The Petroleum Act ; legislation governing matters relating to petroleum exploration and production in Nigeria.

The Petroleum Act ; legislation governing matters relating to petroleum exploration and production in Nigeria.

The Petroleum Act (The Act) (and the Regulations issued pursuant to it) is the main legislation governing matters relating to petroleum exploration and production in Nigeria.

The Act amongst others:

  1. Vests entire ownership and control of all petroleum in, under or upon any lands (including underwater) in the State.
  2. Governs the issuance of oil exploration licenses, oil prospecting licenses and oil mining leases.
  3. Provides the basis for the issuance of DPR permit, along service lines applied for (renewable annually).
  4. Provides for the Ministry of Petroleum Resources as the supervisory ministry. tained in the PPTA. “Deep Offshore” has been defined as any water depth beyond 200 metres. Under the DOIBPSCA, PPT is assessed at the rate of 50% of chargeable profits for each contract area, during the duration of the PSC. The fiscal regime applicable to any PSC may also be specific to the licensing round during which the relevant Oil Prospecting License (OPL) or Oil Mining Lease (OML) was awarded and the PSC signed.

 

 

2.2.2 Petroleum Profits Tax Act (PPTA) Companies engaged in petroleum operation are subject to tax under the PPTA. Their income is liable to tax at 85% (subject to the incentives contained in the MOU as relevant), or 65.75% within the first five years of operation during which they are recovering their capitalized preproduction expenditure. However, for petroleum companies operating under PSC terms, the applicable PPT rate is 50% for the contract area (see 2.2.3 below for further discussion).

All expenses which are wholly, exclusively and necessarily incurred in furtherance of the petroleum operation of the company are tax-deductible against the company’s revenue before ascertaining the taxable profit. Expenses that do not satisfy the above conditions are disallowed. Tax depreciation (capital allowance) is also granted on qualifying capital expenditure (QCE) at a flat rate of 20% annually (19% in the fifth year, and the balance is retained in the books until the QCE is disposed).

tained in the PPTA. “Deep Offshore” has been defined as any water depth beyond 200 metres. Under the DOIBPSCA, PPT is assessed at the rate of 50% of chargeable profits for each contract area, during the duration of the PSC. The fiscal regime applicable to any PSC may also be specific to the licensing round during which the relevant Oil Prospecting License (OPL) or Oil Mining Lease (OML) was awarded and the PSC signed.

The other incentives applicable under the DOIBPSCA include: • Claim of Investment Tax Credit (ITC) at 50% of QCE (for PSCs signed Pre July 1998) or a Petroleum Investment Allowance (PIA) at 50% of QCE for PSCs signed after July 1998. • Royalty rate of 10% for companies operating in the Inland Basin and graduated royalty rates for companies in Deep Offshore operations (ranging from 0% to 12% depending on the water depth of operation).