Production Sharing Agreement Nigeria

The President today expressed his support for legislation on production-sharing contracts for oil and gas extraction in the watershed. Once the licensing oil, cost oil and tax oil have been awarded, the rest of the oil is distributed between the NNPC and the IOC on the basis of cumulative production volumes, in accordance with a pre-agreed profit sharing. It is a production-based sliding model and is mainly used in the COPS models 1993 and 2000. At lower production levels, interest rates favour the IOC, which moves in favour of NNPC in the event of an increase in production. In contrast, the 2005 PSC model uses an R-factor sliding scale. The R factor is calculated by delegating the contractor`s total revenues from the contractor`s total expenses. A significant difference between the two profit-sharing models is that the former does not affect NNPC`s share of profits when the price of oil increases, while NNPC`s profit share increases with increases in oil prices in the R factor model. However, Section 16 of the Deep Offshore Decree generally provides for an adjustment of CSP conditions to profit sharing when the price of oil exceeds $20 per barrel in real terms to ensure that the additional revenues are economically advantageous to the federal government. PSC is a contract by which the State, as the owner of mineral resources, instructs a multinational oil company (MNOC), as a contractor, to provide technical and financial services for exploration and development activities. The state is traditionally represented by the government or one of its agencies such as the National Oil Company (NNPC).

The MNOC acquires a right to a certain share of the oil produced as a reward for the risk taken and the services provided. However, the state still owns the subject produced by oil, with only the right of the contractor to its share of production. The government (NNPC) generally has the opportunity to participate in different aspects of the exploration and development process. In addition, PSOs often provide for the creation of a single committee in which both parties are represented and oversee operations. [3] Egypt has a 20% royalty rate, which can be reduced in accordance with double taxation agreements with other countries. The tax on oil exploration and production is 40.55 per cent, including many other taxes, including production premiums. [16] Nigeria, as a member of the oil producing and exporting countries (OPEC), now operates various forms of joint venture agreements. From 1908, when oil exploration in Nigeria began with a German company, the Nigerian Bitumen Corporation (NBC), until 1937, when Shell D`Arcy made the whole country a single bloc, when more than 13 international companies joined the entrepreneurship, the Nigerian oil industry experienced many forms of production sharing contracts. These agreements, which reflected the state of the industry at the time, ranged from simple taxes and royalties to “money sharing” to equity sharing to “PRODUCTION SHARING AGREEMENTS”. In addition, each phase of these agreements partly reflected that the licensed oil is the quantum oil that is allocated to the NNPC and the proceeds of the effective licence fee payable each month and the concession rent payable each year.

This award to NNPC is for payment for itself and the IOC (section 7, Deep Offshore And Inland Basins Production Sharing Contracts Contracts 1999). KSPs charges for deep and inland water basins are set in accordance with Section 5 of the Deep Offshore Decree 1999, while royalties for onshore and shallow PSCs are set by the provisions of the 1969 Drilling and Production Regulations.