By Sarafina Nwabueze, Esq.
The President of the Federal Republic of Nigeria, President Muhammadu Buhari, GCFR, signed the Petroleum Industry Bill into Law on the 16th day of August, 2021. The Act seeks to provide legal, governance, regulatory and fiscal framework for the Nigerian petroleum Industry and Development of Host Communities.
The Act repeals the following Acts:
Associated Gas Reinjection Act;
Hydrocarbon Oil Refineries Act;
Motor Spirit Act; NNPC (Projects) Act;
NNPC Act (when NNPC ceases to exist);
PPPRA Act;
Petroleum Equalisation Fund Act;
PPTA;
Deep Offshore and Inland Basin PSC Act.
It amends the Pre-Shipment Inspection of Oil Exports Act while the provisions of certain laws are saved until termination or expiration of the relevant oil prospecting licenses and mining leases including the Petroleum Act, PPTA, Oil Pipelines Act, Deep Offshore and Inland Basin PSC Act.
The PIA brought about series of changes in the petroleum Industry. Some of these changes include:
The new PIA has established dual regulators in the petroleum Industry. The dual regulators are the Upstream Regulatory Commission (the commission) and the Nigerian Midstream and Downstream Petroleum Regulatory Authority (the authority).
The Commission is responsible for the technical and commercial regulation of the upstream petroleum operations while the Nigerian Midstream and Downstream Petroleum Regulation Authority is charged with the technical and commercial regulation of the midstream and downstream operations in Nigeria.
The PIA imposes a 1% levy on the wholesale price of petroleum products sold in the country. 0.5% each goes to both the Authority Fund & Midstream Gas Infrastructure Fund.
10% of the proceeds from the sale of profit oil and profit gas will be remitted to NNPC Limited as management fee while 30% will be remitted to Frontier Exploration Fund for the development of frontier acreages. This will be in addition to 10% rents on petroleum prospecting licences and mining lease.
A contribution of 3-5% for an upstream company and 2% for midstream and downstream companies, of their operating expenditure in the immediate preceding calendar year will be required for any company granted an oil prospecting licence or mining lease or an operating company on behalf of joint ventures partners.
Under the new PIA, profits made from crude oil production are taxable. Tax of 15% – 30% will be paid to FIRS. CIT at the rate of 30% and Education Tax at the rate of 20% will no longer be tax deductible.
Under the new PIA, royalties are paid as follows: 15% for onshore areas, 12.5% for shallow water and 7.5% for deep offshore and frontier basins, 2.5% – 5% for natural gas. In addition, a price-based royalty ranging from 0%-10% is payable to be credited to the Nigerian Sovereign Investment Authority.
Assets, Interest and Liabilities vested in NNPC Limited will be extinguished or transferred to the Federal Government. When all such assets, interests and liabilities have been successfully extinguished or transferred, NNPC shall cease to exist. Transfer and sale of the shares are subject to approval by the government and endorsement by the National Economic Council.
The new PIA seeks to create a market void of economic distortions to further ensure a competitive market for the sale and distribution of petroleum products and natural gas in Nigeria.
Written By Sarafina Nwabueze, Esq., info@thelaw-house.com
