On the 4th of November, 2019, President Muhammadu Buhari signed the Deep Offshore and Inland Basin Production Sharing Contract (PSC) Amendment Bill into law. The amendment introduced major changes to the Deep Offshore and Inland Basin Production Sharing Contract Act (the PSC Act or the Act). Before considering the amendments in detail, we give a little background to the Act for full appreciation.

Background to the PSC Act
The Act in its long title captures its full intent:
An Act … to give effect to certain fiscal incentives given to the oil and gas companies operating in the Deep Offshore and Inland Basin areas under production sharing contracts between the Nigerian National Petroleum Corporation or other companies holding oil prospecting licenses or oil mining leases and various petroleum exploration and production companies.
The act became operational on 1st January 1993 when the average annual oil price was around $16per barrel. At that time, it was necessary for government to give incentives to International Oil Companies (IOCs)involved in oil production activities in the Deep Offshore and Inland Basin (DOIB) areas, which were considered very high risk and capital intensive. The “Deep offshore area” is defined as an area with a water depth beyond 200 metres, while the states of Anambra, Benin, Benue Chad, Gongola, Sokoto are clustered under the umbrella of “Inland Basin Areas”.

Fiscal Incentives under the PSC Act
The Act provides the following fiscal incentives to operators in the DOIB areas:
i. Long duration oil prospecting license: a minimum period of five years and an aggregate period of ten years ;
ii. Significantly reduced petroleum profit tax: 50% flat rate of chargeable profits for the duration of the PSC ;
iii. Application of Investment Tax Credit : a flat rate of 50% of the qualifying capital expenditure incurred wholly, exclusively and necessarily for the purposes of petroleum operations deductible from assessable tax and applicable to companies under the PSC arrangement that entered into their PSC prior to 1st July 1998; for companies that entered into their PSC after 1st July 1998 this is called an Investment Tax Allowance…