Major discoveries in offshore fields are yet to proceed to development as IOCs do not see a path to profitability in the proposed framework by the Nigerian government which seeks to raise royalty rates to between 3 and 8% and cut back taxes from 85% to 70% in new production sharing contracts (PSCs).

Shell’s plan to expand and develop 225,000 barrels per day (bpd) Bonga South West/Aparo, has been unable to reach FID based on disagreement over fiscal terms. The project has been suspended every year since 2016. Other projects that have stalled include 120,000bpd Zabazaba-Etan project; 140,000bpd Bosi project; 110,000bpd Uge project and 100,000bpd Nsiko deepwater project. The 1billion barrel Owowo field development is also waiting on the right fiscal terms among other conditions.

Nigeria’s terms have remained constant since 1993 and even when it recommends adjustment based on the rise of oil prices above $20 bpd, the Nigerian government has failed to enforce it leading to multibillion dollar losses. The ministry of petroleum resources in March this year, released the draft of the National Petroleum Fiscal Policy (NPFP), which reviews the rate in the 1993 PSC but it is proposing rates that are not competitive industry stakeholders say.

Source: Business Day