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23 July 2018
The president recently submitted the Deep Offshore and Inland Basin Production Sharing Contracts (Amendment) Bill 2018 to the National Assembly for consideration and passage.(1) The bill seeks to amend Section 16 of the Deep Offshore and Inland Basin Production Sharing Contracts Act, which was promulgated in 1999.
The proposed amendment creates a new Section 16(3), which provides as follows:
In accordance with the provisions of subsection (1) of this section – (a) a royalty rate of 50% shall apply for the additional revenue in the contract area of the production sharing contracts under this Act; and (b) the additional revenue shall be determined by the product of the volume of crude oil or condensate sold and the difference between the actual nominal sales price of the oil or condensate and the nominal value of $20 per barrel, (1993 real terms) shall be determined based on relevant US All items Consumer Price Index (CPI) as published by the US Bureau of Labour Statistics.
If passed, the bill will alter the economic dynamics of production sharing contracts. Notably, the Petroleum Industry Fiscal Bill, one of the proposed petroleum industry bills under consideration by the National Assembly, seeks to repeal the Deep Offshore and Inland Basin Production Sharing Contracts Act in its entirety.
For further information on this topic please contact Chiagozie Hilary-Nwokonko at Streamsowers & Köhn by telephone (+234 1 271 2276) or email (firstname.lastname@example.org). The Streamsowers & Köhn website can be accessed at www.sskohn.com.
(1) A full review of the bill is available here.
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