• Production royalty :
Crude oil / condensate produced per field per month
Onshore
Shallow water
Deep offshore
Frontier
Gas produced per field per month All depths
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These rates are lower than previous PIB drafts and are , broadly , reductions from the prior regime ( though may not be the case in every scenario given water depth and a new requirement to apply weighted royalties to fields located across acreage types ).
• Price royalty :
< US $ 50 per barrel : 0 %
US $ 100 per barrel : 5 %
> US $ 150 per barrel : 10 %
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< 5,000 bopd : 5 % 5,000 – 10,000 bopd : 7.5 % > 10,000 bopd : 15 %
< 5,000 bopd 5 % 5,000 – 10,000 bopd : 7.5 %; > 10,000 bopd : 12.5 %
< 50,000 bopd : 5 % > 50,000 bopd : 7.5 %
7.5 %
gas utilised in-country : 2.5 % all other gas or NGLs : 5 %.
The rate between these markers is determined by linear interpolation ( e . g . an oil price of US $ 75 per barrel would mean a royalty of 2.5 %).
These rates apply to 2020 and the price markers are to be increased by 2 % each year .
◊ No price royalty is payable for frontier acreages .
New community and environmental related obligations :
• Licence holders must set up a “ host community development trust ” to fund social and environmental projects in the communities in which facilities related to operations are located , with the JOA operator made responsible .
• It appears that this applies to existing OMLs that are not converted under the PIA ( though is not made expressly clear in the PIA ). Operators of existing OMLs must create PIA trusts within 12 months of the PIA .
• Each licence holder must make an annual contribution to the trust of an amount equal to 3 % of its operating expenditure for the relevant operations from the previous year . This has been one of the Act ’ s most controversial and contested provisions ( with some earlier PIB drafts proposing a 5 % levy ).
• The licence holder must appoint a board of trustees ( which does not necessarily include members of the host community ) and a management committee ( which must include one member of the host community ) for each trust .
• Failure to comply with host community obligations under the PIA is grounds for licence revocation .
• Trust funds are exempt from taxation and payments to the trust are deductible for hydrocarbon tax and CIT purposes .
• Existing host community projects must be transferred to the new PIA-established trusts . PIA-host community development trust obligations appear to be additional to existing community levies ( such as the Niger Delta development levy ).
Transition and conversion process :
• Except for some specific mandatory terms , much of the PIA does not apply to existing OPL / OML holders and the existing OPL and OML continue and their terms ( including fiscal ) are preserved until “ conversion ”.
• Conversion can be voluntary or becomes mandatory on licence expiry / renewal .
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Voluntary conversion : the licence holder must enter into a conversion contract , which will terminate all outstanding arbitration and court cases related to the relevant OPL / OML , removes any stability provisions or guarantees given by NNPC , and relinquishes no less than 60 % of the acreage . Voluntary conversion appears to only be available for an 18 month period . bracewell . com