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IOC taxes plunge by N16.46bn amid production cuts

The tax revenue accruing to the Federal Government from Production Sharing Contracts with international oil companies operating in the country fell by $45.72m (N16.46bn) in May.

The tax lifted as oil by the Nigerian National Petroleum Corporation on behalf of the Federal Inland Revenue Service dropped to 2.56 million barrels valued at $59.34m in May from 4.38 million barrels ($105.06m) in April, according to data from the corporation.

The nation’s oil and gas production structure is majorly split between joint ventures onshore and in shallow water with private companies and PSC in deepwater offshore, to which many IOCs have shifted their focus in recent years.

Under the PSCs, the NNPC holds the concessions, and the contractors fund the development of the deepwater offshore blocks and recover their costs from the production after royalty payments.

All in-kind revenues (profit oil, royalty oil and tax oil) are lifted by the NNPC on behalf of the relevant agencies or the federation, with proceeds deposited in the relevant accounts, according to the Nigeria Extractive Industries Transparency Initiative.

Prior to the collapse of oil prices triggered by the COVID-19 pandemic, tax oil from PSCs stood at 5.28 million barrels ($238.90m) in February, up from 4.79 million barrels ($221.15m) in January.

Tax oil from PSCs stood at 5.28 million barrels ($131.32m) in March.

The Organisation of the Petroleum Exporting Countries and its allies, known as OPEC+, agreed in April to an output cut to offset a slump in demand and prices caused by the coronavirus crisis.

They decided to cut supply by a record 9.7 million bpd for May and June but the deal was extended in July by one month.

Under the April deal, Nigeria was expected to cap its production at 1.41 million bpd in May and June but the country overproduced during the period.

The NNPC, in its latest monthly report, said a total of 54.24 million barrels of crude oil and condensate were produced in the country, representing an average daily production of 1.75 million barrels.

It said, “This translates to a decrease of 29.27 per cent in the average daily production compared to April 2020 average daily performance.

“Of the May 2020 production, Joint Ventures and Production Sharing Contracts contributed about 33.38 per cent and 37.82 per cent respectively.

“While alternative financing, the Nigerian Petroleum Development Company and independents accounted for 10.19 per cent, 9.39 per cent and 9.22 per cent respectively.”

The report said a total volume of 56.13 million barrels of crude oil and condensate was lifted by all parties, out of which 19.04 million barrels were lifted by the NNPC on behalf of the federation.

“This comprises 13.53 million barrels lifted on the account of NNPC (domestic and Federation export) while 2.56 million barrels and 2.96 million barrels were superintended for FIRS and Department of Petroleum Resources respectively,” it added.

According to the report, federation crude oil and gas lifting are broadly classified into equity export and domestic crude oil, both of which are lifted and marketed by the NNPC and the proceeds remitted into the Federation Account.

NNPC also lifts crude oil and gas other than equity and domestic crude oil on behalf of the DPR and FIRS and the proceeds are remitted into Federation Account.

 

Source: Voice of Nigeria