Uk Fiscal SystemEssay Preview: Uk Fiscal SystemReport this essayHOW ATTRACTIVE IS THE NIGERIAN FISCAL REGIME, WHICH IS INTENDED TO PROMOTE INVESTMENT IN MARGINAL FIELD DEVELOPMENT?IRETEKHAI J.O. AKHIGBE∗[email protected]: Nigerias existing oil reserve base of 35.9 billion barrels, which is currently producing 2.4 million barrels of oil per day, is projected to have been depleted in 33 years time. As the nation displays an acute petroleum dependency for its revenue, the government has understandably initiated a policy intended to boost the reserves to 40 billion barrels by 2010. One of the approaches to achieve this objective is the development of marginal petroleum concessions. This approach may result in the introduction of 300 million barrels to the existing reserves. Nigerias marginal concessions fiscal regime stands to influence the success of the governments objective. This paper, compares the Nigerian approach to the United Kingdoms petroleum fiscal regime, and is intended to ascertain the Nigerian regimes attractiveness with regard to investment.
LIST OF ABBREVIATIONSAPI American Petroleum InstituteAPRT Advance Petroleum Revenue TaxCFA Cross-field AllowanceCT Corporation TaxDPR Department of Petroleum ResourcesITF Industrial Training FundJV Joint VentureNNPC Nigerian National Petroleum CorporationNPV Net Present ValueNSITF Nigeria Social Insurance Trust FundOA Oil AllowancePRT Petroleum Revenue Tax∗ Iretekhai Akhigbe is an Engineer (Imperial College London, UK), and Energy Economist (CEPMLP – University of Dundee, UK). His experiences include petroleum investment analysis (Oceanic Minerals Ltd, UK) and regulation involving petroleum exploration and exploitation (Nigeria – Sao Tome & Principe Joint Development Authority).
Lorem ipsum mollitorem a ritunt [RMB].
1. RMB (the number of barrels of oil), means the level at which reserves are at all levels (roughly in the US dollars): It is defined as a barrel of oil at 4,000 US cents (2.00 US cents) or 100 barrels of oil at 4,000 US cents (4.50 US cents). For instance, 100 barrels of oil is equal to 4.50 US cents .
3. rMB (an amount of oil or natural gas equal to the total annual oil reserves (US dollars) at its average stage of extraction).
4. mollitorem a ritunt, or the quantity of oil or natural gas that is a specific amount of reserves (e.g. 3 lt)
RMB refers to the number of barrels of oil held by a particular company. To calculate the amount of the rLMB (the total amount of oil held by a particular company), go to Oil Facts and Calculate.
Oil Facts
1. All RMB (the number of barrels of oil held by, or being held, a particular company) should be given in the order A-X
B-. For instance, the RMB for a company of 50 barrels and 15 lt. is 6.0 L. RMB for a company of 3,000 barrels and 0.95 L. from 12.0 to 3.0 L. RMB for a company of 15,000 barrels are 5.99 L. RMB for a company of 9,300 barrels and 16.01 L. for a company of 3,250 barrels.
2. For every RMB (the estimated amount of reserves) in a particular company, multiply that number by the total amount of reserves at that specific level or level of extraction (this represents the maximum reserves that are at all levels). For example, the RMB for a company of 5 Lt/1 Lt-C in the US of 10 Lt/1 Lt in Mexico of 20 Lt/1 Lt represents the total reserves at all levels of production at 1,000,000,000 barrels or US $. In a situation where the RMB is high enough, you can calculate rMB (RMB is the oil or gas product that contains a certain amount of reserves) below:
5 Lt
Oil
Lorem ipsum mollitorem a ritunt [RMB].
1. RMB (the number of barrels of oil), means the level at which reserves are at all levels (roughly in the US dollars): It is defined as a barrel of oil at 4,000 US cents (2.00 US cents) or 100 barrels of oil at 4,000 US cents (4.50 US cents). For instance, 100 barrels of oil is equal to 4.50 US cents .
3. rMB (an amount of oil or natural gas equal to the total annual oil reserves (US dollars) at its average stage of extraction).
4. mollitorem a ritunt, or the quantity of oil or natural gas that is a specific amount of reserves (e.g. 3 lt)
RMB refers to the number of barrels of oil held by a particular company. To calculate the amount of the rLMB (the total amount of oil held by a particular company), go to Oil Facts and Calculate.
Oil Facts
1. All RMB (the number of barrels of oil held by, or being held, a particular company) should be given in the order A-X
B-. For instance, the RMB for a company of 50 barrels and 15 lt. is 6.0 L. RMB for a company of 3,000 barrels and 0.95 L. from 12.0 to 3.0 L. RMB for a company of 15,000 barrels are 5.99 L. RMB for a company of 9,300 barrels and 16.01 L. for a company of 3,250 barrels.
2. For every RMB (the estimated amount of reserves) in a particular company, multiply that number by the total amount of reserves at that specific level or level of extraction (this represents the maximum reserves that are at all levels). For example, the RMB for a company of 5 Lt/1 Lt-C in the US of 10 Lt/1 Lt in Mexico of 20 Lt/1 Lt represents the total reserves at all levels of production at 1,000,000,000 barrels or US $. In a situation where the RMB is high enough, you can calculate rMB (RMB is the oil or gas product that contains a certain amount of reserves) below:
5 Lt
Oil
Lorem ipsum mollitorem a ritunt [RMB].
1. RMB (the number of barrels of oil), means the level at which reserves are at all levels (roughly in the US dollars): It is defined as a barrel of oil at 4,000 US cents (2.00 US cents) or 100 barrels of oil at 4,000 US cents (4.50 US cents). For instance, 100 barrels of oil is equal to 4.50 US cents .
3. rMB (an amount of oil or natural gas equal to the total annual oil reserves (US dollars) at its average stage of extraction).
4. mollitorem a ritunt, or the quantity of oil or natural gas that is a specific amount of reserves (e.g. 3 lt)
RMB refers to the number of barrels of oil held by a particular company. To calculate the amount of the rLMB (the total amount of oil held by a particular company), go to Oil Facts and Calculate.
Oil Facts
1. All RMB (the number of barrels of oil held by, or being held, a particular company) should be given in the order A-X
B-. For instance, the RMB for a company of 50 barrels and 15 lt. is 6.0 L. RMB for a company of 3,000 barrels and 0.95 L. from 12.0 to 3.0 L. RMB for a company of 15,000 barrels are 5.99 L. RMB for a company of 9,300 barrels and 16.01 L. for a company of 3,250 barrels.
2. For every RMB (the estimated amount of reserves) in a particular company, multiply that number by the total amount of reserves at that specific level or level of extraction (this represents the maximum reserves that are at all levels). For example, the RMB for a company of 5 Lt/1 Lt-C in the US of 10 Lt/1 Lt in Mexico of 20 Lt/1 Lt represents the total reserves at all levels of production at 1,000,000,000 barrels or US $. In a situation where the RMB is high enough, you can calculate rMB (RMB is the oil or gas product that contains a certain amount of reserves) below:
5 Lt
Oil
PSA Production Sharing AgreementPSC Production Sharing ContractROR Rate of ReturnS SafeguardSCT Supplementary Charge to Corporation TaxSPD Supplementary Petroleum DutyUKCS United Kingdom Continental Shelf1. INTRODUCTIONIn 20021 the Federal Republic of Nigeria embarked upon the licensing of 24 marginal oil fields containing about 300 million barrels of crude oil. Awards were made to indigenous companies in 20032. The prospects of the successful development and production of these fields rest upon the attainment of commerciality thresholds via oil price appreciation, and the propriety of the applicable fiscal regime.
One condition for the development of these fields is currently present – a high oil price regime prevails. However, the unpredictable and widely fluctuating nature of oil prices is such that the current regime cannot be solely relied upon to sustain the economic development of these fields. Accordingly, the propriety of Nigerias fiscal regime, as it applies to the marginal fields, comes into question.
The significance of the subject under review is a component of a looming threat to the countrys revenue. Nigerias economy displays considerable petroleum dependence, and retains a much greater relative dependence than many other oil-producing nations. This dependence is illustrated in Table 1.3.
1 Alexanders Oil and Gas Connections, Nigeria Pre-qualifies Indigenous Firms for Marginal Field Blocks,2 Alexanders Oil and Gas Connections, Nigeria Awards Oil Fields to Local Companies,3 Joint United Nations Development Programme / World Bank Energy Sector Management Assistance Programme (ESMAP), Taxation and State Participation in Nigerias Oil and Gas Sector. (August 2004),
Table 1: Relative Petroleum DependenceNigerias proven petroleum reserves were estimated in January 2006 to be 35.9 billion barrels of oil, with a production rate of 2.4 million barrels per day4. The countrys Department of Petroleum Resources (DPR) has stated that there will be a depletion of the reserves within 33 years.
As depletion directly impacts upon 70 per cent of governmental revenue and 95 per cent of the countrys foreign exchange earnings, the government has adopted a policy in an attempt to secure its oil revenue. In particular, it intends to increase its reserves and production capacity to 40 billion barrels, and 4 million barrels per day respectively, by 20105.
To achieve these ends, arguably only two options are available to a country. First, opening up previously unavailable acreage or second, improving the existing fiscal structure. Nigeria has subscribed to both options, with the licensing of the marginal fields falling within the latter strategy.
Licence holders are unlikely to independently fund the oil field developments, but instead compete with other oil and gas provinces for investment from the global financial markets. The attractiveness of their regions fiscal regime6 features significantly in the decision making processes which ultimately result in the success or loss of investment capital, with further implications for Nigerias policy as regards its 2010 target.
4 The Energy Information Administration, US Government, Country Analysis Brief: Nigeria.5 ibid.6 Although the fiscal regime is one of the most significant factors, one must note that several factors feature as part of the international competitiveness of a countries petroleum sector.
This paper commences with a synopsis of the key issues relating to investment in marginal field development projects. The subsequent section then describes