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Official gazette: Presidential directive on reduction of petroleum sector contracting costs and timelines

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PRESIDENTIAL DIRECTIVE ON REDUCTION OF PETROLEUM SECTOR CONTRACTING COSTS AND TIMELINES, 2024

WHEREAS, comparative analysis has shown that the contracting cycle within the Nigeria’s petroleum sector exceeds global industry standards by 4 to 6 times and adversely affects our competitiveness for potential investors ;

Whereas, the Federal Government of Nigeria (FGN), with a view to promoting transparency and efficiency, and to encourage investment in the petroleum sector, aims to:

(a) Shorten the procedure for getting approval for contracts to which companies in the petroleum sector and companies controlled by the FGN
are parties; and

(b) give effect to and reinforce the provisions of the Business Facilitation

(Miscellaneous Provisions) Act, 2022 and enhance the ease of doing business within the petroleum sector ;

WHEREAS, there is an urgent and compelling need to reform the contracting process in petroleum sector by–

(a) simplifying and compressing the contracting cycle to a period of not more than six months, in alignment with global industry practice ;

(b) raising contract approval thresholds to account for the rate of inflation ; and

(c) raising the duration for third party contracts from three to five years with the option of renewal for an additional two years ;

AND Whereas, the FGN is committed to improving the investment climate and positioning Nigeria as the preferred investment destination for the petroleum sector in Africa.

Now THEREFORE, pursuant to the powers conferred upon me by section 5 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), section 3 of the Petroleum Industry Act, 2021 and section 100 of the Nigerian Oil and Gas Industry Content Development Act, 2010, I, Bola Ahmed Tinubu, GCFR, President, Federal Republic of Nigeria and Minister of Petroleum Resources, direct the Ministry of Finance Incorporated (MOFI) and Ministry of Petroleum Incorporated (MOPI), as shareholders of the Nigerian National Petroleum Company Limited (NNPCL), and the Nigerian Content Monitoring and Development Board (NCDMB) as follows:

1. (1) Where the provisions of Production Sharing Contracts (“PSC”) or Joint Operating Agreements (“JOA”) provide financial value thresholds for the prior consent of the NNPCL for the awards of contracts and procurement, MOFI and MOPI are hereby directed to take steps to procure NNPCL to amend the PSC or JOA to raise the contract approval thresholds to not less than US$10,000,000 or the Naira equivalent determined at the NAFEX FMDQ exchange rate or any other platform determined by the Central Bank of Nigeria (“CBN”).

(2) MOFI and MOPI shall ensure that this threshold will be reviewed and adjusted in line with the rate of consumer inflation as disclosed by the National Bureau of Statistics on a yearly basis.

2. (1) NNPCL and Nigerian Upstream Investment Management Services Limited (“NUIMS”) shall, in collaboration with the NCDMB and industry stakeholders, simplify the contract approval process and adopt a single level of approval by NUIMS and NCDMB at each contract stage including prequalification, technical, commercial and final approval stages.

(2) The NNPCL and NUIMS shall ensure that all approvals or consents required to be given by it for contracts and procurement for each contract stage pursuant to the terms of PSCs or JOAs are issued within 15 days from the date of submission of application by the relevant party to the PSC or JOA.

(3) The NNPCL and NUIMS shall communicate its decision to the applicant within the time-frame stipulated under subparagraph (2) of this paragraph.

(4) Where the NNPCL and NUIMS fails to communicate its decision within the aforementioned timeline, the approval or consent shall be deemed granted.

(5) Where an applicant’s submission is deemed insufficient or inadequate, NNPCL and NUIMS shall request additional information or clarification during the initial review period.

(6) The applicant is required to furnish such additional information or clarification within seven days.

(7) Following the submission, NNPCL and NUIMS are obligated to respond to the applicant within the subsequent seven days and failure to do so will result in the approval or consent being deemed granted.

(8) The NCDMB shall: review any Nigerian Content Plan (“NCP”) submitted to it pursuant to section 7 of the Nigerian Oil and Gas Industry Content Development Act within the 10 days stipulated in the Act.

(9) Where the NCDMB fails to communicate its decision within the 10 days period, the NCP shall be deemed approved.

(10) Where an applicant’s submission is deemed insufficient or inadequate, NCDMB shall request for additional information or clarification
during the initial review period.

(11) The applicant is required to furnish such additional information or clarification within seven days.

(12) Following the submission, NCDMB are obligated to respond to the applicant within the subsequent seven days and the failure to do so will result in the approval being deemed granted.

(13) The NCDMB shall direct an application for expatriate quota to the Ministry of Interior or any other relevant Ministry, Department or Agency (MDA) within 10 working days, provided all supporting documents are in place.

(14) Where any matter requires the approval, satisfaction or consent of the NCDMB and no timeline is provided under the Nigerian Oil and Gas Industry Content Development Act, the NCDMB shall communicate its decision on such matter within 15 days of receiving a request to that effect, failing which the NCDMB shall be deemed to have approved, satisfied or consented to such matter.

3. The duration for third-party contracts awarded pursuant to a PSC or JOA is increased from three years to five years with the option of renewal for an additional two years after the expiration of the initial five years.

4. (1) This Directive shall take effect immediately.

(2) The MOFI, MOPI and NCDMB shall comply with this Directive within 30 days, and shall work out the modalities for its implementation.

6. This Directive may be cited as the Presidential Directive on Reduction of Petroleum Sector Contracting Costs and Timelines, 2024.

OIL AND GAS COMPANIES (TAX INCENTIVES, EXEMPTION, REMISSION, ETC.) ORDER, 2024

In exercise of the powers conferred on me by section 5 of the Constitution of the Federal Republic of Nigeria, 1999 (as amended), sections 23 (2) and 89 of the Companies Income Tax Act, Cap C21, Laws of the Federation of Nigeria, 2004 (as amended), section 48 of the Nigerian Oil and Gas Industry Content Development Act, 2010 and all other powers enabling me in that behalf, I, BOLA AHMED TINUBU, President, Federal Republic of Nigeria make the following Order-

PART I – TAX CREDITS FQR NON-ASSOCIATED GAS GREENFIELD DEVELOPMENT

1.–{I) As from the commencement of this Order, the tax credit incentives specified nder subparagraphs (2) and (3) of this Paragraph hall apply to Non-Associated Gas (NAG) greenfield developments in onshore and shaJlow water locations, with first gas production on or before Ist January, 2029.

(2) Where the Hydrocarbon Liqui.ds (HCL) content –

(a) does not exceed 30 barrels per million Standard Cubic Feet (SCF), there shall be a gas tax credit at the rate of US$LOO per tho sand cubic feet or 30% of the fiscal gas price, whichever is lower; an4

(b) exceeds 30 barrels per million SCF but.does not exceed I 00 barrels per million SCF, there shall be a gas tax credit at the rate of US$0.50 per thousand cubic feet or 30% of the fiscal gas price, whichever is lower.

(3) Any other greenfield NAG project with first commercial production after Ist January, 2029 shall be eligible for gas tax allowance at a rate of US$0.50 per thousand SCF or 30% of the fiscal gas price, whichever is lower, provided that the Hydrocarbon Liquids content does not exceed 100 barrels per million SCF.

(4) The Hydrocarbon Liquids (HCL) content in a non-associated gas field shall be as determined in a guideline issued by the Nigerian Upstream Petroleum Regulatory Commission.

(5) The gas tax credit shall apply for a maximum of 10 years, after which it shall become a gas tax allowance claimable at the respective rates set out in subparagraph (2) (a) and (b) of this Paragraph.

(6) The gas tax credit accruable under this Paragraph in any year for a company shall not –

(a) exceed the companies income tax payable for that year by that company ; and

(b) be combined with the Associated Gas Framework Agreement (AGFA) incentives for the same greenfield NAG project.

2. Where there is a gas tax credit surplus in any year, the surplus shall be carried forward to the subsequent year, provided that tax credit surplus shall only be carried forward for a maximum of three years.

3. The fiscal gas price for calculating a gas tax credit under this Order shall be the same price used for determining royalties under the Petroleum Industry Act (PIA).

PART II – MIDSTREAM CAPITAL AND GAS UTILIZATION INVESTMENT ALLOWANCE

4.-(1) A gas company shall be granted a gas utilization investment allowance on qualifying expenditure on plant and equipment incurred by the company in respect of any new and ongoing project in the midstream oil and gas industry and subsisting on the effective date of this Order.

(2) The gas utilization investment allowance under subparagraph (I) of this Paragraph shall –

(a) be granted as an allowable deduction from the assessable profits of the eligible company from the year of p·urchase of the relevant plant and equipment ; and

( b) not be taken into account in ascertaining the residue of quaIifying expenditure incurred on such plant and equipment.

(c) A company shall only be granted the gas utilization investment allowance upon the expiration qf the tax-free period·granted nder section 39(1) of the Companies Income Tax Act.

5. The rate of the gas utiliza!ion investment allowance to be allowed to a company under this Order shall be 25 per cent of the actual expenditure incurred on such plant”and equipment purchased.

6. The.Federal Inland Revenue Service shall, in conjunction with the Nigerian Midstream and Downstream Petroleum Regulatory Authority, take appropriate steps to implement the gas utilization investment allowance stipulated under this Part, within 15 days from the date of this Order.

‘7.-(1) Notwithstanding the provisions of this Part, a gas utilization investment allowance shall not apply on any qualifying expenditure incurred on plant and equipment within a period of five years from the date on which the expenditure was incurred, where –

(a) a sale or transfer of the plant and equipment representing the expenditure is made by the company incurring the expenditure otherwise
than to a person acquiring the plant and equipment for the same or related business and purpose as the previous holder, or for scrap ;

(b) any appropriation of the plant and equipment is made representing the expenditure made by the company incurring the expenditure for a purpose other than for gas utilization ; or

(c) the incurring of the expenditure for the plant and equipment occurs in a manner otherwise than as a bonafide business transaction or if the same is an artificial or fictitious transaction.

8.-(1)Where an asset in respect of which a gas utilization investment allowance has been claimed is sold or transferred, it shall be the duty of the purchaser or transferee to provide information as may be requested by the Federal Inland Revenue Service, on the sale, transfer or any other dealing with the asset.

(2) A plant or equipment on which a gas utilization investment allowance has been claimed shall not be eligible for another gas utilization investment allowance by the acquiring entity or any subsequent purchaser.

9.-{I) The value of any asset on which capital allowance is claimable by a company under the Companies Income Tax Act, shall not be restricted or reduced by the gas utilization investment allowance available to be claimed by a company under this Order.

(2) The applicable capital allowance under the Companies Income Tax Act shall continue to apply to the company without prejudice to any other allowable deductions, allowances and incentives available to the company under the Companies Income Tax Act and any other applicable legislation.

PART III – INCENTIVES FOR DEEP wATER OIL AND GAS PROJECTS

10. The Minister shall introduce fiscal incentives to ensure that investments for deep water oil and gas projects achieve a competitive Internal Rate of Return (IRR).

11. Pending the introduction·of the fiscal incentives, the Ministry of Finance Incorporated and the Ministry of Petroleum Incorporated shall take steps to procure NNPC Limited to consider and implement commercial enablers for new brownfield and greenfield investments in the deep water.

12. The Minister may issue implementation guidelines in collaboration with the Federal Inland Revenue Service, Nigerian Upstream Petroleum Regulatory Commission, Nigerian Midstream and Downstream Petroleum Regulatory Authority and any other relevant stakeholder.

13. In this Order –
“Minister” means the Minister responsible for finance.

14. This Order may be cited as the Oil and Gas Companies (Tax Incentives, Exemption, Remission, Etc) Order, 2024.

PRESIDENTIAL DIRECTIVE ON LOCAL CONTENT COMPLIANCE REQUIREMENTS, 2024

WHEREAS, investments in the oil and gas sector in Nigeria have significantly decreased, with the country having only 5% of Africa’s total oi-land gas investments despite holding 38% of the continent’s hydrocarbon reserves;

WHEREAS, the Nigerian Oil and Gas Jndustry Content Development Act, 20 IO has recorded success in developing local content capacity in Nigeria, leading to substantial benefits to Nigeria and her citizens;

WHEREAS, engagements with industry regulators and stakeholders have revealed high-cost operating environment and project delivery schedule delays which exceed global standards, occasioned in part by the misapplication of Nigerian content requirements to goods and services in the sector; and

WHEREAS, it has become imperative to provide policy directives to tackle these challenges, with the primary objective of attracting investments into the sector and restoring economic growth by facilitating conducive operating and investment environment.

Now THEREFORE, in exercise of the powers conferred on me by section I 00 of the Nigerian Oil and Gas Industry Content Development Act, 20 I0 and all other powers enabling me in that behalf, I, Bola Ahmed Tinubu, GCFR, President, Federal Republic of Nigeria and Minister of Petroleum Resources, issue the following Policy Directives –

1.-(1) The Nigerian Content Monitoring and Development Board (”the Board”) in its implementation of the Nigerian Oil and Gas Industry Content Development Act, 2010 (“the Act”) shall –

(a) take into account the practical challenges of insufficient in-country capacity for certain services ; and

(b) act in a manner that does not hinder investments or the cost competitiveness of oil and gas projects.

(2) The Board shall not approve a Nigerian Content Plan (NCP) that contains intermediary entities lacking the essential capacity to perform the Services.

(3) The Board shall only approve an NCP that consists of contractors that-

(a) meet the legal definition of Nigerian content; and

(b) demonstrate genuine, substantial, and tangible capacity to independently execute projects within Nigeria.

(4) The approval of an NCP by the Board that contains entities acting solely as intennediaries, with no demonstrable capacity to execute the project or activity, shall be considered a violation of the local content requirements.

(5) The Board shall develop guidelines for assessing and verifying the capacity of companies seeking contracts for specified activities under the Ac in consultation with industry stakeholders.

2.–{I) This Directive shall take effect immediately.
date and

(2) The NCDMB shall work out the modalities for the implementation of this Directive.

3. In this Directive-
“Act” means Nigerian Oil and Gas Industry Content Development Act,
2010;
“Board’ means the Nigerian Content Development and Monitoring Board established by the Nigerian Oil and Gas Industry Content Development Act; and
“Minister” means Minister responsible for Petroleum Resources.

4. This Directive may be cited as the Presidential Directive on Local Content Compliance Requirements, 2024.

Issued at Abuja this 28th day of February, 2024.

BOLA AHMED TINUBU, GCFR
President, Federal Republic of Nigeria