FG Directs IOCs To Pay $20bn In Back Taxes
The Federal Government has ordered international oil companies operating in the country to pay nearly $20bn in taxes it says are owed to states.
In a letter sent to the companies earlier this year via a debt-collection arm of the government, Nigerian National Petroleum Corporation cited what it called outstanding royalties and taxes for oil and gas production, according to Reuters.
Industry and government sources who saw or were briefed on the letters were quoted as saying that Royal Dutch Shell, Chevron, Exxon Mobil, Eni, Total and Equinor were each asked to pay the Federal Government between $2.5bn and $5bn.
Norway’s Equinor , which produced around 45,000 barrels per day of oil in Nigeria in 2017, confirmed the request.
“Several operators have received similar claims in a case between the authorities in Nigeria and local authorities in parts of the country,” an Equinor spokesman was quoted as saying.
Exxon “is currently reviewing the matter”, a spokeswoman for the United States company said.
The charge came after the Federal Government and states settled a dispute over the distribution of revenue from hydrocarbon production. The sides agreed last year that Abuja would pay the states several billion dollars, three company and government sources said.
The companies were expected to dispute their respective payment claims.
“ Equinor sees no merit to the case,” the company spokesman said.
A source at another company said, “This looks like an internal dispute between the federal and local governments. The central government is simply trying to shift to the IOCs (international oil companies) money it owes.”
The tax demand adds a fresh challenge to energy companies investing in Nigeria, Africa’s biggest oil and gas producer, which have been negotiating Production Sharing Contracts with the government to develop and operate giant offshore fields.
Oil theft, massive oil spills and corruption further complicate operations in the country.
Nigeria, a member of the Organisation of the Petroleum Exporting Countries, produced around 2.1 million bpd of oil last year, compared with 1.86 million bpd in 2017, according to the NNPC.
The country uses several types of contract with energy companies, including the establishment of joint ventures and production sharing, the two most common partnerships for IOCs in the country.
The companies pay the government in the form of royalties and taxes as well as providing the state with oil and gas.
Under the PSCs, the NNPC is the oil licence holder but engages oil firms as contractors that bear all risks and recover costs through a share of production at a tax rate of 50 per cent.
Under the JV arrangement, both the NNPC and private operators contribute to the funding of operations in the proportion of their equity holdings and generally receive the produced crude oil in the same ratio.
Last week, the Minister of State for Petroleum Resources, Dr Ibe Kachikwu, said the Federal Government had forced oil companies to fork out N1.2tn in royalty arrears.
President Muhammadu Buhari, in his 2019 budget speech to the National Assembly in December, said the volatility in oil prices, and disruptions in oil production delayed the plans to recover past due oil licence and royalty charges as well as the restructuring of the joint venture oil assets.
“As we have returned to the path of growth, I have directed that action on all our revenue initiatives be expedited. I have already issued a number of Presidential directives on the disposal of recovered assets, deployment of the National Trade Window as well as the immediate recovery of past-due oil royalties including by crude seizures, if necessary,” he added.