The Federal Government has said the new five-year tax holiday introduced by the Petroleum Industry Act for gas pipeline investors will attract the needed investments in gas exploration and development.
The Nigerian Upstream Petroleum Resources Commission, one of the two new regulatory bodies that replaced the defunct Department of Petroleum Resources, said the tax holiday would be granted at the expiration of the tax-free period granted under Section 39 of the Companies Income Tax Act.
The Commission Chief Executive, Gbenga Komolafe, NUPRC, said this at the 2021 NGA Annual Business Forum on Monday, with the theme ‘The Petroleum Industry Act – Progress and Opportunities in the Decade of Gas’.
He said. “The single-minded focus of the NUPRC on upstream business will enhance gas reserves growth through dedicated gas exploration, optimal development of gas resources and increased gas production to cater for the anticipated growth in demand which is forecasted to exceed 20 billion standard cubic feet by 2030.
“To this end, at least 10 critical gas supply projects – both onshore and offshore non-associated gas – would need to be approved for development in the next few years as part of the propositions to give a solid base to the Decade of Gas initiative. The commission stands ready to enable this.”
He noted that its sister institution, the Nigerian Midstream and Downstream Petroleum Regulatory Authority, was also structured to enable critical midstream infrastructure development and mature the gas market through deliberate actions to ensure gas availability, affordability, acceptability, and accessibility.
According to Komolafe, several provisions in the PIA support the aggressive exploitation and valorisation of gas resources.
He said, “For instance, there is increased emphasis on frontier exploration, including the inland basins, which from geological and geophysical evidence, are believed to be gas-rich.
“The establishment of the Frontier Exploration Fund to carry out dedicated exploration and development activities in the frontier acreages is an important measure to diversify the national resource base, grow gas reserves, and guarantee long-term security of supply.”
He said royalty rates for natural gas and natural gas liquids had been harmonised across all terrains to five per cent, compared to the previous seven per cent rate for onshore gas.
Komolafe said, “More significantly, a royalty rate of 2.5 per cent only applies to natural gas dedicated to the domestic market. This enhanced regime is meant to accelerate domestic gas development and stimulate the knock-on economic benefits for the nation.
“Additionally, no hydrocarbon tax is applicable to both associated gas and non-associated gas and liquids derived therefrom in gas processing plants, in line with Section 260 (b) of the PIA.
He added, “In addition to the subsisting incentives of Section 39 of the Companies Income Tax Act, which applies to domestic midstream petroleum operations, downstream gas operations and large-scale gas utilisation industries, the PIA further provides that “investors in gas pipeline will be granted an additional tax-free period of five years at the expiration of the tax-free period granted under Section 39 of CITA.
“It is, therefore, our firm belief that these and other competitive fiscal provisions in the Act will attract the needed investments in gas exploration and development as well as infrastructural and domestic market development, including downstream gas penetration in line with government’s aspirations.”
