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ICYMI - The NASS recently passed the Deep Offshore and Inland Basin Production Sharing Contract Act 2004 (Amendment) Bill, 2019. The bill regulates the operations of oil and gas companies operating under production sharing contracts (PSCs) in the Deep Offshore and Inland Basin.
What is the background to this development?

Nigeria's oil and gas production structure is split between joint ventures onshore and in shallow water and the PSCs in deepwater offshore. Deepwater PSCs currently account for about 40% of Nigeria’s oil production (from 0% in 2004)
Under the PSCs, the NNPC holds the concessions, and the contractors fund the development of the deepwater offshore blocks and recover their costs from the production after royalty payments. The old Act also provided for review of royalty rates where oil prices exceeds $20/barrel.
What are the key differences between the old Act and the new Bill?

- Revision of royalties payable on field basis
- Introduction of specific price reflective royalty rates
- Periodic Review of PSCs and
- Introduction of Offenses and Penalties
What are the pros & cons of this new amendment?

Pros - Increase in Govt Revenue. Govt could earn anywhere from $500m - $1Billion extra revenue with this amendment. This is factored into the 2020 Budget.

Cons - It could lead to reduction in investment in deepwater exploration.
The Bill is awaiting Presidential assent. It is safe to assume that the bill will be signed into law.
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