As the legislative process hit the climax for passing into law the Petroleum Industry Bill, there is yet another major adjustment to the much-awaited oil and gas legislation projected to transform the sector.

This change came as a result of bowing to the pressure of international oil companies (IOCs) to reduce royalties and taxes captured by the PIB. As it stands, the Federal Government of Nigeria has finalized a downward review into the royalties for new production from deep-water oilfields, lowering it from 7.5 percent to 5 percent.

Concerning onshore and shallow water oilfields tax, the adjustment would reduce the hydrocarbon tax to 30 percent for converted leases, away from the 42.5 percent in the original bill.

By projection, this change will jack up production level culminating in the increment of 35,000 barrels per day in addition to the already existing 15,000 barrels per day, making the total of 50 barrels per day.

Changes by the Federal Government of Nigeria to the PIB will now lower royalties for new production from deep-water oilfields from 7.5% to 5%

In generalty, the new changes are targeted at attracting sweeping oil reform as the need to boost investment in the oil industry. The adjustment further goes to show a change of direction by Africa’s largest oil producer, depicting the impact of an increasingly competitive environment in the energy business after 2020’s international oil price collapse and an expected shift to renewables.

Further implication

In a bid to recovering money owed by the Nigerian National Petroleum (NNPC), the new adjustment now makes it a certainty that NNPC’s assets and liability would be transferred to a limited liability corporation.

The buzz around PIB

No bill in the oil and gas sector has generated more buzz than the PIB since its year 2000 initiation.  

Recall that in 2019, Nigeria had fast-tracked a component of the PIB to boost the revenue of offshore oil revenue, a move industry experts analyzed at the time as a danger to billions of dollars, putting offshore oil investments at risk.

Fast forward to 2021, Nigeria has changed its stance in an attempt to balance its immediate revenue demands with the need to ensure long-term investment for its oil industry.

However, the country has experienced different versions of the  PIB since over 2 decades of initiation. A major bone of contention with the bill is the nature of the change proposed in the oil and gas sector which by implication provides 90 percent of foreign exchange and nearly half the national budget.

One of the many back and forth PIB was is a fistfight that broke out in January 2021  between local community leaders during one of the public hearings on the bill.

Recall that in that same January, the bill is expected to be passed this year due to a political alignment between President Muhammadu Buhari and the National Assembly.

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