Reuters: Tax hike could halt Nigerian oil projects – Shell: “A proposed hike in Nigerian oil taxes could halt new offshore oil projects just as the country is trying to attract new investors, Royal Dutch/Shell said on Monday.” (ShellNews.net) Posted 22 March 05
ABUJA (Reuters) - A proposed hike in Nigerian oil taxes could halt new offshore oil projects just as the country is trying to attract new investors, Royal Dutch/Shell said on Monday.
The criticism by the Anglo-Dutch giant, by far the largest investor in Nigeria, is more harsh than previous industry reaction to the proposed measure, which would raise corporate income tax from 50 to 85 percent on multi-billion-dollar deep-water developments and could be applied retroactively.
"Not only would the passage of such a bill imply the government is reneging on existing agreements and eroding trust, but it would also render new projects unsustainable and liable to termination," said Chima Ibeneche, managing director of Shell Nigeria Exploration and Production Co., operator of Shell's deep water projects in the country.
Shell is in the final stages of building a $3.5 billion offshore development at Bonga, where production is set to start mid-year and rise rapidly to 225,000 barrels per day.
Any increase in tax would hit the profitability of such ventures, which would be all the more painful for Shell because Bonga is already two years delayed and 30 percent over budget.
"It is essential that the basis of these investments is not tampered with in any way that will adversely affect the economic returns to investors or the investment climate of the future," Ibeneche said.
Nigerian Presidential Adviser on Petroleum and Energy Edmund Daukoru has said he hopes that the legislation will not affect existing contracts, but the House of Representatives appear to have other ideas.
The proposed bill would have to pass through the Senate before going to President Olusegun Obasanjo for signing into law. Obasanjo could refuse to sign, but the assembly can over-rule him with a two-thirds majority.
The uncertainty over Nigerian oil contracts comes just as the OPEC member nation gears up for a new licensing round including 12 deep water areas to be auctioned by August.
"The proposal would send signals such as would severely jeopardise prospects for future investment in general and stunt if not effectively stall growth in the deep water oil and gas industry at this most critical time," Ibeneche said.
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