The refusal of the federal government's Interagency Group
to back down on its plans to use the Petroleum Industry Bill to change the measurement point for crude production for tax purposes has become one of the biggest bones of contention with the international oil industry.
Up to now, Nigeria has made the measurement point the same as the point of transfer for crude, i.e., the terminal. However, Tim Okon, general manager for strategy at the Nigerian National Petroleum Corporation (NNPC) and a leading figure in the Interagency team, has been insisting that it be moved to the point of production, i.e., the field.
The proposed change has massive consequences for the IOCs, in particular in the onshore environment. In effect it means they would be obliged to pay tax and royalties on sometimes substantial volumes of stolen crude that is drawn off between the field and the terminal. A source with one IOC says, 'A loss of 10 per cent is entirely possible and that could make the difference between whether you break even or not in Nigeria.'
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© 2010 Menas Associates
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