News and developments
A CONSIDERATION OF THE AMENDMENTS TO THE DEEP OFFSHORE AND INLAND BASIN PRODUCTION SHARING CONTRACT ACT
The amendment introduced major changes to the Deep Offshore and Inland Basin Production Sharing Contract Act (the PSC Act or the Act). Before considering the amendments in detail, we give a little background to the Act for full appreciation.
- Background to the PSC Act
- Fiscal Incentives under the PSC Act
- Long duration oil prospecting license: a minimum period of five years and an aggregate period of ten years ;
- Significantly reduced petroleum profit tax: 50% flat rate of chargeable profits for the duration of the PSC ;
- Lower royalty regime based on a graduated scale percentile dependent on water depth as follows :
- From 501 to 800 metres water depth - 8 percent
- From 801 to 1000 metres water depth - 4 percent
- In areas in excess of 1000 metres depth - 0 percent
- The Inland Basin - 10 percent
- Amendments
- The provision of this Act shall be subject to review to ensure that if the price of crude oil at any time exceeds $20 per barrel, real terms, the share of the government of the federation in the additional revenue shall be adjusted under the production sharing contracts to such extent that the production sharing contracts shall be economically beneficial to the government of the Federation.
- Notwithstanding the provisions of subsection (1) of this section, the provisions of this Act shall be liable to review after a period of fifteen years from the date of commencement and every five years thereafter.
- Conclusion