On Monday, 4 November 2019, His Excellency, President Muhammadu Buhari, GCFR, assented to the Deep Offshore and Inland Basin Production Sharing Contract (Amendment) Act, 2019 (“the Amendment Act”) following its passage by the National Assembly in October 2019.
The amendment is in line with the provisions of Section 16 of the Deep Offshore and Inland Basin Production Sharing Contracts Act, Cap D3, Laws of the Federation of Nigeria, 2004 (DOIBPSCA or “the Act”) which requires the Federal Government of Nigeria (FGN) to review the provisions of the Act when the price of crude oil exceeds $20 per barrel in real terms, or within a fixed number of years (15 years from commencement of the Act and 5 years thereafter).
The Amendment Act introduces four key changes to the DOIBPSCA, as follows:
(i) Replacement of the royalty regime applicable to Deep Offshore and Inland Basin fields (substitution of Section 5 of the Act)
The Amendment Act introduces a combined production and price-based royalty system to replace the existing production-based royalty system, which varies according to areas of operations.
The new royalty regime specifies a baseline royalty of 10% for crude oil and condensates produced in the deep offshore (greater than 200 meter water depth) and 7.5% for the Frontier and Inland Basin. In addition to the baseline royalty, a royalty based on the applicable price of crude oil, condensate and natural gas will apply, but only when the price exceeds $20 per barrel.
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