allAfrica.com: Shell Decries New PSC Tax Hike: “A proposed hike in Nigerian oil taxes could halt new offshore oil projects just as the country is trying to attract new investors, Shell has declared.” (ShellNews.net) 29 March 05
Daily Champion (Lagos)
March 29, 2005
A proposed hike in Nigerian oil taxes could halt new offshore oil projects just as the country is trying to attract new investors, Shell has declared.
The criticism by the Anglo-Dutch supermajor, 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% 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 Mr. Chima Ibeneche, managing director of Shell Nigeria Exploration & Production, Company (SNEPLD) Limited, 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% 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," Mr. Ibeneche stated.
Nigerian Presidential Adviser on Petroleum & Energy Edmund Daukoru has said he hopes that the legislation will not affect existing contracts, but the House of Representatives appears 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 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," Mr. Ibeneche said.
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