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More analysts critique the proposed review of PSCs

More analysts have critiqued plans by Nigeria to review offshore production contracts (PSCs) signed with international oil companies (IOCs) two decades ago, saying that this has added to uncertainty in an industry already lacking regulatory clarity.

NNPC has production-sharing contracts with various IOCs in deep offshore oilfields and the fiscal terms were negotiated at a time when these companies were pioneering deep offshore production. Fields such as Shell’s Bonga, Exxon’s Erha, Chevron’s Agbami and Total’s Amenam got tax rates of about 50 percent, compared with 85 percent for onshore fields. The royalty regimes also varied from 12 percent for water depths of 200-500 meters (650-1,600 feet) to nothing once they exceeded 1,000 meters.

Emmanuel Kachikwu, group managing director of the Nigerian National Petroleum Corporation (NNPC) recently said that the objective of the review is to increase Nigeria’s earnings from the fields but the current decline in crude oil prices may mean that some of the incentive for investments that would have given the government more leverage in negotiations might now be eroded according to Philippe de Pontet of Eurasia Group.

London-based analyst at Bloomberg Intelligence, Philipp Chladek also said that putting in place a new law is a bigger and more pressing priority than renegotiating the offshore contracts because this would help increase investment and would also enable the smaller companies to develop their onshore oilfields.

However, the Petroleum Industry Bill first sent to lawmakers in 2008, still looks unlikely to be passed anytime soon, particularly due to the prolonged deadlock between the government and the IOCs over the fiscal terms governing the offshore fields.

Source : energymixreport.com
Posted On: 10/8/2015 12:00:00 AM

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