PIB Will Make Crude Oil Measurement Difficult, Says Mitee

[TGD]

THE Chairman, Nigeria Extractive Industries Transparency Initiative (NEITI), Ledum Mitee, said lack of new royalty provisions in the Petroleum Industry Bill (PIB) would make it impossible to measure petroleum production in the country.

   He also observed that rather than scare investors with heavy tax burden in the proposed PIB, government's tax reform should ensure greater responsibility for international oil companies in the areas where they operate, in order for the bill to achieve its objective.

   Mitee stated this in a paper titled: "Some Reflections On The Petroleum Industry Bill and The Niger Delta", which he delivered at a workshop on the PIB and the Niger Delta organised by AFROFIT consult.

  He noted that the lack of new royalty provisions has a significant implication with respect to the measurement of petroleum production.    

   According to him, the PIB ought to have adopted the international practice of measuring oil and gas production at the measurement point in the field, directly where oil and gas leaves the field area. This, he stressed, would have been in contrast to the existing practice of measuring at a point downstream where oil or gas is delivered or sold.

   "The reason for the tougher measurement point is to stop the practice of stealing or diverting oil or gas before it is measured. The PIB 2012 would continue the existing practices, which means that it will remain possible to steal or divert oil or gas before it is measured. This will continue to result in losses to the Niger Delta and the Nigerian economy in general, and will continue to benefit those involved in these practices," he said.

    Mitee, while reviewing the PIB, said fiscal regime proposed in the bill would impact negatively on the 13 per cent derivation enjoyed by oil producing states. According to him, the PIB proposes the replacement of the current Petroleum Profits Tax (PPT) with the Nigerian Hydrocarbon Tax (NHT) and Companies Income Tax (CIT) as the applicable imposition on profits of companies engaged in upstream petroleum operations.

   He explained that NHT would be computed on the chargeable profits for the relevant accounting period at 50 per cent for onshore and shallow water areas, and 25 per cent for bitumen, frontier acreages and deepwater areas. He pointed out that whereas NHT would be subject to the 13 per cent derivation, CIT would not and therefore the loss of revenue to the Niger Delta.

    "Section 60 of the PPT Act, provides that any dividend paid out by a company from profits on which PPT has been paid, is exempted from further Nigerian tax. This provision is retained in section 350 of the PIB. Hence, dividends paid out of profits that have been subjected to NHT will not be liable to withholding tax, personal income tax, CIT and other Nigerian taxes. Consequently, the restriction on effects of Personal Income Tax and other Acts on dividends would reduce the revenue under 13 per cent derivations, and which would have direct bearing on the interests of the Niger Delta states" he said.

The Guardian