On the 8th of March, 2021 OPTS made a presentation at the Public hearing on Inclusion of Gas in Production Sharing Contracts (PSC) by the Nigerian National Petroleum Corporation to the House of Representatives Committee on Gas Resources in Abuja The OPTS Chairman was ably represented by Mrs. Yemi Famori, the Gas Subcommittee lead. OPTS proposed the following fiscal and contractual incentives that would greatly benefit PSC gas development:
- Fiscal Terms:
- Lower royalty rate for Non Associated Gas (NAG) Developments
- Income Tax/Hydrocarbon Tax incentives that support investment to include:
- Tax Holiday should be for a duration that is adequate to achieve a viable investment, specific to each gas project.
- Retain Company Income Tax (CIT) at 30% for Gas and associated liquids/condensates.
- Creation of new “Deep Offshore Associated Gas Investment Allowance” at a flat rate of 50% of Qualifying Capital Expenditure deductible against total profit.
- No Hydrocarbon Tax (HT) for Deep Offshore Petroleum Operations (incl. Oil, AG & NAG).
- And consolidation of PSC Gas Costs with oil for Oil Hydrocarbon Tax (HT) Purposes.
- Contractual Terms:
- All costs spent wholly for NAG development should be fully recoverable with no annual cost recovery ceiling.
- There should be cost consolidation for NAG Developments across other licenses including with other liquid producing licenses to obtain earlier cost recovery.
- Assurance for the cost recovery of gas transportation and other midstream investments.
- Contractors should have rights to natural gas similar to crude oil production.
- Gas legislation should allow market forces to determine gas prices for all sectors, promote contract sanctity and stability of fiscal, legal, and regulatory framework.
- A revision of OPL and OML durations to 15 years and 30 years, respectively, would enable investment in PSC NAG fields.
- Gas Utilization for Production Operations – Own Use: The PIB should include provisions for AG/NAG utilization at no cost.
OPTS promised to continue to engage with the committee constructively to develop PSC NAG terms as a win/win for both Nigeria and investors.