The President recently sent the Deep Offshore and Inland Basin Production Sharing Contracts (Amd.) Bill, 2018 to the National Assembly for consideration and passage. The Bill seeks to amend Section 16 of the Deep Offshore and Inland Basin Production Sharing Contracts Act which was promulgated in 1999.
The proposed amendment creates a new Section 16(3) which provides that “In accordance with the provisions of subsection (1) of this section – (a) a royalty rate of 50% shall apply for the additional revenue in the contract area of the production sharing contracts under this Act; and (b) the additional revenue shall be determined by the product of the volume of crude oil or condensate sold and the difference between the actual nominal sales price of the oil or condensate and the nominal value of $20 per barrel, (1993 real terms) shall be determined based on relevant US All items Consumer Price Index (CPI) as published by the US Bureau of Labour Statistics.”
If passed, the Bill will alter the economic dynamics of the PSCs. It will be recalled that the Petroleum Industry Fiscal Bill, one of the proposed Petroleum Industry Bills under consideration by the National Assembly, seeks to repeal the Deep Offshore and Inland Basin Production Sharing Contracts Act in its entirety.
For a proper review of the Bill, please click here http://sskohn.com/the-deep-offshore-and-inland-basin-production-sharing-contracts-2/