Oil majors to shun investment in Nigeria over fiscal reforms

International oil company chief executives have taken exception to tax increases in planned fiscal reform policy of government and feared that such move may hamper investment in the oil and gas sector.

They said oil reform which have taken almost two decades to conclude is urgently needed to get money into its energy sector.

Nigeria, has not carried out a full revamp of the law underpinning its oil and gas sector since the 1960s as piecemeal tax hikes, and a growing lack of certainty around terms, have made companies wary.

Government is however promising a sweeping overhaul and will be presented to the National Assembly next week, which for industry leaders is not a moment too soon,,according to Reuters.

It’d be challenging,” Jeffrey Ewing, managing director of Chevron Nigeria, said of investing without regulatory clarity. “They’re competing against the world.”

Chevron is selling assets in Nigeria. Total’s stake in the profitable Bonga offshore field is also on the block, while ExxonMobil is looking to shed Nigerian fields as part of a global retrenchment strategy.

Fiscal uncertainty has delayed a decision on a multi-billion expansion, known as Bonga Southwest, by Royal Dutch Shell and its partners.

Total Chief Executive Patrick Pouyanne, speaking to Reuters in Scotland, said he took a forceful message to President Muhammadu Buhari, who holds the oil portfolio.

“My message there was please lift the uncertainty, because today operators in Nigeria are waiting, which is not good for the Nigerian economy,” Pouyanne said. “It is not good for investments in the country, so we are waiting.”

Minister of State for Petroleum, Timipre Sylva, said the revised law governing oil and gas dubbed the Petroleum Industries Bill (PIB) would be presented to the National Assembly this week.

The law governs virtually all terms of oil and gas – from who allocates coveted exploration licences to where money goes once it lands in government coffers.

A draft measure is circulating divided into two bills, one covering fiscal terms and the other the share that goes directly to oil-producing communities. Both topics are contentious.

While unanimous that removing regulatory uncertainty is crucial for investment, some companies also hope a new law will make taxes and fees more transparent.

Nigeria last year hiked offshore oil royalties – changes companies said rendered billions in planned investments unprofitable.

A VAT increase passed last month added costs too. Consultancy Wood Mackenzie said offshore projects would, at a minimum, be delayed.

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