The PIB seeks to provide legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry and development of Host<\/p>\n
Communities. It contains 5 Chapters, 319 Sections and, 8 Schedules dealing with Rights of Preemption; Incorporated Joint Ventures; Domestic<\/p>\n
Base Price and Pricing Framework; Pricing Formula for Gas Price for the Gas Based Industries; Capital Allowances; Production Allowances and<\/p>\n
Cost Price Ratio Limit; Petroleum Fees, Rents and Royalty; and Creation of the Ministry of Petroleum Incorporated.<\/p>\n
Below are the key changes:<\/p>\n
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1. The key objective is ensuring good governance and accountability, creation of a commercially oriented national petroleum company, and fostering a conducive business environment for petroleum operations.<\/p>\n
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2. Creation of the Nigerian Upstream Regulatory<\/p>\n
Commission responsible for the technical and<\/p>\n
commercial regulation of the upstream petroleum<\/p>\n
operations; and the Nigerian Midstream and<\/p>\n
Downstream Petroleum Regulatory Authority<\/p>\n
responsible for the technical and commercial<\/p>\n
regulation of the midstream and downstream<\/p>\n
operations in Nigeria. The Commission and<\/p>\n
Authority are exempted from the provisions of any<\/p>\n
enactment relating to the taxation of companies or<\/p>\n
Trust Funds.<\/p>\n
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3. Imposition of up to 1% levy on the wholesale price<\/p>\n
of petroleum products sold in the country (0.5%<\/p>\n
each for the Authority Fund and Midstream Gas<\/p>\n
Infrastructure Fund)<\/p>\n
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4. Incorporation of a commercial and profit focused<\/p>\n
NNPC Limited under CAMA within 6 months from<\/p>\n
commencement of the new law with ownership<\/p>\n
vested in the Ministry of Finance Incorporated<\/p>\n
(and Ministry of Petroleum Incorporated) on behalf<\/p>\n
of the Federation to take over assets, interests<\/p>\n
and liabilities of NNPC. This structure is expected<\/p>\n
to pave the way for eventually sale of shares to<\/p>\n
Nigerians.<\/p>\n
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5. Any assets, interest and liabilities not transferred<\/p>\n
to NNPC Limited will remain with NNPC until<\/p>\n
extinguished or transferred to the government<\/p>\n
after which NNPC shall cease to exist. Transfer<\/p>\n
and sale of the shares are subject to approval by<\/p>\n
the government and endorsement by the National<\/p>\n
Economic Council.<\/p>\n
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6. NNPC Limited will earn 10% of proceeds of the<\/p>\n
sale of profit oil and profit gas as management fee<\/p>\n
while 30% will be remitted to Frontier Exploration<\/p>\n
Fund for the development of frontier acreages in<\/p>\n
addition to 10% of rents on petroleum prospecting<\/p>\n
licences and mining leases.<\/p>\n
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The main objective is to promote the exploration<\/p>\n
and exploitation of petroleum resources in Nigeria<\/p>\n
for the benefit of the Nigerian people and<\/p>\n
promote sustainable development of the industry,<\/p>\n
ensure safe, efficient transportation and<\/p>\n
distribution infrastructure, and transparency and<\/p>\n
accountability in the administration of petroleum<\/p>\n
resources in Nigeria.<\/p>\n
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8. Avoid economic distortions and ensure a<\/p>\n
competitive market for the sale and distribution of<\/p>\n
petroleum products and natural gas in Nigeria;<\/p>\n
and avoid cross-subsidies among different<\/p>\n
categories of consumers.<\/p>\n
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9. The Commission is required to develop a model<\/p>\n
licence and model lease to include a carried<\/p>\n
interest provision giving NNPC Limited the right to<\/p>\n
participate up to 60% in a contract.<\/p>\n
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10. The main objective is to foster sustainable<\/p>\n
prosperity within host communities, provide direct<\/p>\n
social and economic benefits and enhance<\/p>\n
harmonious co-existence.<\/p>\n
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11. Any company granted an oil prospecting licence<\/p>\n
or mining lease or an operating company on<\/p>\n
behalf of joint venture partners (settlor) is<\/p>\n
required to contribute 3% – 5% (upstream<\/p>\n
Companies) and 2% (other companies) of its<\/p>\n
actual operating expenditure in the immediately<\/p>\n
preceding calendar year to the host communities<\/p>\n
development trust fund. This is in addition to the<\/p>\n
existing contribution of 3% to the NDDC. The<\/p>\n
Fund is tax exempt and any contributions by a<\/p>\n
settlor is tax deductible.<\/p>\n
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12. Board of trustees and executive members of the<\/p>\n
management committee may include persons of<\/p>\n
high integrity and professional standing who may<\/p>\n
not necessarily come from any of the host<\/p>\n
communities.<\/p>\n
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13. Available funds are to be allocated 75% for<\/p>\n
capital projects, 20% as reserve and 5% for<\/p>\n
administrative expenses. However, a community<\/p>\n
will forfeit the cost of repairs in the event of<\/p>\n
vandalism, sabotage and other civil unrest<\/p>\n
causing damage to petroleum facilities or<\/p>\n
disruption of production activities.<\/p>\n
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14. The key objective is to establish a progressive<\/p>\n
fiscal framework that encourages investment in<\/p>\n
the Nigerian petroleum industry, provides clarity,<\/p>\n
enhances revenues for the government while<\/p>\n
ensuring a fair return for investors.<\/p>\n
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15. FIRS to collect Hydrocarbon Tax of 15% – 30% on<\/p>\n
profits from crude oil production, CIT at 30% and<\/p>\n
Education Tax at 2% which will no longer be tax<\/p>\n
deductible. The Commission will collect rents,<\/p>\n
royalties, and production shares as applicable<\/p>\n
while the Authority will collect gas flare penalty<\/p>\n
from midstream operations. Late filing of tax<\/p>\n
returns will attract N10m on the first day and N2m<\/p>\n
for each subsequent day the failure continues. A<\/p>\n
N20m fine is applicable to an offense where no<\/p>\n
penalty is prescribed.<\/p>\n
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16. Generally, expenses must be wholly, reasonably,<\/p>\n
exclusively and necessarily incurred to be tax<\/p>\n
deductible. However, a cost price ratio limit of 65%<\/p>\n
of gross revenue is imposed for hydrocarbon tax<\/p>\n
deduction purposes, any excess cost incurred<\/p>\n
may be carried forward.<\/p>\n
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17. No tax deduction for head office costs while tax<\/p>\n
deduction of interest on monies borrowed is<\/p>\n
subject to the satisfaction of the commission that<\/p>\n
the fund was employed for upstream operations<\/p>\n
and the interest rates reflect market conditions.<\/p>\n
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18. Royalties are payable at the rates of 15% for<\/p>\n
onshore areas, 12.5% for shallow water, and 7.5%<\/p>\n
for deep offshore and frontier basins, 2.5% – 5%<\/p>\n
for natural gas. In addition, a price-based royalty<\/p>\n
ranging from 0% – 10% is payable to be credited<\/p>\n
to the Nigerian Sovereign Investment Authority.<\/p>\n
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19. Gas utilisation incentive will apply to midstream<\/p>\n
petroleum operations and large-scale gas<\/p>\n
utilisation industries. An additional 5-years tax<\/p>\n
holiday will be granted to investors in gas<\/p>\n
pipelines.<\/p>\n
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20. The PIB repeals about 10 laws including the<\/p>\n
Associated Gas Reinjection Act; Hydrocarbon Oil<\/p>\n
Refineries Act; Motor Spirit Act; NNPC (Projects)<\/p>\n
Act; NNPC Act (when NNPC ceases to exist);<\/p>\n
PPPRA Act; Petroleum Equalisation Fund Act;<\/p>\n
PPTA; and Deep Offshore and Inland Basin PSC<\/p>\n
Act. It amends the Pre-Shipment Inspection of Oil<\/p>\n
Exports Act while the provisions of certain laws<\/p>\n
are saved until termination or expiration of the<\/p>\n
relevant oil prospecting licenses and mining<\/p>\n
leases including the Petroleum Act, PPTA, Oil<\/p>\n
Pipelines Act, Deep Offshore and Inland Basin<\/p>\n
PSC Act.<\/p>\n
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The PIB seeks to provide legal, governance, regulatory and fiscal framework for the Nigerian Petroleum Industry and development of Host Communities. It contains 5 Chapters, 319 Sections and, 8 Schedules dealing with Rights of Preemption; Incorporated Joint Ventures; Domestic Base Price and Pricing Framework; Pricing Formula for Gas Price for the Gas Based Industries; Capital […]<\/p>\n","protected":false},"author":1,"featured_media":32680,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[351],"class_list":["post-32679","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-uncategorized","tag-pib","has-post-title","has-post-date","has-post-category","has-post-tag","has-post-comment","has-post-author",""],"yoast_head":"\n