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Nigeria's proposed fiscal policy puts ultra-high costs firmly in the firing line

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23 August 2017

Nigeria's proposed fiscal policy puts ultra-high costs firmly in the firing line

Report summary

After years of trying to pass the ill-fated Petroleum Industry Bill (PIB), the current administration has broken up the PIB and revised the fiscal proposals within a separate document: the National Petroleum Fiscal Policy. Wood Mackenzie's fiscal experts have engaged stakeholders on all sides of the debate. We bring you our in-depth economic analysis of the National Petroleum Fiscal Policy, blending it with our unique global perspective.

Table of contents

  • Executive summary
  • Basis of analysis
  • NPFP principles and objectives
    • Royalty
    • Taxes
    • Tax allowances and deductions
      • Production allowances are a positive, if you qualify...
      • ...but punitive limits on deductible costs are regressive
        • International Cost Price Ratio comparison
        • Costs are key in the NPFP
          • Gas costs will no longer be recoverable against oil revenues
          • Economic impact on current investors (fiscal disruption)
            • Concessions
            • PSCs
            • Pre-FID projects
              • Breakeven prices of pre-FID deepwater projects (NPV15)
            • Impact on government revenues
          • Economic impact on new investment (fiscal evolution)
            • New small onshore oil discoveries
            • New shelf oil discoveries
            • New deepwater oil discoveries
            • New onshore wet gas discovery
          • Will the NPFP become law?
          • Conclusion

Tables and charts

This report includes 19 images and tables including:

  • NPFP aims and instruments
  • Nigeria's proposed fiscal policy puts ultra-high costs firmly in the firing line: Image 2
  • Forecast of average realised oil royalty (post-2017)
  • Current and NPFP tax rates
  • Forecast average realised tax rates (post-2017)
  • Simplified illustration of NHT calculation, TIP and production allowance for new deepwater production
  • Nigeria's proposed fiscal policy puts ultra-high costs firmly in the firing line: Image 6
  • Investor value change by contract type
  • Value and scale of fiscal changes in top 20 IOC jurisdictions (NPV10, base case)
  • NNPC-Majors JVs (NPV10)
  • Top ten indigenous companies (NPV10)
  • Deepwater PSC value change (NPV10)
  • Change in annual government revenues
  • Split of the barrel
  • Key metrics for new investment: onshore oil
  • Key metrics for new investment: shelf oil
  • Key metrics for new investment: deepwater oil
  • Key metrics for new investment: onshore wet gas
  • Nigeria's proposed fiscal policy puts ultra-high costs firmly in the firing line: Image 11

What's included

This report contains:

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    Nigeria's proposed fiscal policy puts ultra-high costs firmly in the firing line

    PDF 1.09 MB

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    Nigerias proposed fiscal policy puts ultra high-costs firmly in the firing line.xlsx

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    ZIP 1.57 MB

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