Nigeria announces reforms to lure oil and gas investment
(Reuters) - Nigeria will offer tax credits and streamline contracting processes for new oil and gas projects, the Information Minister said, in a move by Africa's top energy producer to attract much-needed investment.
Africa's biggest producer, which relies on oil for at least two-thirds of its revenue, is trying to halt a flight of investment capital from its onshore fields by oil majors fleeing assets prone to spills caused by attacks including sabotage and vandalism.
Information Minister Mohammed Idris said the government will apply fiscal sweeteners for new gas projects, such as a tax credit for non-associated gas, referring to gas produced from a gas-targeted well rather than an oil well, in fields where hydrocarbon liquids are less than 100 barrels per million standard cubic feet.
As part of a sweeping executive order approved by President Bola Tinubu on Wednesday, Nigeria will also offer a 25% gas utilization investment allowance for equipment and plant for new and ongoing projects, and commercial enablers for offshore exploration to make them financially attractive, Idris said in a statement.
The president "has executed these policy directives to improve the investment climate and position Nigeria as the preferred investment destination for the oil and gas sector in Africa," Idris said.
These incentives address previous shortcomings, such as the lack of differentiation for non-associated gas fields and aim to prevent value erosion for ongoing projects.
Nigeria is also streamlining contracting procedures by raising approval thresholds for Production Sharing Contracts (PSCs) and Joint Operating Agreements (JOA) to not less than $10 million, simplifying processes, and extending the duration of third-party contracts from three to five years.
These changes are expected to significantly reduce project contracting cycle to between four and six months, from at least 2 years, leading to faster oil and gas production and increased revenue.
The measures also address concerns regarding the application of local content requirements. While the government continues to push for the use of local manpower, it acknowledges the need for flexibility in situations where domestic capacity is insufficient, the statement said.
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