Oil
Oil Remittance: Only NPDC can remit royalties and taxes under SAA- Atlantic Energy
ABUJA – Following the current controversy over non remittances of oil proceeds to the federation account as alleged by the Governor of Central Bank Of Nigeria (CBN) Mallam Sanusi Lamido Sanusi Atlantic Energy, has denied claims by the CBN governor that NNPC handed over oil blocks to the company under the Strategic Alliance Agreement and that it has not met its tax and royalty payment obligations.
Atlantic Energy makes it clear that what it got from NPDC was remuneration in kind for taking the risk in funding 100% of NPDC’s operating and Capital activity costs in the oil wells where the joint venture partners had divested and that licence holder pays the royalties and taxes.
“The fact of the matter is that NPDC as license holder is the only party that can and must deduct and remit to the various government agencies the Royalties and Taxes due on the blocks like any other license holder in Nigeria, irrespective of whether there is an SAA or PSC in place or not. This is the sole duty of the license holder and cannot be undertaken by the SAA counterpart. NPDC fully complies with this requirement to pay all the Royalties and Taxes due on the blocks under our SAA. Furthermore, AE pays the applicable taxes on its activities’ and profits in addition to the above.”
All this is following the latest revelation by the Governor of the Central Bank of Nigeria (CBN) Mallam Sanusi Lamido Sanusi, that the Nigerian National Petroleum Corporation (NNPC) withheld $20 billion oil revenue from the federation account with illegal transfer of proceeds from certain oil wells to two private firms.
The CBN Governor last week alleged that NNPC handed over OMLs to NPDC which then handed over to two Nigerian companies, Atlantic Energy and Seven Energy and transferred revenue that should come to the Federation to private hands.
“The unfortunate and misleading statement totally mischaracterizes the relationship between Atlantic Energy and NPDC. It is indeed cause for grave concern that despite Atlantic Energy’s past effort to clarify, in the public domain, the nature of its relationship with NPDC the facts of this matter continue to be deliberately distorted by otherwise knowledgeable persons,” a statement from Atlantic Energy said.
Explaining the partnership with NPDC from which it was receiving such remuneration, Atlantic Energy said, “In 2011, Shell Petroleum Development Company(Shell), Total E&P Nigeria Limited (Total) and Nigerian Agip Oil Company (Agip) divested their interest in OMLs 26, 30, 32 and 42 (the divested OMLs) to various Nigerian companies.
“Around the same time, the NNPC simultaneously exercised its right under the joint operating agreements (JOAs) governing the divested OMLs and assumed operatorship of the OMLs. The NNPC subsequently assigned its interest in the Divested OML as well as its new role of operator to its subsidiary NPDC.
“In May 2011, NPDC entered into a strategic Alliance Agreement (SAA) with Atlantic Energy in relation to the divested OMLs. Under the SAA, Atlantic Energy has undertaken to, among other things, provide NPDC with the required technical capacity, assist NPDC in funding its share of the costs of petroleum operations through payment of its cash obligations, and also provide technical training to NPDC’s staff. In return for the foregoing, Atlantic Energy simply receives remuneration from the NPDC and does NOT have any ownership interest of any kind whatsoever in the Divested OMLs.
“For the avoidance of doubt, the SAA model is not uncommon in the oil and gas industry. Indeed, it has been successfully adopted in Malaysia, China and Iran as a toll by national oil companies like the NNPC to meet cash call obligations as well as to develop local technical capacity.
“Atlantic Energy had made investment in hundreds of millions in the relevant OMLs including the payment of the entry fees prescribed by the SAAs.
“Among other significant investments and contributions, Atlantic Energy has in furtherance of the SAAs, invested in a number of key projects including the upgrade of OML 34 area to a 360millon standard cubic feet of gas per day producing facility. This all important plant is the single largest gas supply facility for the Escravos-Lagos pipeline system which distributes critical gas feedback to power plant in the South East Nigeria and to a number of countries in the west African region.”
The statement said production optimisation activities and infrastructure improvement initiated by NPDC and Atlantic Energy following the SAAs had arrested production declines in the underdeveloped fields comprised in the relevant OMLs, thus resulting in increased production year-to-year.
“Furthermore, on account of Atlantic Energy’s contributions, NPDC has recorded significant step-change progress in understanding the subsurface reservoirs and surface facilities in the areas comprised in the relevant OMLs, thus resulting in a 200 per cent increase in certified reserves and of 200 million barrels of crude oil in new fields development plans,” the statement said.
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.
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.
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.
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