Requirements/Guidelines for Investors
In The Oil and Gas Industry
(a) Specification
Operations in the Oil and Gas industry are highly sophisticated and require
technological know-how. Therefore they are classified into various areas of
specialization as follows:
(i) Exploration service
(ii) Drilling service
(iii) Construction service
(iv) Pipeline/Production service
(v) Equipment supply service
(vi) Consultancy service
(vii) Laboratory service
(viii) Marine survey/cargo superintendence
service
(ix) Marine/Special transportation services
(x) Pressure testing service
(xi) Calibration services.
(b) Requirements
Any company that wishes to participate in any of the above categories is
required to satisfy the following minimum requirements:
(i) Complete the prescribed application form and Form F2a stating clearly the
specific areas of services to be rendered.
(iii) Give proof or show evidence of expertise and technical know-how in the
specialized activities of the oil industry it has applied for. To this end,
it is desirable that a profile of jobs previously handled or being handled
by the applicant be supplied coupled with a list of equipment at the
company’s disposal stating clearly their types and technical specifications.
(iv) Submit the company’s current Tax Clearance Certificate (TCC) in the
case of a limited liability company or the tax clearance certificate of one
of the directors in the case of a sole proprietorship/partnership business
firm.
(v) Submit an accident status report for the preceding year.
For registration/renewal of oil industry service companies that engage in
calibration and pressure testing, marine survey and cargo superintendence,
it is imperative that their facilities be inspected and expertise verified
before accreditation. Also, the certification of all standard measures used
for calibration service shall be verified.
Nigeria Oil & Gas Petroleum and Gas Reserves
The proven Nigerian oil reserves are 23 Billion barrels; the gas reserves
are 160 Trillion cubic meters.
Nigerian Petroleum And Gas Policy
Objectives
The country has put in place a Petroleum and Gas policy with the following
objectives:
- Increasing oil reserve base and productivity through vigorous exploration
and ensuring judicious exploitation of the resource.
- Allowing for private sector participation in all the facets of the
industry through attractive fiscal measures. Government is giving serious
consideration to selling its equity shares in joint venture operation.
- Acquiring reasonable market shares for the crude oil and its derivatives
and achieve-ment of domestic refining self-sufficiency.
- Expanding the utilization of natural gas.
Virtually every sector is open to investors in the Oil and Gas Industry.
They include:
- Up-stream Sector;
- Down-stream Sector;
- Gas Development and Conversion; and
- Marketing of Nigeria crude oil.
The Upstream Sector
Activities under the upstream sector include:
Surveying: Geodetic control
establishment; Mapping - Tropical and plan metric; and Sea Bottom
Survey/Investigation.
Civil Works: Site Surveys; Preparation
of drilling locations; Construction of mud pits and slabbing or concreting
jobs at rig sites. Supplies of cement, chemicals, sands, gravel, iron rods,
labor, road mat, timber, etc.
Seismic Data Acquisition and Interpretation:
Analysis and interpretation of data acquired from seismic and
geodetic surveys - such data on soil land rock samples.
Geological Activities: Wireline,
logging, core analysis, geological and geochemical studies.
Drilling Operations: Drilling and
work-over rigs; field transportation and equipment for haulage and rig
movements; general and specialized service such as casing running,
cementation, welding, diving and catering; and provision of mud and other
chemicals.
Crude Oil Transportation & Storage:
Construction and maintenance of crude oil storage tanks and pipelines.
Exploration and Production: Investors
wishing to participate in this venture are welcome. This involves applying
for block(s) for exploration through the
oil prospecting license (OPL) and the oil mining lease (OML).
Currently, emphasis is shifting from production sharing
contract (PSC) to Service Contract.
Pursuant to the above, the Oil Exploration
License (OEL) confers on the licensee, non-exclusive right to explore
and investigate by surface geological and geophysical methods within an area
of about 12,944.4sq. km; for an initial period of one year, renewable on
expiration. The oil prospecting
licensee (OPL) confers upon the licensee the exclusive
rights of surface and subsurface exploration for petroleum in an area not
more than 2,588.8 sq. km. for an initial period of three years, renewable
for two years and for PSC, a period of 10 years. If a commercial discovery
of hydrocarbon is made, then the licensee is eligible to apply for
conversion of not more than half of the area into an oil mining lease (OML).
The OML confers on the holder exclusive rights to explore, win, produce and
transport petroleum for the delineated area. The maximum duration of lease
is 20 years, renewable for another 20 years on expiration.
The Down-Stream Sector
Refining
- Investors can set up and wholly own a refinery;
- Companies with the technological know-how can undertake turn-around main-tenance
of refineries;
- There is tremendous scope for small scale joint venture manufacture of
spare parts, chemicals with technical foreign partners;
- Also opportunities exist in the manufacture of other special products such
as:
(a) industrial and food grade solvents;
(b) insecticides;
(c) cosmetics;
(d) mineral oil, petroleum jelly greases;
(e) bituminous-based water/damp proof building materials such as floor
tiles, rubber products, tarpaulin, etc;
(f) exports of refined products surplus;
(g) asphalt storage, packaging and blending plants to handle products for
export and local use.
Petrochemicals
- A three phased petrochemical development plan is in place. The first phase
is already in place producing:
- linear alkyl-benzene, carbon black and polypropylene;
- Carbon black, used for manufacture of tyres, rubber products, pigments,
printing inks,
polish, etc;
- Linear alkyl-benzene, used as an active agent in the production of
detergents and shampoos;
- Polypropylene, used as a raw material in the manufacture of injection
moulding, fibres extrusion, shipping sacks,prayer mats, carpet underlay and
cloth wrap;
- The second phase, an olefin based complex has been commissioned; and
- investors can engage in products fabrication.
Gas Development and Conversion
Government has opened the sector to foreign investment and is willing to
consider appropriate tailor-made incentives for projects in this sector.
Opportunities which abound in this sector for investors include:-
Natural Gas Pipeline Network
Plans are afoot to build and extend gas pipelines in view of the importance
of gas. Investors wishing to set up energy intensive industries such as
cement factories, iron smelting and foundries will have a significant cost
saving if gas is used as fuel.
The Liquefied Natural Gas Project (LNG)
This project, a two-train plant, is aimed at diversifying the petroleum
sector. The plant is expected to yield about seven billion cubic meters of
gas per annum. The second phase of the project will consist of an additional
three-train plant. Therefore, there is room for investors wishing to
participate by acquiring shares. Also, the LNG project provides business
opportunities for pipe-laying, pipe coating, inspection of numerous related
activities, maritime operations and civil works.
The Butanisation Project
Here private sector investment is needed to acquire rolling stocks for bulk
LPG (liquified petroleum gas) transport. Investors can also engage in the
construction of storage and filling facilities and provision of accessories
- valve regulators, filling head, and ‘pig tail’. In addition, ample
opportunities exist in cylinder manufacturing, installation of filling
plants and retail distribution.
Fertilizer Plants
With abundant natural gas and a teeming population of peasant farmers,
enterprises of fertilizer plants will be viable ventures. Investors are
welcome to complement the existing fertilizer plants in the country (which
hardly meet domestic demand) and boost export trade.
Vehicular Fuel
Entrepreneurs can invest in this highly untapped venture, especially with
the current shift of emphasis to gas worldwide. Opportunities exist in
Compressed Natural Gas (CNG) cylinder manufacturing and CNG filling
stations.
Methanol/MTBE Plants
Currently, plans are being made to construct a methanol plant which is
expected to provide 2,500 tons/day at a cost of $442 million. It is a joint
venture between the NNPC (60%), Nigerian investors (11%), a consortium of
Penspen Group KTI Mannesmann and Berge (15%). The remaining 14% have not
been allocated. Interested foreign companies are welcome to take up the
remaining equity.
Mobil has initiated an independent power plant (IPP) to be sited at Bonny to
generate electricity from associated gas which they will sell to National
Electric Power Authority (NEPA). Other investors may consider similar
investment.
Oil & Gas Incentives offered by the
government of Nigeria to foreign investors.
Incentives to Gas Industries
In view of the enormous potentials of this sector some fiscal incentives
have been put in place. They include:
Gas Production Phase
- Applicable tax rate under Petroleum Profit Tax (PPT) Act to be at the
same rate as company tax which is currently 30%.
- Capital allowance at the rate of 20% per annum in the first four years,
19% in the fifth year and the remaining 1% in the books.
- Investment tax credit of the current rate of 5%.
- Royalty at the rate of 7% on-shore and 5% off-shore.
Gas Transmission and Distribution
- Capital allowance as in production phase above;
- Tax rate as in production phase;
- Tax holiday under pioneering status;
LNG Project
- Applicable tax rate under PPT is 45%.
- Capital allowance is 33% per year on straight line basis in the first 3
years with 1% remaining in the books.
- Investment tax credit of 10%.
- Royalty of 7% on-shore, 5% off-shore tax deductible.
Gas Exploitation (Upstream Operations)
This involves all operations necessary to separate gas from the reservoir
into usable form at utilization or designated custody transfer points,
either through pipelines or tankers. This operation is to help reduce or
completely eliminate gas flaring.
Fiscal Arrangement are to be reviewed as follows:
(a) all investment necessary to separate oil and gas from the reservoir into
usable products is considered part of the oil field development;
(b) capital investment facilities to deliver associated gas in usable form
at utilisation or designated custody transfer points, will be treated for
fiscal purposes as part of the capital investment for oil development;
(c) the capital allowances, operating expenses and basis of assessment will
be subjected to the provisions of Petroleum Profit Tax (“PPT Act”) and
fiscal incentives under the revised Memorandum of Understanding (MOU).
Gas Utilization (Downstream Operations)
Gas utilization involves the marketing and distribution of gas for domestic
and industrial uses. This would include power generation, Liquefied Natural
Gas (LNG), household and factory consumption. The incentives applicable for
this purpose include:
(a) companies engaged in gas utilization as explained above, are to be
subject to the provisions of Companies Income Tax Act;
(b) an initial tax holiday for three years, renewable for an additional two
years, will be granted to such enterprises subject to satisfactory
performance of the enterprises. The tax relief period of the company is to
commence on the first production day of the company;
(c) accelerated capital allowances after a tax holiday are available as
follows:
(i) investment in plant and machinery; 90% annual allowance with 1%
retention;
(ii) Additional Investment Allowance of 15% which will not reduce the value
of the asset;
(d) the dividends distributed during tax holiday to investors in respect of
investments in foreign currency or introduction of plant and machinery of
not less than 30% of the equity of the company, shall be tax free.
Fully appreciating that the use of associated gas will prevent environmental
hazards of air pollution caused by gas flaring, Government has decided to
give additional incentives in 1998 to support the gas industry in the
following areas:
(a) All gas development projects, including those engaged in power
generation, liquid plants, fertilizer plants, gas transmission and
distribution pipelines, are to be taxed under the provision of Companies
Income Tax Act (“CITA”) and not the Petroleum Profit Tax Act. For the
avoidance of doubt, where there is an integrated oil and gas project, the
oil operation which is to be taxable under the PPT is to be separated from
the gas operation project for the latter to enjoy the concession of being
taxed under CITA. All expenditure pertaining to the integrated oil and gas
project would be chargeable under the PPT.
(b) All fiscal incentives under the gas utilization downstream operations in
1997 are to be extended to industrial projects that use gas, i.e. power
plant, gas to liquid plant, fertilizer plant, gas distribution and
transmission pipeline.
(c) The initial tax holiday period is to be extended from 3 to 5 years.
(d) Gas is transferred at 0% PPT and 0% Royalty.
(e) The “Investment Capital Allowance” is increased from 5% to 15%.
(f) Interest on loan for gas project is to be tax deductible provided that
prior approval is obtained from the Federal Ministry of Finance before
taking the loan.
(g) All dividends distributed during the tax holiday shall be tax free.
Nigerian Crude Oil & Gas Major Industry
Policies
Production Sharing Contract (PSC)
In view of the burden of funding joint venture operations (cash calls) by
the NNPC and the need to increase Nigeria’s oil reserves from the present 20
billion barrels and also to develop other sectors of the economy begging for
government attention, the federal government decided to introduce the
Production Sharing Contract (PSC). This policy is designed to transfer
exploration risks and funding of exploration and development efforts on new
acreage to the interested oil companies.
The essence of PSC is that NNPC engages a competent contractor to carry out
petroleum operations on NNPC’s wholly held acreage. The contractor
undertakes the initial exploration risks and recovers his costs if and when
oil is discovered and extracted.
Under the PSC, the contractor has a right to only that fraction of the crude
oil allocated to him under the cost oil (oil to recoup production cost) and
equity oil (oil to guarantee return on investment). He can also dispose of
the tax oil (oil to defray tax and royalty obligations) subject to NNPC’s
approval. The balance of the oil, if any (after cost, equity, and tax), is
shared between the parties (profit oil).
The current direction in the petroleum operations in the country is the
production sharing contract.
Examples below detail the number of
blocks held by named operators operating PSC with NNPC.
(i) Statoil/BP (3 Blocks)
(ii) Ashland (2 Blocks)
(iii) Abacan (1 Block)
(iv) Esso Expt. (1 Block)
(v) Agip (1 Block)
(vi) Shell (5 Blocks)
(vii) Elf (2 Blocks)
(viii) Mobil (1 Block)
(ix) Chevron (7 Blocks)
(x) Conoco (1 Block)
(xi) Allied Energy (1 Block operated by Statoil)
Examples Of Some Specific Provisions Of
A PSC Contract:
(a) The term of the contract is for 30 years (inclusive of 10 years
exploration and 20 years oil mining OML period). However, the contract may
be terminated if at the end of the 6th year (from the effective date of the
contract) the agreed Work Program has not been substantially executed, or
either party gives a notice of not less than 90 days for termination of the
contract (on grounds permitted by the contract terms). Termination of the
contract will also take place if no petroleum is found in the contact area
after 10 years from the effective date of the contract.
(b) Work Program: The minimum work program during the exploration period
shall be as follows:
Contract Years Amount to be Expended
(i) 1 - 3 $24 million
(ii) 4 - 6 $30 million
(iii) 7 - 10 $60 million
If during any period of the contract years, the contractor spends less than
the required expenditure, an amount equal to such under-expenditure shall be
carried forward and added to the amount to be expended in the following
period of contract years.
(c) Management Committee must be established within 30 days from the
effective date of the contract. The Committee is made up of 10 persons
appointed by the parties on a 50/50 basis.
The NNPC appoints the Chairman of the Management Committee while the
contractor appoints the Secretary who will be a non-member of the Committee.
(d) Recovery of Operating Costs and Crude Oil Allocation: The available
crude oil from the contract area shall be allocated in accordance with the
Accounting Procedure, the Allocation Procedure and other applicable
provisions of the contract.
(e) Royalty: Royalty rates in offshore is graduated as follows:
Area/Water Depth Rate
In areas up to 200 meters water depth 16.67%
From 201 to 500 meters water depth 12%
From 501 to 800 meters water depth 8%
From 801 to 1000 meters water depth 4%
In areas in excess of 1,001 meters 0%
Here is a partial list of large foreign companies that know that there is
money to be made in Nigeria who have already invested in Nigeria and are
making millions and billions of dollars in the process.
LIST OF MAJOR PLAYERS
AND FOREIGN INVESTMENT COMPANIES IN THE NIGERIAN CRUDE OIL AND GAS INDUSTRY
We have published this brief list to show that Nigeria is worth investing
in. While the world is confused about all the negative publicity that
Nigeria is getting internationally and feeling that Nigeria is not safe for
investment, these companies are making billions of dollars from the Nigerian
crude oil and gas sector.
These are the major players in the Nigerian Oil and Gas sector. I am sure
you will be familiar with some names. There are more than a thousand other
foreign companies that are small time and making millions of dollars from
the Nigerian crude oil and gas sector and other sectors.
Not to bore you with lists I have compiled a few making ten billion dollars
and above in the Nigerian crude oil and gas sector.
The truth is Nigeria is very safe for any investment when you work with
experts like us.
Contact:
ceo@nigeraincrudeoilandgas.com
International Oil
Companies In Nigeria
There are eighteen international oil companies operating in the country.
Some of them are new entrants who have an interest in the deep offshore
blocks in partnership with other operators. The oil majors account for about
99% of crude oil production in Nigeria. The international oil companies
operating in Nigeria and when they established are:
Shell Petroleum Development Company Ltd (1937)
Mobil Producing Nigeria Unlimited (1955)
Chevron Nigeria Ltd (1961)
Texaco Overseas Nig. Petroleum Co. Unltd (1961)
Elf Petroleum Nigeria Limited (1962)
Philip (1964); Pan Ocean Oil Corporation (1972)
Bought over Ashland Oil Nigeria Limited (1973)
Agip Energy & Natural Resources (1979)
Statoil/BP Alliance (1992)
Esso Exploration & Production Nig. Ltd. (1992)
Texaco Outer Shelf Nigeria Limited (1992)
Shell Nig. Exploration & Production Co. (1992)
Total (Nig.) Exploration & Prod. Co. Ltd. (1992)
Amoco Corporation (1992)
Chevron Exploration & Production Co. (1992)
Conoco (1992)
Abacan (1992)
Here are other major players in the Nigerian Crude Oil And Gas Industry:
-
ADDAX
-
AENR
-
AMNI
-
ATLAS
-
ATLAS/SOGW
-
BG
-
BP
-
CAMAC
-
CAVENDISH PETROLEUM
-
CENTRICA
-
CHEVRON
-
CHEVRON/TEXACO
-
CHVTEX (CNDE)
-
CONOCO
-
CONOCO PHILLIPS
-
CONOIL
-
CONSOLIDATED
-
CONTINENTAL OIL
-
DUBRI
-
ELF
-
EPGA/CONOCO
-
ESSO
-
ESSO EXP. & PRODUCTION
-
EXPRESS PETROLEUM
-
EXXONMOBIL
-
MOBIL
-
MONI PULO
-
NAE
-
NAOC
-
NAOC/PHILLIPS
-
NIGER DELTA PET. RES.
-
NPDC
-
NPDC/AENR
-
OANDO
-
OCEAN ENERGY
-
ORANTO-ORANDI
-
PAN-OCEAN
-
PETROBRAS
-
PLATFORM PETROLEUM
-
SHEBAH
-
SHELL
-
SNEPCO
-
SNUD
-
STAR DEEP
-
STATOIL/BP
-
TEXACO
-
TEXACO OUTER
-
TOPCON
-
TOTAL
-
TOTAL UPSTREAM
-
TUPNI
