FG’s order to IOCs on controversial tax returns may hang Bonga scheme—Shell
Strong indications have emerged revealing that the recent deadline given to leading International Oil Companies (IOCs) including Royal Dutch Shell, Chevron, Exxon Mobil, Eni, Total, and Equinor to pay up contestable royalties amounting $20bn, may hobble planned investments by the firms this year.
This was disclosed by Shell’s head of upstream, Andy Brown on the sidelines of the International Petroleum Week conference, saying “It is something that has gone through the courts in Nigeria, which relates to an original clause within the original PSCs (production sharing contracts),” he said in an interview.
“We will have to take it seriously but we think it has no merits,” said Brown, who steps down from his role this year.
According to him, the outstanding tax issue will delay the final investment decision (FID) on developing Shell’s Bonga Southwest deepwater oil field, one of Nigeria’s largest with production expected to reach 180,000 barrels per day.
He averred that “We’ll need to resolve that before we ever FID the Bonga Southwest project,” decrying that “Bonga Southwest’s FID may slip into next year.”
However,
Whereas Shell has made progress with the government on some basic terms for operating the field but a decision on its development was now unlikely to be made in 2019, Business Hilights recalls that Chevron, Exxon Mobil, Eni, Total, and Equinor were each asked to pay between $2.5 billion and $5 billion on the tax and royalty discrepancies.
Shell maintained that the process of resolving such claims by the Federal Government that IOCs owe local states, industry and government could delay the development of a major oil field off the coast of the West African nation.
Trouble had started when earlier year, the Federal Government in a letter sent to the companies through the Nigerian National Petroleum Corporation (NNPC), cited what it called outstanding royalties and taxes for oil and gas production.
Minister of State for Petroleum Resources, Dr. Emmanuel Kachikwu, had told journalists before the heat of the general elections that the Federal Government recovered no less than N1.2 trillion in unpaid royalty from crude oil sales, following the Ministry’s automation initiatives.
He further averred that just as some oil firms are yet to remit their royalty to the Federal Government at the expiration of the statutory deadline, he threatened that such firms may lose their licences if they fail to make remittances within the extended timeline.
