Oil
The petroleum and Industry Bill 2012 (Part V)
Nothing in section 330 of this Act or in this Part shall prevent the Service from making any assessment or additional assessment to tax for any accountingperiod which does not involve re-opening any issue on the same facts whichhas been determined for that accounting period, under subsection (5) or (6) ofsection 330 of this Act by agreement or otherwise or on appeal. 175
(2) Where an assessment has become final and conclusive, any tax overpaid
shall be repaid.
(3) Nothing in section 330 of this Act or in this Part shall prevent the Service from
making any assessment or additional assessment to tax for any accounting
period which does not involve re-opening any issue on the same facts which
has been determined for that accounting period, under subsection (5) or (6) of
section 330 of this Act by agreement or otherwise or on appeal. 175
334. Procedure in cases where objection or appeal is pending
Collection of tax in cases where notice of an objection or an appeal has been given
shall not be enforced and any pending proceedings for any instalment of the tax shall
be stayed until the objection or appeal is determined and the Service may in any
such case enforce payment of any portion of the tax which is not in dispute.
335. Time limit for making payment
(1) Subject to the provisions of section 336 of this Act, tax for any accounting
period shall be payable in equal monthly instalment together with a final
instalment as provided in subsection (4) of this section.
(2) The first monthly payment shall be due and payable not later than the third
month of the accounting period and shall be in an amount equal to one-twelfth
or, where the accounting period is less than a year, in an amount equal to
monthly proportion of the amount of tax estimated to be chargeable for such
accounting period in accordance with the provision of section 325(1) of this
Act
(3) Each of the remainder of monthly payments to be made subsequent to the
payment under subsection (2) of this section shall be due and payable not
later than the last day of the month in question and shall be in an amount
equal to the amount of tax estimated to be chargeable for such period by
reference to the latest returns submitted by the company in accordance with
the provision of section 325(2) of this Act less the amount already paid for
such accounting period divided by the number of the monthly payments
remaining to be made in respect of the applicable accounting period.
(4) A final instalment of tax shall be due and payable within twenty-one days after
filing of the self-assessment for such accounting period, and shall be the
amount of the tax assessed for that accounting period less the amount paid
under subsections (2) and (3) of this section or is the subject of any
proceedings.
(5) Any instalments on account of tax estimated to be chargeable shall be treated
as tax charged and assessed for the purposes of section 338 of this Act.
336. Penalty for non-payment of tax and enforcement of payment
(1) If any instalment of tax due and payable pursuant to section 337 of this Act is
not paid within the appropriate time limit prescribed. –
(a) a sum equal to ten per cent of the amount of the instalment of tax due
and payable shall be added to the tax, and the provisions of this Act
relating to the collection and recovery of tax shall apply to the collection
and recovery of such sum; 176
(b) in the case of Naira remittances, the tax due shall attract interest at the
prevailing minimum rediscount rate of the Central Bank of Nigeria plus
a spread to be determined by the Minister from the date when the tax
becomes payable until it is paid, and the provisions of this Act relating
to the collection and recovery of tax shall apply to the collection and
recovery of the interest;
(c) in the case of foreign currency remittance, the tax due shall attract
interest at the prevailing London Inter Bank Offered Rate, plus a spread
to be determined by the Minister from the date when the tax becomes
payable until it is paid, and the provisions of this Act relating to the
collection and recovery of tax shall apply to the collection and recovery
of the interest.
(2) Any company or person in whose name the company is assessed, who,
without lawful justification or excuse, the proof of which shall lie on the
company or the person assessed, fails to pay the tax within the period of one
month prescribed in subsection (1)(b) of this section, commits an offence
(3) The Service may, for good cause shown, remit the whole or any part of the
penalty due under subsection (1) of this section.
337. Collection of tax after determination of objection or appeal
Where payment of tax in whole or in part has been held over pending the result of a
notice of objection or appeal, the tax outstanding under the assessment as
determined on such objection or appeal, as the case may be, shall be payable
immediately and the balance of the tax shall be paid as to any part of the tax in the
proceedings stayed within one month from the date of service on the company
assessed, or on the person in whose name the company is assessed, and if such
balance is not paid within such period the provisions of section 338 of this Act shall
apply.
338. Suit for tax by the Service
(1) The Service may sue and recover tax in any court of competent jurisdiction at
the place where the tax is due against a company or the person in whose
name the company is assessed and the cost of the proceedings shall be
borne by the company or the person in whose name the company is
assessed.
(2) In any suit under subsection (1) of this section the production of a certificate
signed by any person duly authorised by the Service giving the name and
address of the defendant and the amount of tax due by the defendant shall be
sufficient evidence of the amount due and sufficient authority for the court to
give judgment for this amount.177
339. Relief in respect of error or mistake
(1) Where any person who has paid tax for any accounting period alleges that
any assessment made upon him or in his name for that period was excessive
by reason of some error or mistake in the accounts, particulars or other written
information supplied by him to the Service for the purpose of the assessment,
such person may at any time, not later than six years after the end of the
accounting period in respect of which the assessment was made, make an
application in writing to the Service for relief.
(2) Upon receipt of the application, referred to in subsection (1) of this section the
Service shall inquire into the matter and subject to the provisions of this
section shall by way of repayment of tax give such relief in respect of the error
or mistake as appears to the Service to be reasonable and just.
(3) No relief shall be given under this section in respect of an error or mistake as
to the basis on which the liability of the applicant ought to have been
computed where such accounts, particulars or information was in fact made or
given on the basis or in accordance with the practice of the Service generally
prevailing at the time when such accounts, particular or information was made
or given.
(4) In determining any application under this section, the Service shall have
regard to all the relevant circumstances of the case, and in particular, shall
consider whether the granting of relief would result in the exclusion from
charge to tax of any part of the chargeable profits of the applicant, and for this
purpose the Service may take into consideration the liability of the applicant
and assessments made upon him in respect of other years.
(5) No appeal shall lie from a determination of the Service under this section,
which determination shall be final and conclusive.
340. Repayment of Tax
(1) Save as is otherwise in this Act expressly provided, no claim for the
repayment of any tax overpaid shall be allowed unless it is made in writing
within six years next after the end of the accounting period to which it relates
and if the Service disputes any such claim it shall give to the claimant notice
of refusal to admit the claim and the provisions of sections 328 and 329 of this
Part shall apply.
(2) The Service shall give a certificate of the amount of any tax to be repaid under
any of the provisions of this Act or under any order of a court of competent
jurisdiction and upon the receipt of the certificate, the Accountant-General of
the Federation shall cause repayment to be made in conformity with provision
of the certificate. 178
341. Penalty for Offences
(1) Any person who fails to comply with the provisions of this Act or any rule
made under this Act for which no other penalty is specifically provided, shall
be liable to a fine of N1,500,000
(2) A person who commits an offence under subsection (1) of section 323 of this
Act, or where such offence is a failure to submit a return under section 324 of
this Act or is a failure, arising from the provisions of this Part, to deliver
accounts, particulars or information or to keep records required, a further sum
of N300,000.00 for each and every day during which such offence or failure
continues, and in default of payment to imprisonment for six months, the
liability for the additional sum to commence from the day following the
conviction, or from such day thereafter as the court may order.
(3) A person who-
(a) fails to comply with the requirements of a notice served on him under
this Part; or
(b) having a duty so to do, fails to comply with the provisions of section
322 of this Act; or
(c) without sufficient cause fails to attend in answer to a notice or
summons served on him under this Part or having attended fails to
answer any question lawfully put to him; or
(d) fails to submit any return required to be submitted by section 323 of
this Act in accordance with the requirement of that section or in
accordance with section 325 of this Act, commits an offence.
342. Penalty for making incorrect accounts
(1) Every person who without reasonable excuse:
(a) makes up or causes to be made up any incorrect accounts by omitting
or understating any profits or overstating any losses in the accounts; or
(b) prepares or causes to be prepared any incorrect schedule required to
be prepared by section 322 of this Act by overstating any expenditure
or any incorrect statement or overstating any royalties or other sums or
by omitting or understating any amounts repaid, refunded, waived or
released; or
(c) gives or causes to be given any incorrect information in relation to any
matter or thing affecting his liability to tax, commits an offence and
liable to a fine of N150,000.00 and to double the amount of tax which
has been undercharged in consequence of such incorrect accounts, 179
schedule, statement or information, or would have been so
undercharged if the accounts, schedule, statement or information had
been accepted as correct.
(2) No person shall be liable to any penalty under this section unless the
complaint concerning such offence was made at any time within six years
after the end of the accounting period in respect of which the offence was
committed.
(3) The Service may compound any offence under this section, and may before
judgment stay or compound any proceedings under this Act.
343. False statements and returns.
(1) Any person who:
(a) for the purpose of obtaining any deduction, rebate, reduction or
repayment in respect of tax for himself or for any other person, or who
in any return, account, particulars or statement made or furnished with
reference to tax, knowingly makes any false statement or false
representation, or forges or fraudulently alters or used, or fraudulently
lends, or allows to be used by any other person any receipt or token
evidencing payment of the tax under this Act; or
(b) aids, abets, assists, counsels, incites or induces any other person to:
(i) make or deliver any false return or statement under this Act;
(ii) keep or prepare any false accounts or particulars affecting tax;
or
(iii) unlawfully refuse or neglect to pay tax;
commits an offence and liable to a fine of N150,000.00 and three times
the amount of tax for which the person assessable is liable under this
Act for the accounting period in respect of or during which the offence
was committed, or to imprisonment for six months, or to both fine and
imprisonment.
(2) The Service may compound any offence under this section and with the leave
of the court may before judgment stay or compound any proceedings arising
from the implementation of this section.
344. Penalty for failure to pay tax
(1) Any person who being obliged to deduct any tax under this Act, but fails to
deduct, or having deducted, fails to pay to the Service within thirty days from
the date the amount was deducted or the time the duty to deduct arose, shall 180
upon determination by the Service, be liable to pay the tax withheld or not
remitted in addition to a penalty of ten per cent of the tax withheld or not
remitted per annum and interest at the prevailing Central Bank of Nigeria
minimum re-discount rate.
(2) Any person who continues to commit the breach referred to in subsection (1)
of this section beyond thirty days and after the determination by the Service
commits an offence and is liable on conviction to imprisonment for a period of
not more than six months.
345. Penalties for offences by authorised and unauthorised persons
(1) Any person who –
(a) being a member of the Service charged with the due administration of
this Act or any consultant engaged in connection with the assessment
and collection of the tax who –
(i) demands from any person an amount in excess of the
authorised assessment of the tax payable;
(ii) withholds for his own use or otherwise any portion of the amount
of tax collected;
(iii) renders a false return, whether verbal or in writing, of the
amount of tax collected or received by him;
(iv) defrauds any person, embezzles any money, or otherwise uses
his position to deal wrongfully either with the Service or any
other individual; or
(b) not being authorised under this Act to do so, collects or attempts to
collect the tax under this Act;
commits an offence and liable to a fine of N1,000,000.00 or to imprisonment
for three years or to both.
346. Deduction of tax at source
(1) Income tax assessable on any company, partnership or person (whether or
not resident in Nigeria) who provides petroleum operation services and related
activities to a company carrying on upstream petroleum operations in Nigeria,
whether or not an assessment has been made, shall be recoverable from any
payment (whether or not made in Nigeria) made by any person to such
company, partnership or person.
(2) For the purpose of this section, the rate at which tax is to be deducted and the
nature of the activities and services for which a company making payment is 181
to deduct tax at the date when the payment is made or credited, whichever
first occurs, shall be as specified in any extant Government Notice .
(3) A company which has deducted tax under this section shall forward to the
Service the amount of tax deducted and a statement showing the name and
address of the person who suffered the tax deduction and the nature of
activities or services in respect of which any payment was made.
(4) Income tax recovered under the provisions of this section by deduction from
payments made to a company, partnership or person shall be set-off for the
purposes of collection against tax charged on such company, partnership or
persons by an assessment, provided that the total of such deductions shall
not exceed the amount of the assessment.
347. Tax to be payable notwithstanding any proceedings for penalties
The institution of proceedings for or the imposition of a penalty, fine or term of
imprisonment under this Act shall not relieve any person from liability to payment of
any tax for which the person is or may become liable.
348. Prosecution to be with the sanction of the Service
Subject to the provisions of the Constitution no prosecution in respect of an offence
under section 302, 343, 344, 345 or 346 of this Act may be commenced, except at
the instance of or with the sanction of the Service.
349. Savings for criminal proceedings
The provisions of this Act shall not affect any criminal proceedings under any other
Act or law.
350. Restriction on effects of Personal Income Tax and other Acts
Tax shall not be charged under the provisions of the Personal Income Tax Act or any
other Act in respect of dividends paid out of any profits which are taken into account,
under the provisions of this Act, in the calculation of the amount of any chargeable
profits upon which tax is charged, assessed and paid under the provisions of this
Act.
351. Double taxation arrangements with other territories
(1) Where the Minister by order declares that arrangements specified in the order
have been made with the Government of a territory outside Nigeria with a 182
view to affording relief from double taxation in relation to tax imposed under
the provisions of this Act and any tax of a similar character imposed by the
laws of that territory, and that it is expedient that those arrangements should
have effect, the arrangements shall have effect notwithstanding anything in
any enactment.
(2) The Minister may make rules for carrying out the provisions of any
arrangements having effect under this section.
(3) An order made under the provisions of subsection (1) of this section may
include provisions for relief from tax for accounting periods commencing or
terminating before the making of the order and provisions as to income (which
expression includes profits) which is not itself liable to double taxation.
(4) Any regulation, Order or rule made or deemed to have been by the Minister in
respect of any double taxation arrangement with the Government of any
territory outside Nigeria prior to the Effective Date shall continue to have effect
as if made pursuant to the provisions of this Part.
352. Method of calculating relief to be allowed for double taxation
(1) The provisions of this section shall have effect where, under arrangements
having effect under section 353 of this Act, foreign tax payable in respect of
any income in the territory with the Government of which the arrangements
are made is to be allowed as a credit against tax payable in respect of that
income in Nigeria.
(2) In this section, the expression- –
(a) “foreign tax” means any tax payable in that territory which, under the
double taxation arrangements, is to be allowed; and
(b) “income” means that part of the profits of any accounting period which
is liable to both tax and foreign tax, before the deduction of any tax,
foreign tax, credit therefore or relief granted under subsection (6) of this
section.
(3) The amount of the credit admissible to any company under the terms of any
double taxation arrangement shall be set off against the tax chargeable upon
that company in respect of the income, and where that tax has been paid the
amount of the credit may be repaid to that company or carried forward against
the tax chargeable upon that company of any subsequent accounting period.
(4) The credit for an accounting period shall not exceed whichever is the less of
the following amounts, –
(a) the amount of the foreign tax payable on the income; or183
(b) the amount of the difference between the tax chargeable under this
Part (before allowance of credit under, any arrangements having effect
under section 353 of this Act) and the tax which would be so
chargeable if the income were excluded in computing profits.
(5) Without prejudice to the provisions of subsection (4) of this section, the total
credit to be allowed to a company for any accounting period for foreign tax
under all arrangements having effect under section Error! Reference source not
found. of this Act shall not exceed the total tax which would be ultimately borne
by that company, for that accounting period, if no such credit had been
allowed.
(6) Where the income includes a dividend and under the arrangements foreign
tax not chargeable directly or by deduction in respect of the dividend is to be
taken into account in considering the credit is to be given against tax in
respect of the dividend, the amount of the income shall be increased by the
amount of the foreign tax not so chargeable which falls to be taken into
account in computing the amount of the credit.
(7) Where the amount of the foreign tax attributable to the income exceeds the
credit computed under subsection (4) of this section, then the amount of that
income, to be included in computing profits for any purposes of this Act other
than that of subsection (4) of this section, shall be taken to be the amount of
that income increased by the amount of the credit after deduction of the
foreign tax.
(8) Where –
(a) the arrangements provide, in relation to dividends of some classes, but
not in relation to dividends of other classes, that foreign tax not
chargeable directly or by deduction in respect of dividends is to be
taken into account in considering the credit to be given against tax in
respect of the dividends; and
(b) a dividend is paid which is not of a class in relation to which the
arrangements provide, then, if dividend is paid to a company which
controls, directly or indirectly, not less than half of the voting power in
the company paying the dividends, credit shall be allowed as if the
dividend were a dividend of a class in relation to which the
arrangements provide.
(9) Any claim for an allowance by way of credit shall be made not later than three
years after the end of the accounting period, and in the event of any dispute
as to the amount allowable, the Service shall give to the claimant notice of
refusal to admit the claim which shall be subject to appeal in like manner as
an assessment. 184
(10) Where the amount of any credit given under the arrangements is rendered
excessive or insufficient by reason of any adjustment of the amount of any tax
payable either in Nigeria or elsewhere, nothing in this Act limiting the time for
the making of assessments or claims for repayment of tax shall apply to any
assessment or claim to which the adjustment gives rise, being an assessment
or claim made not later than three years from the time when all such
assessments, adjustments and other determination have been made whether
in Nigeria or elsewhere, as are material in determining whether any, and if so,
the credit to be given.
(11) Where a company is not resident in Nigeria throughout an accounting period
no credit shall be admitted in respect of any income included in the profits of
that company of that period.
353. Procedure for amendment of Schedules
As from the effective date, the Minister may by order delete any of the powers or
duties specified in the Third Schedule or include therein additional powers or duties
and may do so by amendment of such Schedule or by substituting a new Schedule
therefore.
B. COMPANIES INCOME TAX APPLICABLE TO UPSTREAM
PETROLEUM OPERATIONS
(1) All companies, concessionaires, licensees, lessees, contractors and
subcontractors involved in upstream petroleum operations under this Act
shall be subject to tax under the Companies Income Tax Act, Cap C21,
Laws of the Federation of Nigeria 2004.
(2) Notwithstanding section 27 of the Companies Income Tax Act, Cap C21,
Laws of the Federation of Nigeria 2004, any company involved in both upstream
petroleum operations and downstream petroleum operations shall determine the
Companies Income Tax separately for:
(a) upstream petroleum operations under this Act; and
(b) downstream petroleum operations under this Act.
(3) In determining the Company Income Tax payable, the Nigerian
Hydrocarbon Tax under this Act shall not be deductible. 185
(4) Section 22 of the Companies Income Tax Act shall be amended by replacing
subsection (1) of section 22 with the following:
“Where the Service is of the opinion that any disposition is not in fact given effect to
or that any transaction which reduces or would reduce the amount of any tax payable
is artificial or fictitious, the Service may disregard any such disposition and direct that
such adjustments shall be made as respects liability to tax as the Service considers
appropriate in accordance with its transfer pricing rules, so as to counteract the
reduction of liability to tax effected, or reduction which would otherwise be effected,
by the transaction and the companies concerned shall be assessable accordingly. In
this subsection, the expression “disposition” includes any trust, grant, covenant,
agreement or arrangement.
(5) Section 24 of the Companies Income Tax Act shall be amended by inserting a
new paragraph (j) as follows –
“any rents and royalties payable on Upstream Petroleum Operations” and by renumbering the existing paragraph (j) as (k).
(6) Section 29 of the Companies Income Tax Act shall be amended by replacing
subsection (3) with the following:
“The assessable profits of any company from any trade or business for the year of
assessment in which it commenced to carry on such trade or business (or in the
case of a company other than a Nigerian company, for the year of assessment in
which it commenced to carry on such trade or business in Nigeria) and for the
subsequent years shall be ascertained in accordance with the following provisions –
(a) for the first year the assessable profits shall be the profit from the date of
commencement of business to the end of the accounting period in the preceding
year;
(b) for the second year the assessable profits shall be the profits for the
accounting year following the first year;
(c) for the third year and thereafter the assessable profits shall be computed
in accordance with subsection (1) of this section for the accounting year;
(7) Section 31 of the Companies Income Tax Act shall be amended by replacing
subparagraph (ii) of paragraph (a) of subsection (2) of section 31 with the following:
“a deduction under this section for any particular year of assessment shall not
exceed the amount, if any, of assessable profits, included in the total profits for that
year of assessment, from the trade or business in which the loss was incurred and
shall be made as far as possible from the amount of such assessable profits of the
first year of assessment after that in which the loss was incurred and, so far as it
cannot be so made, then from such amount of such assessable profits of the next
year of assessment, and so on;” 186
(8) The incentives provided under Section 39 of the Companies Income Tax Act
shall be available to:
(a) companies engaged in export gas operations with respect to LNG;
(a) companies engaged in downstream gas distribution;
(b) companies operating gas extraction facilities; and
(c) companies operating downstream crude oil processing facilities such as
refineries.
(9) Under Section 39 of Companies Income Tax Act, companies engaged in
upstream gas operations shall be entitled to only the tax holiday under,
provided the gas supply destination is solely to the domestic market.
(10) For purposes of computation, assessment and payment of Companies
Income Tax, companies engaged in upstream petroleum operations shall
apply the Nigerian Hydrocarbon Tax accounting periods on an actual year
basis and the procedures for paying tax estimates on a monthly basis in
anticipation of paying the balance of the full tax due at the end of the
accounting period.
(11) The Second Schedule of the Companies Income Tax Act Cap C21, Laws of
the Federation of Nigeria 2004 shall be amended by adding the definition of
Qualifying Upstream Petroleum Expenditure as follows:
“Qualifying Upstream Petroleum Expenditure” means Qualifying
Expenditure as defined in Part VIII A of this Act.
(12) The Second Schedule to the Companies Income Tax Act shall be amended
by inserting below the word “Mining Expenditure” in Table I (Initial Allowance) and
Table II (Annual Allowances) with respect to Initial and Annual Allowance, the
word “Qualifying Upstream Petroleum Expenditure”, with an initial allowance of
“Nil” and annual allowances of 20%, with a retention of 1% in the last year until
the asset is disposed.
(13) The Second Schedule of the Companies Income Tax Act shall be amended
by inserting a paragraph 7(3) stating the following:
“Where a licensee or lessee has entered into a contract pursuant to section
173 of the Petroleum Industry Act, and such contract provides for the transfer
of assets to such licensee or lessee by the contractor, such transfer shall be
valued as equal to the value of cost oil, cost gas or cost condensates paid for
such assets (“the deemed income”) and capital cost allowances shall be
claimed against such deemed income in the hands of the licensee or lessee.
The contractor parties shall be entitled to deduct the expenditures for the 187
creation of assets to be owned by a licensee of a petroleum prospecting
licence or lessee of a petroleum mining lease.”
PART IX
REPEALS, TRANSITIONAL AND SAVINGS PROVISIONS
354. Repeals
(1) From the Effective Date, the following enactments are repealed –
(a) Associated Gas Re-injection Act, CAP A25 Laws of the Federation of
Nigeria, 2004;
(b) Motor Spirits (Returns) Act, CAP M20 Laws of the Federation of
Nigeria, 2004;
(c) Petroleum Act, CAP P 10, Laws of the Federation of Nigeria, 2004;
(d) Petroleum Products Pricing Regulatory Agency (Establishment) Act,
2003;
(e) Petroleum Equalisation Fund (Management Board, etc.) Act, CAP P11
Laws of the Federation of Nigeria, 2004;
(f) Petroleum (Special) Trust Fund Act, CAP P14 Laws of the Federation
of Nigerian, 2004; and
(g) Petroleum Technology Development Fund Act, CAP P15 Laws of the
Federation of Nigeria, 2004.
(h) Deep Offshore and Inland Basin Production Sharing Act, CAP D3 Laws
of the Federation of Nigeria, 2004, except for sections 16 subsection
(1) and (2). 188
(i) Petroleum Profits Tax Act, CAP P13 Laws of the Federation of Nigeria,
2004.
(3) Any subsidiary legislation made pursuant to any of the enactments repealed in
subsection (1) of this section shall, where it is not inconsistent with the provisions
of this Act, remain in operation until it is revoked or replaced by subsidiary
legislation made under this Act, and shall be deemed for all purposes to have
been made under this Act.
(4) The NNPC Act, NNPC (Projects) Act and NNPC Amendment Act shall be deem
to be repeal on the date that the Minister signifies by legal notice in the Gazette
that the assets and liabilities of NNPC are fully vested in successor entities.
355. Saving provisions
(1) Any licence or lease granted under the Oil Minerals Act, 1958 and the
Petroleum Act 1969 shall remain effective, subject to the provisions of this Act
except that oil prospecting licences from the Effective Date, shall not be
subject to the provisions of sections 172 and 178 and for such licences, the
terms with respect to the oil prospecting licences regarding duration of the
licence, work program, commitments and relinquishments shall continue
unaltered for a period up to the tenth anniversary of the granting of such
licence;
(2) Any company granted a licence, permit or other right in respect of activities in
the downstream petroleum, sector downstream, petroleum sector including
refineries, pipelines, storage, transportation, distribution and retail, under any
law in force at the time in Nigeria, shall within three months from the Effective
Date apply to the Agency for the issuance of the appropriate licence under
this Act, and pending the issuance of the appropriate licence, the prior
licence, permit, or right shall continue in force as if it had been issued under
the provisions of this Act.
(3) Any other licence, permit or other right in respect of any sector of the
petroleum industry in Nigeria to which subsections (1) and (2) of this section
do not apply, which were granted by the Department of Petroleum Resources
or the Petroleum Products Pricing and Regulatory Authority, as the case may
be, and which is still valid on the Effective Date, shall continue in force for the
remainder of its duration as if it had been issued under this Act.
(4) Any tariff, price, levy, or surcharge which was payable to the Department of
Petroleum Resources or the Petroleum Products Pricing and Regulatory
Authority prior to the Effective Date shall continue in force until the expiration
of the term of the said tariff, price, levy, or surcharge, or until alternative
provisions are made pursuant to the provisions of this Act or any regulations
made under it, whichever is earlier. 189
(5) Within three months from the Effective Date, the Minister on the advice of the
Inspectorate, or the Agency, or NNPC as the case may be, may make any
further transitional and savings provisions as are consistent with the
transitional and savings provisions in this Act
356. Transfer of staff, etc
(1) All staff performing duties relating to upstream petroleum operations of the
Department of Petroleum Resources in the Ministry of Petroleum Resources on
the Effective Date shall be deemed to have transferred their services to the
Inspectorate with effect from that date on terms and conditions no less favourable
than those obtained immediately before the Effective Date, unless they indicate
otherwise before the expiration of three months after the Effective Date.
(2) From the Effective Date, the staff of the former Petroleum Products Pricing
Regulatory Authority shall be regarded as having transferred their services to the
Agency with effect from that date on terms and conditions no less favourable than
those obtaining immediately before the Effective Date.
(3) From the date of vesting of the assets and liabilities of NNPC in the National Oil
Company, staff performing functions relating to those assets and liabilities shall
be regarded as having transferred their services to the National Oil Company.
(4) From the date of vesting of the assets and liabilities of NNPC in the National Gas
Company, the staff of the Nigerian Gas Company performing functions relating to
such assets being vested in the National Gas Company shall be regarded as
having transferred their services to the National Gas Company Plc.
(5) From the date of vesting of the assets and liabilities of NNPC in the Management
Company, the staff of the NNPC performing functions relating to such assets and
liabilities vested in the Management Company Limited shall be regarded as
having transferred their service to the Management Company.
(6) Any transfer of services by virtue of the provision of subsections (1) and (2) of this
section shall be regarded as continuous for the purpose of pension and gratuity.
357. Cessation of employment
Every person whose service has been transferred to the Inspectorate or the Agency
by virtue of the provision of section 357 of this Act shall be deemed to be employed
by the Inspectorate or the Agency as the case may be with effect from the Effective
Date and shall cease to be in the employment of the former Petroleum Pricing
Regulatory Authority and the Department of Petroleum Resources. 190
358. Application of subsisting contracts
(1) The provisions of this section shall apply to –
(a) all contracts or other instruments subsisting before the Effective Date
entered into by the former Department of Petroleum Resources in
relation to its downstream petroleum operations;
(b) all contracts or other instruments subsisting before the Effective Date
entered into by the Petroleum Products Pricing Regulatory Agency.
(2) By virtue of this Act there is vested in the Agency as from the Effective Date
and without further assurance all assets, funds, resources and other
moveable or immovable property relating to the downstream petroleum
operations functions which immediately before the Effective Date were vested
in the Department of Petroleum Resources.
(3) Any proceeding or cause of action pending or existing or which could have
been taken by or against the Department of Petroleum Resources of the
Ministry of Petroleum Resources immediately before the effective date in
respect of any such right, interest, obligation or liability of the Petroleum
Agency or the Department of Petroleum Resources may be commenced,
continued or enforced or taken by or against the Agency as if this Act had not
been made.
(4) By virtue of this Act there is vested in the Agency as from the Effective Date
and without further assurance all assets, funds, resources and other
moveable or immovable property which immediately before the effective date
were vested and held by the Petroleum Products Pricing and Regulatory
Authority.
(6) As from the Effective Date:
(a) the rights, interest, obligations and liabilities of the Petroleum Products
Pricing and Regulatory Authority existing immediately before the
Effective Date under any contract or instrument at law or in equity
which shall have been held on behalf of or have accrued to or have
been incurred for its own benefit or use, shall by virtue of this Act be
assigned to and vested in the Downstream Petroleum Regulatory
Agency;
(b) any such contract or instrument as is mentioned in sub-paragraph (a)
of the subsection, shall be of the same force and effect against or in
favour of the Downstream Petroleum Regulatory Agency and shall be
enforceable as fully and effectively as if instead of the Petroleum
Products Pricing and Regulatory Authority, the Inspectorate had been
named therein or had been a party thereto; and 191
(c) Any proceeding or cause of action pending or existing or which could
have been taken by or against the Department of Petroleum Resources
of the Ministry of Petroleum Resources immediately before the effective
date in respect of any such right, interest, obligation or liability of the
Petroleum Agency or the Department of Petroleum Resources may be
commenced, continued or enforced or taken by or against the Agency
as if this Act had not been made.
(c) any proceeding or cause of action pending or existing or which could
have been taken by or against the Petroleum Products Pricing and
Regulatory Authority immediately before the effective date in respect of
any such rights, interest, obligation or liability of the Petroleum
Products Pricing and Regulatory Authority, may be commenced,
continued or enforced or taken by or against the Inspectorate as if this
Act had not been made.
(7) As from the Effective Date:
(a) the rights, interest, obligations and liabilities relating to upstream
functions of the Department of Petroleum Resources existing
immediately before the Effective Date under any contract or instrument
at law or in equity which shall have been held on behalf of or have
accrued to or have been incurred for its own benefit or use, shall by
virtue of this Act be assigned to and vested in the Upstream Petroleum
Inspectorate;
(b) any such contract or instrument as is mentioned in sub-paragraph (a)
of this subsection, shall be of the same force and effect against or in
favour of the Upstream Petroleum Inspectorate and shall be
enforceable as fully and effectively as if instead of the Department of
Petroleum Resources, the Inspectorate had been named therein or had
been a party thereto; and
(c) Any proceeding or cause of action pending or existing or which could
have been taken by or against the Department of Petroleum Resources
of the Ministry in relation to its upstream petroleum functions
immediately before the Effective Date in respect of any such right,
interest, obligation or liability of the Department of Petroleum
Resources may be commenced, continued or enforced or taken by or
against the Inspectorate as if this Act had not been made.
360. Delisting of Subsidiaries192
The subsidiaries of NNPC listed under the relevant Schedule to the Public
Enterprises (Privatisation and Commercialisation) Act 2004 shall be delisted
from the schedule and as from the effective date the Power of Attorney earlier
donated to the Bureau of Public Enterprises in respect of the subsidiaries of
NNPC shall be vacated and shall have no force or effect.
361. Other Institutions
(1) The Petroleum Training Institute, established by the Petroleum
Training Institute Act, CAP. 16 of the Laws of the Federation of
Nigeria 2004 shall remain as a parastatal supervised by the Minister
and shall have the objective of delivering quality education and
providing efficient technological manpower for the needs of Nigerian
and African Petroleum Industries in accordance with its enabling
legislation.
(2) The Nigerian Content Development and Monitoring Board, established by the
Nigerian Oil and Gas Industry Content Development Act, 2010 shall remain as a
parastatal under the Minister and shall have the objective of developing Nigerian
content in the upstream petroleum sector in accordance with its enabling
legislation.
362. Interpretation
In this Act unless the context otherwise requires –
“accounting date” means the date to which a company usually prepares its
accounting statement;
“accounting period”, in relation to a company engaged in petroleum operations;
means –
(a) a period of one year commencing on 1st January and ending on 31st
December of the same year; or
(b) any shorter period commencing on the day the company first makes a sale or
bulk disposal of chargeable oil or chargeable natural gas, or chargeable
condensate or bitumen domestic or export or both, and ending on 31st
December of the same year; or
(c) any period of less than a year being a period commencing on 1st January of
any year and ending on the date in the same year when the company ceases
to be engaged in upstream petroleum operations, and 193
(d) in the event of any dispute with respect to the date of the first sale of
chargeable oil, chargeable natural gas, chargeable condensate or bitumen
with respect to the date on which the company ceases to be engaged in
upstream petroleum operations, the Minister shall determine the same and no
appeal shall lie therefrom;
“Act” means the Petroleum Industry Act, 2012;
“adjusted profit” means adjusted profit as stated in Part VIII of this Act;
“aggregate gas price” means the calculated volume-based weighted average price
for gas in a particular month by the three consuming sectors of power generation,
gas based industries and local distribution companies;
“assessable profit” means assessable profit as stated in Part VIII of this Act;
“assessable tax” means assessable tax as stated in Part VIII of this Act;
“associated gas” means
(a) natural gas, commonly known as gas-cap gas, which overlies and is in
contact with crude oil in a reservoir; and
(b) solution gas dissolved in crude oil in a reservoir and emerging from the fluid
as pressure drops;
“barrel” means a barrel of 42 United States gallons;
“barrel of oil equivalent” means a unit of energy that is equal to 5.8 × million BTU;
“benchmark prices” means:
(a) a price based on globally benchmarked indices set by the Inspectorate as a
basis for comparison; or
(b) a price based on globally benchmarked indices set by the Agency to be used
as a reference point for petroleum products;
“Board” means the governing board of any of the institutions or entities that is the
subject matter of the Part within which the word has been used, unless it is
specifically stated otherwise;
“British Thermal Unit” or “BTU” means the calculation of the amount of energy
needed to heat 1 pound of water by 1 degree Fahrenheit and 1 BTU = 1.06
Kilojoules;
“chargeable bitumen” in relation to a company engaged in upstream petroleum
operation means bitumen won or obtained by the company from such operations; 194
“chargeable condensates” in relation to a company engaged in upstream petroleum
operation means condensate won or obtained by the company from such operations;
“chargeable natural gas” in relation to a company engaged in upstream petroleum
operations means natural gas actually disposed by such company to a customer,
based on arm’s length gas sales purchase contract (GSPA) in respect of which
revenue is earned.;
“chargeable oil” in relation to a company engaged in upstream Petroleum
operations, means crude oil won or obtained by the company from such operations;
“chargeable profit” means chargeable profit as stated in Part VIII of this Act;
“chargeable tax” means chargeable tax as stated in Part VIII of this Act;
“commercial discovery” means a discovery of a petroleum accumulation within a
petroleum prospecting licence or petroleum mining lease which, in the sole opinion of
the licensee, can be economically developed and operated, taking into account all
relevant economic, funding, fiscal and risk considerations normally applied for the
evaluation;
“commercial opportunity” means a petroleum discovery which can be economically
developed and operated, taking into account all relevant economic, funding, fiscal
and risk considerations normally applied for the evaluation and is expected to
provide a reasonable rate of return to the investor;
“commercial production” means the production of petroleum in such quantities which
make the exploitation of the field economical for the licensee;
“company” means any entity incorporated under any law in force in Nigeria or
elsewhere;
“Compressed Natural Gas” or “CNG” means natural gas pressurized to 200 – 248
bar to reduce its volume and comprises mainly methane;
“condensate” refers to a portion of natural gas of such composition that are in the
gaseous phase at temperature and pressure of the reservoirs, when produced and in
the liquid phase at surface pressure and temperature;
“continuous production flaring” means the long-term flaring of natural gas that is
associated with the process of crude oil production and that is not utilized for on-site
or off-site energy needs, recovered for local or international gas markets, or reinjected;
“contract area” refers to the area of – 195
(i) a PPL and any PML derived therefrom; or
(ii) an OPL and any PPL derived therefrom; or
(iii) an OML and any PML derived therefrom plus any contractual consolidated
areas as defined in the respective production sharing contracts;
“crude oil” means any oil (other than oil extracted by destructive distillation from coal,
bituminous shales or other stratified deposits) won in Nigeria either in its natural state
or after the extraction of water, sand or other foreign substance therefrom but before
the crude oil has been refined or otherwise treated;
“decommissioning” or “abandonment” refers to the approved process of cessation of
operations of oil and gas wells, installations and structures, including shutting down
an installation’s operation and production, total or partial removal of installations and
structures where applicable, chemicals, radioactive and all such other materials
handling, removal and disposal of debris and removed items, environmental
monitoring of the area after removal of installations and structures;
“deep water” means areas offshore Nigeria with a water depth in excess of 200
meters;
“Domestic Gas Aggregator” has the meaning as specified in Part V of this Act;
“Domestic Gas Supply Obligation” has the meaning as specified in Part V of this Act;
“downstream gas distribution and operations” comprises the activities of processing,
distribution and supply of gas to customers, construction and operation of city-gate
reception terminals for natural gas and gas or ethane distribution pipelines, and the
sale, marketing and delivery to final consumers of gas and compressed natural gas;
“downstream gas sector” comprises the sector of the Nigerian economy that consist
of downstream gas distribution and operations within Nigeria;
“downstream petroleum industry ” means the aggregation of companies duly
licensed to conduct downstream petroleum product operations and downstream gas
distributions and operations in Nigeria;
“downstream petroleum operations” means activities downstream of the
measurement points of petroleum mining leases or unrelated to petroleum mining
leases including the construction and operation of natural gas transport or
transmission pipelines, including the related compressor stations; construction and
operations of facilities to compress, transport and deliver compressed natural gas
(“CNG”), construction and operations of gas processing facilities and central
processing facilities, producing ethane, propane, butane and natural gas liquids and
marketable natural gas; construction and operation of underground or above ground
facilities for the storage of natural gas; ethane extraction plants; construction and
operation of gas to liquids (“GTL”) plants; construction and operation of liquified 196
natural gas (“LNG”) plants, and related LNG terminals; acquisition, operation or
chartering of LNG tankers for coastal and marine transportation; other construction
and activities incidental thereto and related administration and overhead ; purchase
and sale, trading, bartering, aggregating and marketing of natural gas transported by
pipelines, compressed natural gas, liquified natural gas, methane, ethane, propane,
butane, natural gas liquids and liquids from GTL plants with respect to wholesale
customers; purchase, distribution and supply of marketable gas to small customers,
construction and operation of city-gate reception terminals for natural gas and gas or
ethane distribution pipelines, and the sale, marketing and delivery of gas to small
customers; construction and operation in Nigeria of facilities, product pipelines, tank
farms and stations for the distribution, marketing and retailing of petroleum products,
and other construction and activities incidental thereto and related administration and
overhead, purchase of petroleum products and sale of petroleum products on a retail
basis;
“downstream petroleum product sector” comprises the sector of the Nigerian
economy that consist of the sale and distribution of petroleum products, as well as
product pipelines and storage within Nigeria;
“downstream product operations” means construction and operation in Nigeria of
facilities, product pipelines, tank farms and stations for the distribution, marketing
and retailing of petroleum products, and other construction and activities incidental
thereto and related administration and overhead;
“dry gas” means gas containing less than five barrels of condensate per million
standard cubic feet;
“disposal” and “disposed of”, in relation to chargeable oil owned by a company
engaged in upstream petroleum operations, mean or connote respectively:
(a) delivery, without sale, of chargeable oil to; and
(b) chargeable oil delivered, without sale, to,
a refinery or to an adjacent storage tank for refining by the company
“disposal” and “disposed of”, in relation to chargeable natural gas owned by a
company engaged in petroleum operations, mean or connote respectively:
(a) delivery, without sale, of chargeable natural gas to; and
(b) chargeable natural gas delivered, without sale, to,
a gas processing plant or an LNG plant.
“Effective Date” means the date on which this Act comes into force; 197
“energy efficiency” means a change to energy use that results in an increase in net
benefits per unit of energy;
“enforcement order” means an order issued by the Inspectorate , or the Agency
under this Act;
“Exclusive Economic Zone” shall have the same meaning as defined in the Exclusive
Economic Zone Act Cap. 350, Laws of the Federation of Nigeria, 2004;
“explore” means to make a preliminary search by surface geological and geophysical
methods, including aerial surveys but excluding drilling below 91.44 metres;
“field” includes an area consisting of a single reservoir or multiple reservoirs all
grouped on, or related to, the same individual geological structural feature or
stratigraphic condition, the surface area, it may refer to both the surface and the
underground productive formations;
“field development plan” means a plan, as amended from time to time, for a field to
develop the discovered petroleum which plan, shall be submitted to the Inspectorate
for approval;
“fiscalised crude” means the net quantity of crude oil or condensate produced at the
measurement point excluding solid and liquid impurities of the crude, or the total
quantum of crude oil at standard temperature and pressure that is produced and
metered at the measurement point or at the delivery point to the refinery in Nigeria;
“fiscalised natural gas” means the net quantity of gas delivered at the fiscal sales
point;
“fiscal rent” means the aggregation of royalty, Nigerian Hydrocarbon Tax and
Companies Income Tax obligations arising from upstream petroleum operations;
“fiscal sales point” means for oil and condensate, the fiscal metering point where title
transfers or is deemed to have transferred at an export terminal, Floating Production
Storage and Offtake (‘FPSO’) or a refinery inNigeriaand for gas, it means the fiscal
metering point where title transfers or is deemed to have transferred at the point of
sale;
“Force Majeure” includes-
(a) acts of war (whether declared or not), invasion, armed conflict, act of foreign
enemy or blockade in each case occurring within or involving Nigeria;
(b) acts of rebellion, riot, civil commotion, strikes of a political nature, act or
campaign of terrorism, or sabotage of a political nature in each case occurring
within Nigeria;
(c) a change in law; 198
(d) interruption resulting from force majeure of utilities or infrastructure necessary
to operate the oil assets;
(e) action or failure to act by a Governmental entity (which includes any
governmental authorization ceasing to remain in full force and effect; or is not
issued or renewed upon application having been properly made); and
(f) boycott, sanction or embargo imposed by countries where equipment is
sourced during the period up to and including but not after the start up of
operations in Nigeria or on equipment specified in construction contracts;
“frontier acreages” means any or all licences or leases located in an area defined as
frontier in a regulation issued by the Minister in charge of petroleum matters
pursuant to this Act ;
“gas” or “natural gas” means all gaseous hydrocarbons, and all substances
contained therein, as exists in their natural state in strata, associated or not with
crude oil, and are in a gaseous state upon production from a reservoir and excludes
condensates;
“gas flaring” means any flaring of natural gas associated with the process of oil
production, and includes continuous production flaring but excludes safety flaring
and non-continuous production flaring and analogous expressions, such as “gas
flare”, ”flaring of gas”, “flare gas” shall have the same meaning as “gas flaring”;
“Gazette” means the Official Gazette of the Federal Government of Nigeria;
“good oilfield practice” means generally the reasonable and prudent diligent use of
policies, procedures, methods, equipment and materials that result in effective and
efficient exploration, appraisal and development of petroleum including optimum
recovery of petroleum from a discovery area with minimal impact on the environment
as permitted and use of efficient and effective practices for transforming produced
petroleum into marketable form and delivering it to the market, having due regard for
safety and other factors and means in particular, knowledge of and compliance with
the latest standards developed by relevant professional institutions including but not
limited to:
(a) the American Gas Association (AGA);
(b) the American Petroleum Institute (API);
(c) the American Society of Mechanical Engineers (ASME);
(d) the American Society for Testing of Materials (ASTM);
(e) the British Standard Institute (BSI);
(f) the International Organisation for Standardisation (ISO); and199
(g) any other organisation deemed acceptable by the Inspectorate .
“Government” means the government of the Federal Republic of Nigeria;
“Court” means Federal High Court in Nigeria within whose jurisdiction –
(a) in relation to any offence under this Act, the place is situated where such
offence is, for the purposes of this Act, deemed to have occurred;
(b) in relation to any suit for tax or appeal against an assessment of tax, the place
is situated where the return under section….. of this Act was submitted or
where the assessment of the tax was made as the case may be;
(c) in relation to any direction under section …. of this Act, the place is situated
from which the direction was issued; and
(d) in relation to any claim or other matter which is subject to appeal in like
manner as an assessment, or to which the provisions of section of this Act
apply with any modifications, the place is situated from which the claim or
other matter was refused by the Service;
“indigenous petroleum company” means a company:
(a) engaged in the exploration for and production of petroleum of which fifty-one
per cent or more of its shares are beneficially owned directly or indirectly by
Nigerian citizens or associations of Nigerian citizens;
(b) which meets the requirements of any guidelines or regulations that may be
issued by the Inspectorate or the Agency; and
(c) which is accredited as an indigenous petroleum company by the Agency
provided that a company listing on any stock of exchange in Nigeria with a
majority of Nigerian directors shall be deemed to qualify as an indigenous
petroleum company in Nigeria ;
“industry” means the petroleum industry in Nigeria;
“Inland Basin” means any of the following basins, namely; Anambra, Benin, Benue,
Chad, Bida, Dahomey, Gongola, Sokoto and such other basins as may be
determined from time to time, by the Minister;
“intangible drilling costs” means all expenditure for labour, fuel, repairs,
maintenance, hauling, and supplies and materials (not being supplies and materials
for well cement, casing or other well fixtures) which are for or incidental to drilling,
cleaning, deepening or completing wells or the preparation thereof incurred in
respect of: 200
(a) determination of well locations, geological studies, topographical and
geographical surveys preparatory to drilling;
(b) drilling, shooting, testing and cleaning wells;
(c) cleaning, draining and leveling land, road building and the laying of
foundations;
(d) erection of rigs and tankage assembly and installation of pipelines and other
plant and equipment required in the preparation or drilling of wells producing
petroleum;
“LIBOR” means, as of any date of determination, the per annum rate of interest,
based on a three hundred and sixty (360) day year, rounded downwards, if
necessary, to the nearest whole multiple of one-sixteenth of one percent (l/16th%),
determined as the simple average of the offered quotations appearing on the display
referred to as the “LIBOR Page” (or any display substituted therefore) of Reuters
Monitor Money Rates Service or, if such “LIBOR Page” shall not be available, the
simple average of the offered quotations appearing on page 3750 of the AP/Dow
Jones Telerate Systems Monitor (or any page substituted therefore) for deposits in
U.S. Dollars for a three month period, at or about 11:00 a.m. (London, England time)
on the first London Banking Day of the calendar quarter in which the date of
determination occurs (or, if the first day of such calendar quarter in which the date of
determination occurs is not a London Banking Day, the immediately preceding
London Banking Day). If neither such “LIBOR Page” nor such page 3750 or any
successor page is available, or if for any reason a rate of interest cannot be
determined as aforesaid, then the parties shall designate an alternative mechanism
consistent with Eurodollar market practices for determining such rate. For purposes
of this definition, a “London Banking Day” is a day on which dealings in deposits in
Dollars are transacted on the London interbank market;
“Liquefied Natural Gas” or “LNG” means natural gas in its liquid state at
approximately atmospheric pressure;
“local distribution zone” means an authorized area as specified in regulations issued
under this Act, within which one distributor of downstream natural gas may operate;
“loss” means a loss ascertained in like manner as an adjusted profit;
“Marginal field” means an oil or gas field as defined in pursuant to this Act;
“measurement point” means a point at which petroleum is measured pursuant to this
Act;
“Minister” means the Minister in charge of petroleum resources and overseeing the
petroleum industry in Nigeria;
“Ministry” means the Ministry of Petroleum Resources; 201
“MMbtu” means one million BTU;
“MMscf” means one million standard cubic feet;
“National Gas Master Plan” has the meaning as specified in section …;
“National Oil Company” has the meaning as specified in section ….;
“natural gas liquids” or “NGL” means hydrocarbons liquefied at the surface in
separators, field facilities or in gas processing plants and include but are not limited
to ethane, propane, butanes, pentanes, and natural gasoline and may or may not
include condensate;
”network code” has the meaning as specified in section 246;
“Nigeria” includes the submarine areas beneath the territorial waters of Nigeria and
the submarine areas beneath any other waters which are or at any time shall in
respect of mines and minerals become subject to the legislative competence of the
National Assembly;
“Nigerian Content” has the meaning as defined in the Nigerian Oil and Gas Industry
Content Development Act, 2010;
“Nigerian company” means a company incorporated under the laws of Nigeria;
“Nigerian Hydrocarbon Tax” or “NHT” has the meaning as specified in Part VIII of this
Act;
“non-associated gas” means natural gas accumulation which does not occur with
crude oil;
“non-continuous production flaring” means the flaring of gas streams that may result
from short-term releases, including but not limited to pilot flaring, short-term well
testing, commissioning of facilities, emergencies, equipment or compressor start-ups
and shutdowns, equipment failure; 202
“non-productive rents” means and includes the amount of any rent as to which there
is provision for its deduction from the amount of any royalty under a petroleum
prospecting licence or petroleum mining lease to the extent that such rent is not so
deducted;
“official selling price” means the price at which comparable crude oil or condensate
of similar quality could be sold on similar terms at similar times by parties under no
compulsion to buy or sell and whereby none of such parties exerts or is in a position
to exert influence on the other party having regard to all relevant factors;
“Oil and Gas Policy” means the policy of the government for the time being in force
in the petroleum sector;
“Oil Mining Lease” means a lease granted to a company, under the Minerals Act or
the Petroleum Act, CAP N12, LFN 2004 for the purpose of winning petroleum or any
assignment of such lease;
“Oil Prospecting Licence” means a licence granted to a company, under the Minerals
Act or this Act, for the purpose of prospecting for petroleum, or any assignment of
such licence;
“person” means any individual, company or other juristic person;
“petroleum” means hydrocarbons and associated substances as exist in its natural
state in strata, and includes crude oil, natural gas, condensate, bitumen and mixtures
of any of them, but does not include coal and tar sands;
“Petroleum Exploration Licence” or “PEL” means a licence granted to a company
pursuant to section 172 of this Act;
“petroleum exploration operations” means any geological, geophysical, geochemical
and other surveys and any interpretation of data relating thereto, and the drilling of
such shot holes, core holes, stratigraphic tests, exploration wells for the discovery of
petroleum, appraisal of discoveries and other related operations;
“Petroleum Industry Act” refers to this Act;
“Petroleum Mining Lease” or “PML” means a lease granted to a company pursuant
to section 172 of this Act;
“upstream petroleum operations” means the winning or obtaining and transportation
of petroleum, chargeable oil or chargeable natural gas chargeable condensate or
bitumen in Nigeria by or on behalf of a company for its own account including
production sharing contractors, by any drilling, mining, extracting or other like
operations or process, not including refining at a refinery, in the course of a business
carried on by the company engaged in such operations, and all operations incidental
thereto and any sale of or any disposal of chargeable oil or chargeable natural gas or
chargeable condensate or bitumen by or on behalf of the company; 203
“petroleum products” include motor spirit, gas oil, black oil, diesel oil, automotive gas
oil, fuel oil, aviation oil, kerosene, liquefied natural gas, compressed natural gas,
natural gas liquids, liquefied petroleum gases and any lubrication oil or grease or
other lubricant;
“petroleum prospecting licence” or “PPL” means a licence pursuant to section 172 of
this Act;
“pilot flaring” means the continuous low volume flaring, not exceeding one million
standard cubic feet per day, which is required as part of reasonable, prudent and
good oil field practice to avoid venting of gas during any emergency discharge at the
flare tip;
“production allowance” means an allowance provided for under the Third Schedule
to this Act;
“profits” means profits for the purpose of Part VIII of this Act;
“refining company” means a body corporate having been licensed by the appropriate
authorities to either take over an existing refinery or refineries at the inception of this
Act, or to establish new refineries in Nigeria;
“regulations” mean rules or order having force of law issued by the Minister in
accordance with the provisions of this Act;
“rent” includes any annual or other periodic charge made in respect of a licence
granted under this Act;
“resident in Nigeria”, in relation to a company, means a company the control and
management of the business of which are exercised in Nigeria;
“royalties” means and includes—
(a) the amount of any rent as to which there is provision for its deduction from the
amount of any revenue under an Petroleum Prospecting Licence or Petroleum
Mining Lease to the extent that such rent is so deducted; and
(b) the amount of any royalties payable under any such licence or lease less any rent
deducted from those royalties;
“safety flaring” means the flaring of natural gas that occurs because of a temporary
or permanent lack of adequate gas processing facilities to prevent gas venting and
injuries to people, equipment and the environment during process upsets, testing or
commissioning;
“Service” means the Federal Inland Revenue Service; 204
“shallow water” means areas in the offshore of Nigeria up to and including a water
depth of 200 meters;
“significant gas discovery” means a discovery of natural gas that is substantial in
terms of reserves and is potentially commercial, but cannot be declared commercial
for one or more of the following reasons:
(a) no markets or natural gas within Nigeria;
(b) export markets need to be identified and developed;
(c) no pipeline, processing or liquefaction capacity is available in existing systems
where commercial conditions indicate the best option for development is
based on future expansion of such systems or use of such systems when
capacity will become available in the future; or
(d) where the natural gas discovery would only be commercial when jointly
developed with other existing natural gas discoveries; or potential future
natural gas discoveries.
“standard cubic feet” means, in relation to natural gas, the quantity of dry ideal gas at
a temperature of sixty degrees Fahrenheit and a pressure of fourteen decimal six
nine six (14.696) pounds per square inch absolute contained in a volume of one
cubic foot;
“standards” means limits made binding through laws, regulations or guidelines which
must be observed within the appropriate regulatory framework in all cases where
they are applicable;
“State” means the sovereign State of the Federal Republic of Nigeria, except where
the context so admits or where it is specifically stated to mean a State of the
Federation;
“tax” means chargeable tax;
“ultra-deep water” means areas offshore Nigeria with a water-depth in excess of
2,500 metres;
“uncommitted capacity” means capacity that is:
(a) not contractually committed to a party;
(b) not conditionally assigned by means of an arm’s length option agreement to a
party;
(c) not demonstrably planned to be utilised on the basis of an approved utilisation
plan;
“upstream” refers to all activities entered into for the purpose of finding and
developing petroleum and includes all activities involved in exploration and in all 205
stages through, up to the production and transportation of petroleum from the area of
production to the fiscal sales point or transfer to the downstream sector;
“upstream crude oil operations” means the winning or obtaining of crude oil in Nigeria
by or on behalf of a company on its own account for commercial purposes and shall
include any activity or operation related to crude oil that occurs up to fiscal sales
point or transfer to the downstream sector;
“upstream gas operations” means the winning or obtaining of natural gas in Nigeria
by or on behalf of a company on its own account for commercial purposes and shall
include any activity or operation related to natural gas, including but not limited to the
treatment of gas, that occurs up to the fiscal sales point or transfer to the
downstream sector;
“upstream petroleum operations” means upstream gas operations and upstream
crude oil operations;
“U.T.M” means Universal Transverse Mercator co-ordinate system.
363. Short title
This Act may be cited as the Petroleum Industry Act, 2012.
FIRST SCHEDULE
[Section 7 (2).]
RIGHTS OF PRE-EMPTION
1. The Minister shall have the right to require the holder of any licence or lease granted
under this Act (referred to in this Schedule as “the licensee or lessee”) to – 206
(a) provide for the Federal Government, to the extent of any refinery or petroleum
products storage capacity he may have in Nigeria, petroleum products
complying with specification given by the Minister; or
(b) deliver to any person holding a licence to operate a refinery, such quantity and
quality of crude oil as may be specified by the Minister to the extent that the
licensee or lessee has crude oil of that quantity and quality.
2. The licensee or lessee shall use his best endeavours to increase so far as possible
with his existing facilities, the supply of petroleum or petroleum products, or both, for
the Federal Government to the extent required by the Minister.
3. The licensee or lessee shall, with all reasonable expedition and so as to avoid
demurrage on the vessels conveying the same, use his best endeavours to deliver
all petroleum or petroleum products purchases by the Minister under the right of preemption in such quantities, and at such places of shipment or storage in Nigeria, as
may be determined by the Minister.
4. If a vessel employed to carry petroleum or petroleum products pursuant to paragraph
3 of this Schedule is detained on demurrage at the port of loading, the licensee or
lessee shall pay the amount due for demurrage according to the terms of the charterparty or the rates of loading previously agreed by the licensee or lessee, unless the
delay is due to causes beyond the control of the licensee or lessee.
5. Any dispute which may arise as to whether a delay is due to causes beyond the
control of the licensee or lessee shall be settled by agreement between the Minster
and the licensee or lessee or, in default of agreement, by arbitration.
6. The price to be paid for petroleum or petroleum products taken by the Minister in
exercise of the right of pre-emption shall be –
(a) the reasonable value at the point of delivery, less discount to be agreed by
both parties; or
(b) if no such agreement has been entered into prior to the exercise of the right of
pre-emption, a fair price at the port of delivery to be settled by agreement
between the Minister and the licensee or lessee or, in default of agreement,
by arbitration.
7. To assist in arriving at a fair price for the purposes of paragraph 6(b) of this
Schedule, the licensee or lessee shall, if the Minister so requires- 207
(a) furnish for the confidential information of the Minister particulars of quantities,
descriptions and prices of petroleum or petroleum products sold to other
customers and of charters or contracts entered into for their carriage; and
(b) exhibit original or authenticated copies of the relevant contracts or charterparties.
8. The Minister may take control of any works, plants or premises of the licensee or
lessee and if he does so, the licensee or lessee and his servants or agents shall
conform to and obey all directions issued by the Minister or on his behalf.
9. Reasonable compensation shall be paid to the licensee or lessee for any loss or
damage caused to him by reason of the exercise by the Minister of the powers
conferred by paragraph 8 of this Schedule.
10. Any compensation payable under paragraph 9 of this Schedule shall be settled by
agreement between the Minister and the licensee or lessee or, in default of
agreement, by arbitration.
SECOND SCHEDULE
[Sections 17, 47, 76, 101, etc ]
SUPPLEMENTARY PROVISIONS RELATING TO THE PROCEEDINGS OF
THE
BOARDS OF INSTITUTIONS UNDER THIS ACT
PROCEEDING OF THE BOARD INSTITYUTIONS
1. Subject to this Act and the provisions of section 27 of the Interpretation Act, the
Board (‘the Board’) shall have the power to regulate its proceedings and may make
standing orders with respect to the holding of its meetings, and those of its 208
committees, the notice to be given, the keeping of minutes of its proceedings, the
custody and production for inspection of such minutes and such other matters as the
Board may, from time to time, determine.
2. (a) There shall be at least one ordinary meeting of the Board in every quarter of the
year and subject thereto, the Board shall meet whenever it is summoned by the
Chairman and if the Chairman is requested to do so by notice given to him by not
less than three other members, the Chairman shall summon a meeting of the Board
to be held within fourteen days from the date on which the notice is given.
(b) Every meeting of the Board shall be presided over by the Chairman and if the
Chairman is unable to attend a particular meeting, the members present at the
meeting shall elect one of their numbers to preside at the meeting.
3. The quorum at the meeting of the Board shall consist of the Chairman (or in an
appropriate case, the person presiding at the meeting pursuant to paragraph 2 of this
Schedule) and the majority of the other members, as appropriate
4. The Board shall meet for the conduct of its business at such places and on such
days as the Chairman may appoint.
5. A question put before the Board at a meeting shall be decided by consensus, and
where this is not possible, by a majority of the votes of the members present and
voting.
6. The Chairman shall, in the case of an equality of votes, have the casting vote in
addition to his deliberative vote.
7. Where the Board desires to seek the advice of any person on a particular matter, the
Board may co-opt a person as a member for such period it thinks fit, but a person
who is a member by virtue of this paragraph shall not be entitled to vote at any
meeting of the Board and shall not count towards the quorum.
Committees
8. The Board may constitute one or more committees for the purpose of carrying out
any of its functions as the Board may determine and report on any matter with which
the Board is concerned.
9. A committee appointed under this Schedule shall be presided over by a member of
the Board and consist of such number of persons (not necessarily all members of the
Board) as may be determined by the Board, and a person other than a member of
the Board shall hold office on the committee in accordance with the terms of his
appointment.
10. A decision of a committee of the Board shall be of no effect until it is confirmed by
the Board.
Miscellaneous209
11. The fixing of the seal of the entity shall be authenticated by the signature of the
Secretary or some other person authorized generally by the Board to act for that
purpose.
12. A contract or an instrument which, if made or executed by any person not being a
body corporate, would not be required to be under seal, may be made or executed
on behalf of the entity by the Director-General or the Executive Secretary, as the
case may be, or any person generally or specially authorized to act for that purpose
by the Board.
13. A document purporting to be a contract, an instrument or other document signed or
sealed on behalf of the entity shall be received in evidence and, unless the contrary
is proved, be presumed without further proof to have been signed and sealed.
14. The validity of any proceedings of the Board or its committees shall not be affected
by-
(a) any vacancy in the membership of the Board or its committees; or
(b) reason that a person not entitled to do so took part in the proceedings; or
(c) any defect in the appointment of a member.
15. Any member of the Board and any person holding office on a committee of the
Board, who has a personal interest in any contract or arrangement entered into or
proposed to be considered by the Board or a committee shall –
(a) forthwith disclose his interest to the Board or committee, as the case may be;
and
(b) not vote on any question relating to the contract or arrangement.
THIRD SCHEDULE
[Sections 355]
POWERS AND DUTIES OF THE SERVICES UNDER THIS ACT
1. The Service shall have the exclusive power and responsibility to exercise the
functions required to be carried out under the following sections of this Act-
(i) Section 323;
(ii) Section 224;
(iii) Section……..
(iv) Section…….. 210
(v) Section……..
(vi) Section……..
(vii) Section……..
(viii) Section……..
(ix) Section……..
(x) Section……..
(xi) Section……..
(xii) Section……..
2. Nothwithstanding the provisions of paragraph 1 of this Schedule, powers or duties as
consist of a power or duty to make inquiries or other incidental or preparatory powers
or duties of a like nature which may be undertaken by any other dully authorised
person or entity.
FOURTH SCHEDULE
[SECTION 312]
CAPITAL ALLOWANCES
1. Interpretation.
(1) For the purposes of this Schedule, unless the context otherwise requires–
“Concession” includes an oil exploration licence, an oil prospecting licence,
an oil mining lease, a petroleum exploration licence, a petroleum prospecting
licence and a petroleum mining lease, any right, title or interest in or to
petroleum oil in the ground and any option of acquiring any such right, title or
interest;
“Lease” includes an agreement for a lease where the term to be covered by
the lease has begun, any tenancy and any agreement for the letting or hiring 211
out of an asset, but does not include a mortgage and all cognate expression
including “Leasehold Interest” shall be construed accordingly; and
(a) where, with the consent of the lessor, a lessee of any asset remains in
possession thereof after the termination of the lease without a new
lease being granted to him, that lease shall be deemed for the
purposes of this Schedule to continue so long as he remains in
possession as aforesaid; and
(b) where, on the termination of a lease of any asset, a new lease of that
asset is granted to the lessee, the provisions of this Schedule shall
have effect as if the second lease were a continuation of the first lease;
“Qualifying Expenditure” means, subject to the express provisions of this
schedule, expenditure incurred in an accounting period, which is –
(a) Capital expenditure (hereinafter called “qualifying plant expenditure”)
incurred on plant, machinery and fixtures;
(b) Capital expenditure (hereinafter called “qualifying pipeline and storage
expenditure”) incurred on pipelines and storage tanks;
(c) Capital expenditure (hereinafter called “qualifying building
expenditure”), other than expenditure which is included in paragraphs
(a), (b) or (d) of this paragraph, incurred on the construction of
buildings, structures or works of a permanent nature; or
(d) Capital expenditure (hereinafter called “qualifying drilling expenditure”)
other than expenditure which is included in paragraph (a) or (b) of this
paragraph, incurred in connection with, petroleum operations in view on
–
(i) the acquisition of, or of rights in or over, petroleum deposits,
(ii) searching for or discovering and testing petroleum deposits, or
winning access thereto; or
(iii) the construction of any works or buildings which are likely to be
of little or no value when the petroleum operations for which they
were constructed cease to be carried on, provided that, for the
purposes of this definition qualifying expenditure shall not
include any sum which may be deducted under the provisions of
section 305 of this Act.
(2) For the purposes of the interpretation of qualifying expenditure above,
where expenditure is incurred by a company before its first accounting
period and such expenditure would have fallen to be treated as
qualifying expenditure (ascertained without the qualification contained 212
in the foregoing proviso) if it had been incurred by the company on the
first day of its first accounting period, and
(a) that expenditure is incurred in respect of an asset owned by the
company then such expenditure shall be deemed to be
qualifying expenditure incurred by it on that day; or
(b) that expenditure is incurred in respect of an asset which has
been disposed of by the company before the beginning of its first
accounting period then any loss suffered by the company on the
disposal of such asset shall be deemed to be qualifying
petroleum expenditure incurred by the company on that day and
be deemed to have brought into existence an asset owned by
the company in use for the purposes of petroleum operations
carried on by the company, and any profit realised by the
company on such disposal shall be treated as income of the
company of its first accounting period for the purposes of
subsection (3) of section 304
2. Provisions Relating to Qualifying Petroleum Expenditure
(1) For the purposes of this Schedule where-
(a) expenditure has been incurred before its first accounting period and
such expenditure would have been treated as such qualifying
petroleum expenditure (ascertained without the qualification contained
in the proviso in the interpretation of qualifying expenditure) if it had
been incurred in that first accounting period; and
(b) such expenditure (ascertained in the case of sub-paragraph (1)(a) of
this paragraph without such qualification) shall be deemed to have
brought into existence an asset owned by the company incurring the
expenditure and in use for the purposes of such petroleum operations.
(2) For the purposes of this Schedule, an asset in respect of which qualifying
drilling expenditure has been incurred by any company for the purposes of
petroleum operations carried on by it during any accounting period of the
company, and which has not been disposed of, shall be deemed not to cease
to be used for the purposes of such operations so long as such company
continues to carry on such operations.
(3) So much of any qualifying petroleum expenditure incurred on the acquisition
of rights in or over petroleum deposits and on the purchase of information
relating to the existence and extent of such deposits as exceeds the total of
the original cost of acquisition of such rights and of the cost of searching for,
discovering and testing such deposits prior to the purchase of such
information shall be left out of account for the purposes of this Schedule
provided that where the company which originally incurred such costs was a 213
company which carried on a trade or business consisting, as to the whole or
part thereof, in the acquisition of such rights or information with a view to the
assignment or sale, the price paid on such assignment or sale shall be
substituted for the aforementioned costs.
3. Owner and meaning of relevant interest
(1) For the purposes of this Schedule, where an asset consists of a building,
structure or works, the owner shall be taken to be the owner of the relevant
interest in such building, structure or works.
(2) Subject to the provisions of this paragraph, in this Schedule, the expressions
“the relevant interest” means, in relation to any expenditure incurred on the
construction of a building, structure or works to which the company which
incurred such expenditure was entitled when it incurred the expenditure.
(3) Where, when a company incurs qualifying building expenditure or qualifying
drilling expenditure on the construction of a building, structure or works, the
company is entitled to two or more interests therein, and one of those
interests is an interest which is reversionary on all the others, that interest
shall be the relevant interest for the purposes of this Schedule.
4. Sale of Buildings, Etc.
Where capital expenditure has been incurred on the construction of a building,
structure or works and thereafter the relevant interest therein is sold, the company
which buys that interest shall be deemed, for all the purposes of this Schedule
except the granting of petroleum investment allowance, to have incurred, on the date
when the purchase price became payable, capital expenditure on the construction
thereof equal to the price paid by it for such interest or to the original cost of
construction, whichever is the less, provided that where such relevant interest is sold
before the building, structure or works has been used, the foregoing provisions of
this paragraph shall have effect with respect to such sale with the omission of the
words “except the granting of investment tax credit” and the original cost of
construction shall be taken to be the amount of the purchase price on such sale;
5. Owner under production sharing contract
Where the production sharing contract between the national oil company and a
contractor provides for the contractor to finance the cost of equipment and for such
equipment to become the property of the national oil company, the contractor shall
be deemed to be the owner of the qualifying expenditure thereon, for the purpose of
the claim of capital allowances.
6. Annual Allowance214
(1) Subject to the provisions of this Schedule, where in any accounting period, a
company owning any asset has incurred in respect thereof qualifying
expenditure wholly, necessarily and exclusively for the purposes of petroleum
operations carried on by it, there shall be due to that company as from the
accounting period in which such expenditure was incurred, an allowance (in
this Act referred to as “an annual allowance”) at the appropriate rate
percentum specified in Table II of this Schedule.
(2) Notwithstanding the provisions of sub-paragraph (1) of this paragraph, there
shall be retained in the books, in respect of each asset, one percent of the
initial cost of the asset which may only be written off in accordance with subparagraph (3) of this paragraph.
(3) Any asset or part thereof in respect of which capital allowances have been
granted may only be disposed of on the authority of a Certificate of’ Disposal
issued by the Minister of Finance or any person authorised by him.
7. Asset to be in use at end of accounting period
An annual allowance in respect of qualifying expenditure incurred in respect of any
asset shall only be due to a company for any accounting period if at the end of such
accounting period it was the owner of that asset and the asset was in use for the
purposes of the petroleum operations carried on by it.
8. Balancing Allowances
Subject to the provisions of this Schedule, where in any accounting period of a
company, the company owning any asset in respect of which it has incurred
qualifying expenditure wholly and exclusively for the purposes of petroleum
operations carried on by it, disposes of that asset, an allowance (hereinafter called “a
balancing allowance”) shall be due to that company for that accounting period of the
excess of the residue of that expenditure, at the date; such asset is disposed of, over
the value of that asset at that date provided that a balancing allowance shall only be
due in respect of such asset if immediately prior to its disposal it was in use by such
company for the purposes of the petroleum operations for which such qualifying
expenditure was incurred.
9. Balancing Charges.
Subject to the provisions of this Schedule, where in any accounting period of a
company, the company owning any asset in respect of which it has incurred
qualifying expenditure wholly and exclusively for the purposes of petroleum
operations carried on by it, disposes of that asset, the excess (hereinafter called “a
balancing charge”) of the value of that asset, at the date of its disposal, over the
residue of that expenditure at that date shall, for the purposes of this Act, be treated
as income of the company of that accounting period, provided that a balancing
charge in respect of such asset shall only be so treated if immediately prior to the 215
disposal of that asset it was in use by such company for the purposes of the
petroleum operations for which such qualifying expenditure was incurred and shall
not exceed the total of any allowances due under the provisions of this Schedule, in
respect of such asset.
10. Residue
The residue of qualifying expenditure, in respect of any asset, at any date, shall be
taken to be the total qualifying expenditure incurred on or before that date, by the
owner thereof at that date, in respect of that asset, less the total of any annual
allowances due to such owner, in respect of that asset, before that date.
11. Meaning of “disposed of”
Subject to any express provision to the contrary and for the purposes of this
Schedule-
(a) a building, structure or works of a permanent nature is disposed of if any of
the following events occur-
(i) the relevant interest is sold, or
(ii) that interest, being an interest depending on the duration of a
concession, comes to an end on the coming to an end of that
concession, or
(iii) that interest, being a leasehold interest, comes to an end otherwise
than on the company entitled thereto acquiring the interest which is
reversionary thereon, or
(iv) the building, structure or works of a permanent nature are demolished
or destroyed or, without being demolished or destroyed, cease
altogether to be used for the purposes of petroleum operations carried
on by the owner.
(b) plant, machinery or fixtures are disposed of if they are sold, discarded or
cease altogether to be used for the purposes of petroleum operations carried
on by the owner thereof;
(c) assets in respect of which qualifying drilling expenditure is incurred are
disposed of if they are sold or if they cease to be used for the purposes of the
petroleum operations of the company incurring the expenditure either on such
company ceasing to carry on all such operations or on such company
receiving insurance or compensation monies therefor.
12. Value of an Asset216
(1) The value of an asset at the date of its disposal shall be the net proceeds of
the sale of the asset or of the relevant interest therein, or, if it was disposed of
without being sold, the amount which, in the opinion of the Service, such
asset or the relevant interest therein, as the case may be, would have fetched
if sold in the open market at that date, less the amount of any expenses which
the owner might reasonably be expected to incur if the asset were so sold.
(2) For the purpose of this paragraph, if an asset is disposed of in such
circumstances that insurance or compensation monies are received by the
owner thereof, the asset or the relevant interest in the asset, as the case may
be, shall be treated as having been sold and as though the net proceeds of
the insurance or compensation monies were the net proceeds of the sale
thereof.
13. Apportionment
(1) Any reference in this Schedule to the disposal, sale or purchase of any asset
includes a reference to the disposal, sale or purchase of that asset, as the
case may be, together with any other asset, whether or not qualifying
expenditure has been incurred on such last-mentioned asset, and, where an
asset is disposed of, sold, or purchased together with another asset, so much
of the value of the assets as, on a just apportionment, is properly attributable
to the first mentioned asset shall, for the purposes of this Schedule, be
deemed to be the value of, or the price paid for, that asset, as the case may
be.
(2) For the purposes of this paragraph, all the assets which are purchased or
disposed of in pursuance of one bargain shall be deemed to be purchased or
disposed of together, notwithstanding that separate prices are or purport to be
agreed for each of those assets or that there are or purport to be separate
purchases or disposals of those assets.
(3) The provisions of sub-paragraph (1) of this paragraph shall apply, with any
necessary modifications, to the sale or purchase of the relevant interest in any
asset together with any other asset or relevant interest in any other asset.
14. Part of an asset
Any reference in this Schedule to any asset shall be construed whenever necessary
as including a reference to a part of any asset (including an undivided part of that
asset in the case of joint interests therein) and when so construed any necessary
apportionment shall be made as may, in the opinion of the Service, be just and
reasonable.
15. Extension of meaning of “in use”
For the purposes of this Schedule, an asset shall he deemed to be in use during a
period of temporary disuse. 217
16. Exclusion of certain expenditure
(1) Subject to the express provisions of this Schedule, where any company has
incurred expenditure which is allowed to be deducted under any provision
(other than a provision of this Schedule) to this Act, such expenditure shall not
be or be treated as qualifying expenditure.
(2) Where any company has incurred expenditure upon any ocean going oiltanker plying between Nigeria and any other territory that expenditure shall
not be treated as qualifying expenditure.
17. Asset used or expenditure incurred partly for the purpose of petroleum
operations.
(1) The following provisions of this paragraph shall apply where either or both of
the following conditions apply with respect to any asset-
(a) the owner of the asset has incurred in respect thereof qualifying
expenditure partly for the purposes of petroleum operations carried on
by him and partly for other purposes; and
(b) the asset in respect of which the owner has incurred qualifying
expenditure thereof is used partly for the purposes of petroleum
operations carried on by such owner and partly for other purposes.
(2) Any allowances which would be due or any balancing charges which would be
treated as income if both such expenditure were incurred wholly and
exclusively for the purposes of such petroleum operations and such asset
were used wholly and exclusively for the purposes of such operations shall be
computed in accordance with the provisions of this Schedule.
(3) So much of the allowances and charges computed in accordance with
provisions of sub-paragraph (2) of this paragraph shall be due or shall be so
treated, as the case may be, as in the opinion of the Service is just and
reasonable having regard to all circumstances and to the provisions of this
Schedule
18. Disposal without change of ownership
Where an asset in respect of which qualifying expenditure has been incurred by the
owner of the asset has been disposed of in such circumstances that such owner
remains the owner, then, for the purposes of determining whether and, if so, in what
amount, any annual or balancing allowance or balancing charge shall be made to or
on such owner in respect of his use of that asset after the date of such disposal –
(a) qualifying expenditure incurred by such owner in respect of such asset prior to
the date of such disposal shall be left out of account; 218
(b) the owner shall be deemed to have bought the asset immediately after the
disposal for a price equal to the residue of the qualifying expenditure at the
date of the disposal, increased by the amount of any balancing charge or
decreased by the amount of any balancing allowance made as a result of the
disposal –
TABLE I
[Paragraph]
Qualifying expenditure in respect of Rate per centum
On-shore operations …………………………………………. 5
Operations in territorial waters and continental shelf up to
And including 100 metres of water depth …………………. 10
Operations in territorial waters and continental shelf areas
in water depth between 100 metres and 200 metres of
water depth……………………………………………………. 15
Operations in territorial waters and continental shelf areas
beyond 200 metres of water depth…………………………. 20
………………………
TABLE II
[Paragraph]
Annual allowance Rate per centum
First year …………………………………………………… 20
2
nd
year …………………………………………………… 20219
3
rd
year ……………………………………………………. 20
4
th
year ……………………………………………………. 20
5
th
year ……………………………………………………. 19
6
th
year and after ………………………………………….. 19
………………………………..
FIFTH SCHEDULE
[SECTION 312]
Production Allowance
(1) There shall be a production allowance for crude oil production by a company
determined as follows:
(a) (a) for onshore – the lower of US $ 30 per barrel or 30% of the official
selling price, up to a cumulative maximum of 10 million barrels and the
lower of US $ 10 per barrel or 30% of the official selling price, for
volumes exceeding 10 million barrels up to a cumulative maximum of
75 million barrels;
(b) (b) for shallow water areas – the lower of US $ 30 per barrel or 30%
of the official selling price, up to a cumulative maximum of 20 million
barrels and the lower of US $ 10 per barrel or 30% of the official selling
price, for volumes exceeding 20 million barrels up to a cumulative
maximum of 150 million barrels; and
(c) for bitumen deposits, frontier acreage and deep water areas – the
lower of US $ 15 per barrel or 30% of the official selling price, up to a
cumulative maximum volume of 250 million barrels per PML, and the
lower of US $ 5 per barrel or 10% of the official selling price, for
volumes exceeding 250 million barrels per PML.
Provided that:
i) For companies in a production sharing contract arrangement with
NNPC or Holder on the effective date of this Act not benefiting from 220
Investment Tax Credit or Investment Tax Allowance, there shall be a
general production allowance of $ 5 per barrel or 10% of the official
selling price, for all production volumes.
ii) For companies that on the effective date of this Act are in a Joint
Venture contract arrangement with the NNPC, production allowance
shall not apply.
(2) There shall be a production allowance for natural gas fields with liquid yield
greater than 5 barrels of condensate per million cubic feet of gas:
(a) for onshore – the lower of US $ 1.0 per MMBtu or 50% of the value of the
natural gas, up to a cumulative maximum of 1,000 billion cubic feet per
PML and the lower of US $ 0.50 per MMBtu or 30% of the official selling
price, for volumes 1,000 billion cubic feet per PML;
(b) for shallow offshore – the lower of US $ 1.0 per MMBtu or 50% of the
value of the natural gas, up to a cumulative maximum of 2,000 billion cubic
feet per PML and the lower of US $ 0.50 per MMBtu or 30% of the official
selling price, for volumes 2,000 billion cubic feet per PML; and
(c) for bitumen deposits, frontier acreage and deep water areas – the lower
of US $ 1.0 per MMBtu or 50% of the value of the natural gas, up to a
cumulative maximum of 3,000 billion cubic feet per PML and the lower of US $
0.50 per MMBtu or 30% of the official selling price, for volumes 3,000 billion
cubic feet per PML;
(3) There shall be a production allowance for natural gas fields with liquid yield
less than 5 barrels of condensate per million cubic feet of gas:
(a) for onshore – the lower of US $ 1.0 per MMBtu or 100% of the value of
the natural gas, up to a cumulative maximum of 1,000 billion cubic feet per
PML and the lower of US $ 0.50 per MMBtu or 50% of the official selling price,
for volumes 1,000 billion cubic feet per PML;
(b) for shallow offshore – the lower of US $ 1.0 per MMBtu or 100% of the
value of the natural gas, up to a cumulative maximum of 2,000 billion cubic
feet per PML and the lower of US $ 0.50 per MMBtu or 50% of the official
selling price, for volumes 2,000 billion cubic feet per PML; and
(c) for bitumen deposits, frontier acreage and deep water areas – the lower
of US $ 1.0 per MMBtu or 100% of the value of the natural gas, up to a
cumulative maximum of 3,000 billion cubic feet per PML and the lower of US $
0.50 per MMBtu or 50% of the official selling price, for volumes 3,000 billion
cubic feet per PML; 221
Provided that:
i) For companies in a production sharing contract arrangement with the
Corporation or Holder on the effective date of this Act not benefiting from
Investment Tax Credit or Investment Tax Allowance, there shall be a general
production allowance of $ 0.5 per MMBtu or 30% of the value of the natural
gas per PML regardless of the liquid yield, for all production volumes.
ii) For companies that on the effective date of this Act are in a Joint
Venture contract arrangement with the NNPC, there shall be a general
production allowance of $ 0.3 per MMBtu or 30% of the value of the natural
gas per PML regardless of the liquid yield, for all production volumes.
(4) There shall be a production allowance for condensate production from gas
fields of US $ 20 per barrel or 30% of the official selling price, whichever value
is lower:
(a) for onshore – the lower of US $ 10 per barrel or 20% of the official selling
price, up to a cumulative maximum of 100 million barrels and the lower of US
$ 3 per barrel or 10% of the official selling price, for volumes exceeding 100
million barrels
(b) for shallow water areas – the lower of US $ 10 per barrel or 20% of the
official selling price, up to a cumulative maximum of 200 million barrels and
the lower of US $ 3 per barrel or 10% of the official selling price, for volumes
exceeding 200 million barrels
(c) for bitumen deposits, frontier acreage and deep water areas – the lower
of US $ 10 per barrel or 20% of the official selling price, up to a cumulative
maximum of 300 million barrels per PML and the lower of US $ 5 per barrel or
10% of the official selling price, for volumes exceeding 300 million barrels per
PML.
Provided that:
i) For companies in a production sharing contract arrangement with the
Corporation or Holder on the effective date of this Act not benefiting from
Investment Tax Credit or Investment Tax Allowance, there shall be a general
production allowance of $ 5 per barrel or 10% of the official selling price, for all
production volumes.
(5) The allowances provided in this Schedule shall be allocated to companies on
the basis of the entitlement of the relevant barrels.
(6) The gas allowances pursuant to sub-paragraph (2)(a) and sub-paragraph
(2)(b) of this Schedule, as applicable, shall only apply to gas production which
is subject to royalties and where such gas is not utilized for the purposes of
reinjection. 222
(7) The total amount of the allowances computed under this Schedule shall be
deducted from the amount determined pursuant to section 312 of this Act and
where these allowances cannot be deducted under section 312 of this Act
owing to there being an insufficiency of or no assessable profits of the
accounting period the deductions shall be added to the aggregate amount to
be computed for the following accounting period of the company, and
thereafter shall be deemed to be an allowance due to the company, under
relevant provisions of the to this Act for that following accounting period.
(8) Where a field development produces any combination of crude oil,
condensate and natural gas, the allowances under paragraphs (1), (2) and
(3) of this Schedule shall be taken separately.
(10) Notwithstanding the foregoing –
(a) where a lessee is producing crude oil with associated gas in a field at
the Effective Date and is flaring substantial volumes of gas, and
proposes a development program to the National Petroleum
Inspectorate in order to eliminate routine flaring in the field in a
significant manner, and such development plan is approved by the
inspectorate, the lessee shall be entitled to claim the allowances under
paragraphs (2) and (3) of this Schedule, with respect to the natural gas
and condensate production attributable to such development plan; and
.
(c) all existing crude oil, condensate and gas production from production
sharing contracts in existence prior to the Effective Date shall be
eligible for a general production allowance of US $ 5 per barrel of oil
equivalent;
(11) Marginal field operators shall be entitled to claim the allowances under
paragraphs (1), (2), (3) and (4) of this Schedule on the incremental production
from the Effective Date up to the cumulative amounts provided for in these
paragraphs.
(12) Where a field is covered by two or more Petroleum Mining Leases (PML), the
production allowances pursuant to this Schedule for each PML shall be
determined based on the total unitized production.
(13) All production allowance thresholds shall be fixed on the total production per
PML aggregated at company level, provided that:
(a) Claims by a contractor under a production sharing contract in the
deepwater shall be ring-fenced per PML;
(b) A supplier of gas destined solely for the domestic market shall be
entitled to claim production allowance per PML; and 223
(c) where a shareholder holds at least 10% directly or indirectly in
several companies, the companies shall be treated as one
company for the purposes of computing production allowance.
EXPLANATORY MEMORANDUM
This Act provides for a legal, fiscal and regulatory framework for the Nigerian petroleum
industry and establishes institutions, regulatory and commercial entities for the proper
administration and coordination of the operation of the upstream and downstream sectors of
the petroleum industry as well as providing for the imposition, assessment and collection of
the Nigerian Hydrocarbon tax.
Oil
FG Introduces New Incentives To Revitalize Nigeria’s Oil & Gas Industry
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
Business
Tinubu set to approve ExxonMobil-Seplat oil deal, expands CNG bus initiative
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
Oil
ExxonMobil To Invest $10bn In Nigeria’s Deep-Water Oil Operations
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.