Nigeria raked in N2.30trn in taxes, royalties from Shell in 2018

Royal Dutch Shell paid the Nigerian government the sum of $6.30 billion (N2.30 trillion) in taxes, royalties, fees and bonuses last year, the company said in published disclosures made to governments around the world where it has production.

According to the document sent to BusinessDay, prepared in accordance with The Reports on Payments to Governments Regulations 2014 as enacted in the UK in December 2014 and as amended in December 2015, Shell paid $1,286,152,191 to the Federal Government through the Federal Inland Revenue Service (FIRS) as taxes in 2018.

In 2017, the Anglo-Dutch oil major had paid $4.32 billion (N1.557trn) to the Federal Government of Nigeria.

“The increase in payment for 2018 is due either to larger volumes or higher prices. But in this case the major factor will be higher prices given that they picked in 2018,” Israel Aye, legal expert, oil and gas, at Lagos-based Primera Africa Legals, said.

The company further paid the Department of Petroleum Resources (DPR) $358,161,091 in royalties, and $895,062,325 as fees. In total, the amount paid to the upstream regulatory agency in Nigeria was $1,253,223,416.

The Nigerian National Petroleum Corporation (NNPC) received $3.776 billion as production entitlements in 2018, compared to the sum of $3.197 billion for production entitlements Shell paid the NNPC in 2017.

“This report includes payments to governments made by Royal Dutch Shell plc and its subsidiary undertakings. Payments made by entities over which Shell has joint control are excluded from this report,” the company said.

According to the company, payments it made to governments from activities involving the exploration, prospection, discovery, development and extraction of minerals, oil and natural gas deposits or other materials (extractive activities) are disclosed in the report.

“It excludes payments related to refining, natural gas liquefaction or gas-to-liquids activities. For a fully integrated project, which does not have an interim contractual cut-off point where a value can be attached or ascribed separately to the extractive activities and to other processing activities, payments to governments will not be artificially split but disclosed in full,” it said.

Shell also spent a total of $4.53 billion (N1.63 trillion) on projects which comprised production entitlements, taxes and royalties. The projects included PSC 1993 (OPL209), PSC 1993 (OPL212/OML118, OPL219/OML135), SPDC East, SPDC Shallow Water and SPDC West.

However, Shell is not having an easy ride in Nigeria because while Nigeria’s African peers are creating opportunities for investment dollars, Nigeria is building a barricade.

Last month, Shell said that Nigeria’s claims that it was owed billions in taxes could delay the development of 180,000 barrels per day Bonga South West oil field. Andy Brown, Shell’s head of upstream, told Reuters on the sidelines of the International Petroleum Week conference that the claims dealing with production sharing contracts (PSCs) terms lacked merit.

BusinessDay’s analysis shows that it would be difficult to find worse royalty terms than Nigeria’s PSCs which gifted oil companies zero royalty in water depths below 1,000 metres where the bulk of Nigeria’s deepwater finds have been located, but banking on successfully plugging a 14-year revenue gap in one fell swoop and unilaterally is comforting delusion. Yet, there is a yawning need to review Nigeria’s obsolete fiscal terms.

 

ISAAC ANYAOGU & STEPHEN ONYEKWELU