According to the chamber, the proposed legislation should seek to protect existing investments from value erosion, noting that assets and operations therefrom were the foundation upon which new projects could be built.
The Director-General, Dr. Muda Yusuf, yesterday, observed that some sections of the bill were harmful to the growth of industries.
Specifically, he said the deepwater provisions do not provide a favourable environment for future investments and initiation of new projects, saying the PIB should grant new deepwater oil projects full royalty relief during the first five years of production and should outlaw Hydrocarbon Tax (HT) since companies will still be subject to CITA.
The chamber submitted: “Deepwater non-associated gas resource development is particularly challenging and requires targeted measures to get projects off the ground. A full royalty relief during the first five years of production and a one per cent royalty for natural gas, natural gas liquids, as well as the condensate/ liquids from such development would encourage investment in deepwater gas projects.”
On the segregation of upstream and midstream assets, LCCI said the inclusion of a savings provision should be considered to allow post-conversion continuity of activities undertaken by a single legal entity (instead of segregated independent companies).
Despite earnings from gas revenue, Yusuf noted that the PIB prohibits the export of gas, without exemptions, until the domestic gas obligation is met, thereby creating the potential for breach of existing long-term contractual supply obligations.
He argued that to ensure firms do not end up flouting contracts, the piece of legislation should include an exemption for existing export of gas supply contracts and requirements.
The DG continued: “Finally, the PIB significantly increases the administrative burden of compliance (e.g. dual tax system, multiple terrains, deconsolidated tax filings). The bill should seek to simplify the administrative burden of compliance, minimising ambiguity, and the extent of overlapping regulation.
“This would lead to fewer disputes and avoid increasing the cost of doing business in Nigeria. This can be done by further clarifying the conversion process, setting out a clear process for dispute resolution between operators and the commission or authority, and clarifying which regulator will be responsible for integrated operations.”
