Deep Offshore and Inland Basin Production Sharing Contracts Decree (No. 9 of 1999)

2. The duration of an oil ,prospecting licence relating to Duration of oil Production Sharing Contracts in the Deep Offshore and Inland prospecting licence Basin shall be determined by the Minister and shall be for a minimum period of 5 years and an aggregate period of 10 years. -,..,~ -'-( 1\.,. '""' .. I .:.11~- t'i;trc..,e,1IT! .. ,- . r'~0!1t~ ,...., i u;; ' • . payatH.t; • l3~d.er a ::ctenr,.L.:..:.t!a!l of f ru<luction Shar~ng Co.u.tract :;naH be determL.'1ed in accordance i>c:troleum Profa with the Petroleum Profits Tax Act as amended: ~:;: 354 LFN. Provided that the Petroleum Profits Tax applicable to the contract area as defined in the Production Sharing Contracts shall be 50 per cent flat rate of chargeable profits for the duration of the Production Sharing Contracts. (2) Nothing contained in this Decree shall be construed as having exempted the Contractors from the payment of any other taxes, duties or levies imposed by any Federal, State of Local Government, or Area Council Authority.

4.-(1) Where the Nigerian National Petroleum Corporation Determination (in this Decree referred to as "the Corporation") or the Holder and of investment cax credit and the Contractor have incurred any qualifying capital expenditure investment tax wholly, exclusively and necessarily for the purposes of petroleum allowance. A. 516 1999 No. 9 Deep Offshore and Inland Basin Production sharing Contracts operation~ carried out under the tenns of a Production Sharirg Contract m the Deep Offshore or Inland Basin, there shall be due to the Parties in respect of the· Production Sharing Contracts executed prior to 1st July, 1998, a credit (in this Decree referred to as ."Investment Tax Credit") at a flat rate of. 50 per cent of the qualifying expenditure in accordance with the Production Sharing Contract terms for the accounting period in which that asset was first used for the purposes of such operations. (2) In respect of Parties who executed Production Sharing Contracts after 1st July'1998, there shall be due to such Parties an allowance ("in this Decree referred to as an "Investment Tax Allowance") at a flat rate of 50 per cent of the· qualifying expenditure in accordance with the provisions of existing applicable legislation for the accounting period in which that asset was first used for the purposes of such operations. Royalty payable in 5.-(1) The payment of royalty in respect of the Deep respect of deep . Offshore Production Sharing Contracts shall be graduated as offs~ore product1oll'follows that is _ sharmg contracts. ' Area Rate (a} In areas from :201 to 500 metres water depth · . ..., per cer,i- 1"' (b) From 50 I to 800 metres water depth 8 per cent (c) From 801 to 1000 metres water depth 4 per cent (d) In areas in excess of 1000 men:es depth 0 per cent (2) The royalty rate payable under the Production Sharing Contracts in the Inland Basin shall be IO per cent. Computation of 6. Computation and payment of estimated . and ?nal petroleum profit petroleum profit tax shall be made in US dollars on the basis of tax. the US dollar returns filed: Deep Offshore and Inland Basin Production sharing Contracts 1999 No. 9 A 517

7. Royalty oil shall be allocated to the Corporation or the Allocat1on of Holder, as the case may be, in such quantum as shail generate an royalry oil. amolliii of proceeds equal to actual royalty payable during each month and the concession rental payable annually in accordance with the Production Sharing Contracts terms.

8. -( 1) Cost oil shall be allocated to the Contractor in such Allocation of quantum as shall generate an a..'!lount of proceeds sufficient for the cost oil. recovery of operating costs in oil prospecting licences as defined in the Production Sharing Contracts ·and any oil mining leases. derived therefrom. (2) All operating costs shaU he recovered in U.S. Dollars through cost oil allocations in accordance with the tenns of the Production Sharing Contract . . 9. Tax oil shall be allocated to the Corporation or the Allocation of Holder, as the case may be, in such quantum as shall generate an tax oil. amount of proceeds equal to the actual petroleum profit tax liability "payable during each month. ·

10. Profit oil, being the balance of available crude.oil after Allocation of deducting royalty oil, tax oil and cost oil, shall be allocated to profit oil. each Party in accordance with the terms of the Production Sharing Contract.

11.-(l) The Corporation ot the Holder, as the case may be, Payment of shall pay all royalty, concession rentals and petroleum profit tax royalcy. , on behalf of itself and the Contractor out of the allocated royalty oil and tax oil. (2) Separate tax receipts in the names of the Corporation or the Holder and the Contractor for the respective amounts of petroleum profit tax paid on behalf of the Corporation or the. Holder and Contractor shall be issued by the Federal Inland Revenue Service (in this Decree referred. to as "the Service") in accordance with the terms of the Production Sharing Contract.

12. The chargeable tax on petroleum operations in the Chargeable tax contract area under the Production Sharing Contracts shall be split on petroleum operations. between the Corporation or the Holder and the Contractor in the same ratio as the split of profit oil as defined in the Production Sharing Contract between them. A 518 1999 No. 9 Deep Offehore and Inland Basin Production sharing Contracts use of realisable 13.-(1) The realisable price as defined in the Production price in determining Sharing Contract established by the Corporation or the Holder in royalty an~ petroleum accordance with the provisions of the Production Sharing· Contract profit tax m respect . , of crude oil, etc. shall be used to detennme the amount payable on royalD' and petroleum profit tax in respect of crude oil produced and lifted pursuant to the Production Sharing Contract. (2) The parameters for new crude oil streams produced from the contract area shall also be determined in accordance with the provisions of the Production Sharing Contract. Submission of 14. The Corporation or the Holder, as the case may be, receipts. shall make available to the Contractor copies of the receipts issued by the Service bearing the names of each Party as defined in the Production Sharing Contract in accordance with each Party's tax oil allocation for the payment of petroleum profit tax under the provisions of the Production Sharing Contract. Adaptation of lS.-(1) The relevant provisions of all existing enactments laws. or law, inc:luding but not limited to the Petroleum Act, as Cap 350 LFN. Cap 354 LFN. amended, and the Petroleum Profit Tax Act, as amended, shall be read with such modifications as to bring them into conformity with the provisions of this Decree. (2) If the provisions of any othe-1" en~ctment or law: including but not limited to the. enactments specified in subsecticr.. (1) of this section, are inconsistent with the provisions of this Decree, the provisions of this Decree shall prevail and the provisions of that other enactment or law shall, to:-the extent of that inconsistency, be void. Management of 16.-(1) For the purpose of the efficient management of production sharing Production Sharing Contracts and joint ventures under this Decree, contracts and joint venture. the National Petroleum Investment Management Services (in this 1'990 No. 1. Decree referred to as "NAPIMS") shall be ,incorporated into a limited liability company under the Companies and Allied Matters Decree 1990, as amended. (2) Accordingly, NAPIMS shall be vested with the exploration and production properties and ~sets owned by the Federal Republic of Nigeria for the purposes of this Decree. Deep Ojj.~hore and Inland Basin Prod11ctio11 shewing Contracts 1999 No. 9 A 519

17. The provisions of this Decree shall be liable to review Periodic review. after a period of 10 years from the date'of the commencement and every 5 years immediately thereafter.

18. In this Decree, unless the context otherwise requires - Interpreration. "Corporation" me~s the Nigerian National Petroleum Corporation; "Contractor" means any petroleum exploration and production company who has entered into a Production Sharing Contract agreement with the Corporation or entered into an agreement or arrangement with any Nigerian Holder of an oil prospecting licence or an oil mining lease within the Deep Offshore and Inland Basin; "Deep Offshore" means any water depth beyond 200 metres; "Holder" means any Nigerian company who holds an oil prospecting license or oil mining lease situated within the Deep Offshore and Inland Basin under the relevant provision of the Petroleum Act, as amended; "Inland Basin" means any of the following Basins, namely, Anambra, Benin, Benue, Chad, Gongola, Sokoto and such other basins as may be determined, from time to time, by the Minister; "Joint Ventures" means any agreement or arrangements under which the Corporation jointly owns and develops various oil and gas concessions in Nigeria; "Minister" means the Minister charged with responsibility for matters relating to petroleum and "Ministry" shall be construed accordingly; "Parties" includes the Corporation or any Nigerian company as the Holder and the Contractor; A 520 1999 No. 9 Deep Qt/shore and Inland Basin Production sharing Contracts "Production Sharing Contracts" means any agreement or a1:tangements made between the Corporation or the Holder and any other petroleum exploration and production company or companies for the purpose of exploration and production of oil in the Deep Offshore and. Inland Basins; "Service" means the Federal Inland Revenue Service. Citation and 19. This Decree may be cited as the Deep Offshore and commencement. Inland Basin Production Sharing Contracts Decree 1999 and shall be deemed to have come into force on 1st January, 1993. MADE at Abuja this 23rd day of March 1999 GENERAL ABDULSALAMI ALHAJI ABUBAKAR, Head of State, Commander-in-Chief of tlie Anned Forces, Federal. Republic of Nigeria. EXPLANATORY NOTE (This note does notform part of the alJove Decree bur is intended to explain its purport) The Decree provides, amongst other things, for the amendll:lent of certain enactments to give legi~lative effect to the (iscal incentives given to the oil and gas companies operating in . the Deep· Offshore and Inland Basin areas : under Production Sharing Contracts or such other Production Sb.aring Contract type arrangements between . the Nigerian National Petroleum . Corporation or other holders · of oil prospecting licenses and various petroleum exploration and production companies . concerning the terms of the Production Sharing Contracts.