* Oil majors want better terms for deepwater, gas
* Bill to overhaul industry has been stalled for years
* Investment on hold due to regulatory uncertainty
By Tim Cocks
LAGOS, Sept 26 (Reuters) - Nigeria’s leading oil producer Shell thinks the tax terms in a landmark oil bill are so uncompetitive they risk rendering offshore oil and gas projects unviable, the firm’s managing director and industry sources said.
In comments from a stakeholders’ forum that Shell sent to Reuters on Wednesday, Shell Nigeria managing director Mutiu Sunmonu welcomed the bill’s arrival in parliament, but warned it may stifle investment if its terms are not improved.
President Goodluck Jonathan approved the latest draft of the Petroleum Industry Bill (PIB) last month, and parliament is expected to start debating it over the next few weeks.
If it goes through, the bill should end years of regulatory uncertainty that has blocked billions of dollars of investment.
“A balanced PIB is what is required - one that will provide optimal revenue to the government whilst providing sufficient incentives for new investment to fuel growth,” Sunmonu said, adding it must also “take local business challenges into consideration as well as the impact on existing investments.”
“What we have seen of the draft PIB to date does not indicate a bill that fits these criteria.”
The PIB is meant to change everything from fiscal terms to overhauling state-owned Nigerian National Petroleum Corp (NNPC). Its comprehensive nature caused disputes between lawmakers, ministers and the oil majors that have held it back for more than five years. A previous draft never got through parliament.
“The current draft PIB requires significant improvement to secure Nigeria’s competitiveness,” Sunmonu warned. “As it stands right now the PIB will render all deepwater projects and all dry gas projects ... non-viable.”
Government officials were not immediately available for comment.
On the current draft, oil companies will pay 50 percent profit tax for onshore and shallow water areas and a 25 percent one for frontier acreage and deep water areas.
Current taxes on both are not disclosed.
An industry source, who could not be named, said the deep water profit tax was a worse deal than most oil majors were getting on existing deep water projects.
Since the PIB is supposed to govern these retrospectively, the companies would lose earnings on these existing investments, he said, although there was no disagreement over onshore.
Sunmonu also expressed concern over the terms on projects to unlock Nigeria’s huge latent gas potential for domestic use in power plants. The country has 187 trillion cubic feet of proven gas reserves, he said.
“A bad PIB will deter investment ... Nigeria needs to compete - and the PIB will either enable or strangle that competitiveness,” Sunmonu said.
Analysts say the terms for onshore are way more favourable than the deals in existence now. Little is known about secretive terms on offshore contracts.
Nigeria exports some 2 million barrels per day (bpd) but could double that with a better-managed industry, foreign oil majors say. They also say fiscal terms need to compensate them for the extra security risks of operating here such as piracy, kidnapping and oil theft by armed gangs.
An amnesty ended political militancy in the oil rich Niger Delta in 2009, but industrial scale oil theft continues.
“All of this has had a huge impact on both cost and revenues, but we can live with them ... provided the underlying fiscal regime is positive,” Sunmonu said.