already been delayed for five years, precisely because of these sort of disagreements between the administration, oil majors and lawmakers.

Billions of dollars of investment into exploration and production are on hold until it passes. Oil Minister, Diezani Alison-Madueke said the total “government take” in the draft – meaning its total share of oil revenues after all taxes and royalties – was 73 per cent, up from 61 per cent in current deals with oil majors.

“The proposed increase of government take to about 73 per cent is not only competitive but considerate when we look at the scale of other entities around the world like Norway, Indonesia and even Angola with even higher government take,” Alison-Madueke said in a statement.

She added that current deepwater terms were negotiated in 1993, when oil prices were just $20 a barrel. Oil companies argue the fiscal terms on oil drilling in Nigeria should be substantially better than in other regions to compensate them for the extra risks and costs posed by piracy, kidnapping, industrial-scale oil theft and corruption. An amnesty ended political militancy in the oil-rich Niger-Delta in 2009, but massive oil theft has continued unabated.