As Nigeria sleeps, not knowing when to pass into law the Petroleum Industry Bill, Algeria has come out with new hydrocarbon law designed to reverse declining foreign upstream investment through improved contract terms and tax rates.
The law came into force Monday after it was published in the country’s Official Gazette.
The Nigeria Minister of state for Petroleum Resources, Slyva Timipre has promised that the Petroleum Industry Bill which was meant to reposition oil and gas industry but which has suffered setbacks for more than 15 years would be passed into law by June this year.
The implications of not passing the PIB is that the oil and gas industry has been declining in production as there are no new investment coming.
Most investors have taken their money to other climes that are investment friendly.
The Petroleum Industry Governance which was passed by the 8th assembly suffered a setback when President Muhammadu Buhari decided not sign it into law.
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The new Algerian law according to it government is considered essential for restoring the attractiveness of the sector against the background of low oil and gas prices, and increased competition among producing countries to attract new investors.
Under the new legislation, the tax burden on state-owned Sonatrach and its international partners will be cut from 85 percent to around 60-65 percent, Toufik Hakkar, head of the working group responsible for the law, said.
In an interview with state news agency APS, Hakkar — who is also vice president for development at Sonatrach, said the “significant” fall in the tax burden was due to the reduction of three main taxes: the production levy; petroleum income tax (TRP); and complementary income tax (ICR).
Hakkar said the production levy will be set at a fixed rate of 10 per cent compared with a range of 5-20percent previously.
The TRP is changed from a range of 20-70per cent to a range of 10-50 per cent and the ICR moves from a range of 19-80 per cent to a fixed rate of 30percent.
The change in hydrocarbon law comes as production from Algeria’s oil and gas sector — the mainstay of its economy — continues to decline.
Sonatrach has said that the reform was urgently needed given the time it takes to implement new projects, pointing to the average time of 10 years between winning an exploration license and moving it to production.
“The new law is vital for Sonatrach to enable it to develop the discoveries made in recent years,” it said in late 2019, adding that the development of many finds had been uneconomic due to the previous tax regime.
Government officials have said the legislation would mark a return to provisions in the 1986 hydrocarbons law, which led to significant discoveries in the 1990s, before changes to the regulations in the mid-2000s saw investment tail off.
