Nigeria: President Buhari signs new oil law, tougher on majors

Engaged in a fierce battle with the sector’s majors, the Nigerian presidency confirmed on Monday 4 November that it had signed the draft amendment to the oil law, which will significantly increase the country’s share of revenues… to the detriment of foreign companies.

Nigerian President Muhammadu Buhari announced the signing of the new law in a message published on his Twitter account, @ Mbuhari. « This afternoon, I approved the bill amending the law on the sharing of production between deep offshore and inland basins. This is a crucial moment for Nigeria; let me take this opportunity to thank the National Assembly for the cooperation that has made it possible to produce this long-awaited amendment, » said the Head of State, for whom Nigeria will now obtain a fair and just share of the revenues from its natural resources… ».

Faithful to his usual outspokenness, Muhammadu Buhari nevertheless took the political class of his country to task, these « men[…][who], with the complicity of the oil multinationals[have] worked to maintain an income distribution system, valued at its minimum, calculated on a barrel of oil at 20 dollars – that is, three times less than its current price ». Before the President approved it, the draft amendment had been adopted by Parliament in just a few weeks; an unusually fast pace for a country that has been waiting for more than a decade for a draft law on the oil industry. Not to mention that the ratification of this new text comes on top of another punch action: in mid-October, Nigerian Justice Minister Abubakar Malami demanded $62 billion from foreign oil companies, on the grounds that, according to the law, offshore oil extraction had been undervalued and set at prices well below those of the market.

The stakes are, it is true, high: while Nigeria is facing a difficult economic situation, plagued by low barrel prices and stagnant oil production (1.9 million barrels per day), the new oil law essentially aims to ensure that production sharing contracts benefit the State more. The previous legislative version, passed in 1993, provided that « production sharing contracts » could be negotiated between the government and the majors as soon as the barrel exceeded 20 dollars. With the recent amendment of the law, two new sources of revenue are added: a flat-rate royalty of 10% on all offshore wells deeper than 200 metres, and another of 7.5% on border and inland basins. A change that, according to the presidency’s press release, could bring an additional $1.5 billion to the country by 2021. However, it is not clear that the expected effects will be fully achieved, as some oil operators have already warned that these new provisions would make billions of dollars of planned oil investments unprofitable and thus reduce potential offshore production by nearly 30%.