‘Petroleum Industry Act Won’t Stop Divestments by IOCs in Nigeria’

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A Nigerian federal government agency, the Revenue Mobilisation Allocation and Fiscal Commission (RMAFC), has asserted that the Petroleum Industry Act 2021 may not bar international oil companies from divesting from the country.

This is against the general impression created by both President Muhammadu Buhari when he signed the bill into law in August 2021, and many government and public sector officials ever after.

Despite the entrance of the law, echoes of international oil companies have continued to sound in the Nigerian energy sector. Oil majors like Shell and ExonnMobil have relented from their original plans to sell off assets and and leave Nigeria.

In a performance index titled ‘PIA 2021 and its Impact on Federation Revenue: RMAFC Perspective’, published in Abuja yesterday, the agency gave reasons why the international oil companies were divesting from their onshore and shallow water assets despite the reduced taxes and royalty rates in the PIA.

“Before the passage of the PIA, the IOCs were divesting from their onshore and shallow water assets due to hostile environment attributed to community restiveness and security challenges in the Niger Delta.

“Productions from some of the fields are already declining. The PIA as it were may not likely stop this trend due to increased theft, which is now an organised crime,” RMFAC said.

The agency noted that the three per cent operation cost to be paid to the Community Development Fund might not be technically applicable to deep offshore.

“As a result, the IOCs are likely to be more interested in deep water assets where the tax and royalty rates are lower with no community disturbances and no theft. A typical case is Mobil Producing Nigeria in offshore,” the commission stated.

The five major IOCs operating in Nigeria include Shell Producing Development Company, TotalEnergies, Chevron, ExxonMobil and Eni.

A journal on African politics and business, The African Report, recently stated that in the past 11 years, IOCs operating in Nigeria had divested a total of 26 Oil Mining Licences in the Niger Delta with more set to be sold.

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