OIL WELLS IN NIGERIA

Press, Volume XCVIII, Issue 28950, 18 July 1959, Page 10

OIL WELLS IN NIGERIA

Full-Scale Production Next Year [By IGNATIUS ATIGBI, in Owerri, Eastern Nigeria.] The Shell-B.P. Petroleum Development company which has been prospecting for oil in Nigeria wifi begin full-scale production by the end of next year, according to usually reliable sources here. An official of the company told me that the industry is likely to reach its first stage of commercial viability “possibly by the end of this year.” A recent Government statement said that the company hoped to reach a production rate of 500,000 gallons of crude oil per annum later this year.

According to an official of the company, about 27 commercially exploitable wells have been discovered. Apart from these wells, there are a number of exploratory wells where oil has been discovered, in the swamps of the Niger delta. These wells do not look very attractive in view of the cost of operating in the swamp. Asked what was the estimated life of the present exploitable wells, an official took into consideration artificial lifting—a method by which the oil will be extracted from the wells when normal flow declines. At Bonny, in the southern tip of the Niger delta, experimental dredging is in progress to provide a port capable of accommodating fully-loaded tankers able to carry 18,000 gallons of crude oil. At the same time, the construction of a new oil terminal is well under way. The present oil .terminal at Port Harcourt is said to be inadequate for full-scale production. “By the middle of this year we may be producing to the limit of the Port Harcourt facilities,” a ShellBP official said. Shipment Problem Shipment of oil from the Port Harcourt terminal is one of the main problems confronting the company. The terminal is some 40 miles up the Bonny river in the Niger delta, and at the entrance to this river is a bar over which ships drawing more than 21 feet of water cannot pass. As a result, a tanker which, when carrying a full load of 18,000 tons of crude oil, draws about 35 feet of water, cannot load to more than half capacity. The new port at Bonny will, it is estimated, cost about £500,000 on completion. At present, oil is shipped about twice a month. It is reliably learned that the company has also decided on a site near Port Harcourt for building an oil refinery at an estimated cost of between £6,000,000 and £10,000,000. The company has already spent well over £50,000,000 on the oil project. On June 1,. 1959, representatives of the Government of the Federation of Nigeria and of the Shell-BP Petroleum Development Company of Nigeria, Limited, signed a deed of covenant which provides that so much of the profits of the comply for any accounting period as are attributable to certain licences and leases specified in the deed, shall be charged to tax in accordance

with the terms of the Petroleum Profits Tax Ordinance approved by the Federal Parliament during the Budget session earlier this year.

The ordinance provides for a 50-50 profit sharing agreement between Nigeria and any company producing oil in the country. The objects of the bill, whose operation was back-dated to January 1, 1958, are to ensure that the development of a flourishing oil industry will be facilitated by a realistic fiscal policy, that some taxation based on profits of oil production will take place at the earliest possible date, and that taxation provisions are fair and equitable in face of any change in the scale of production. Chief Festus Okotie-Eboh (the Nigerian Federal Minister of Finance) who introduced the bill, said that the Government’s general policy with regard to new industries in Nigeria was to stimulate the establishment and early growth by such devices as the generous income-tax relief contained in the income tax ordinance and two industrial development ordinances. At present the rate of company tax is eight shillings in £1 sterling. Taxation Agreement The agreement signed with Shell-BP provides that, except for royalties and rents payable under the terms of any licence or leases and except for the tax payable under the ordinance, “no tax on profit shall be imposed on any profits under any other ordinance or law in Nigeria. It expressly provides that the company shall not be liable to any federal tax, duty, rate or other due which is a disproportionate imposition against or which in its effects discriminates ’ either directly in indirectly against the company or against the ordinance.

‘‘The Federal Government undertakes to- ensure that the company will not be subjected to any such liability to any government or to any district or local government authority in Nigeria.” The company has also agreed to discuss the 50-50 basis of agreement should it or its associates enter into a. more' favourable arrangement in future with any other governments in Africa. In his speech at the opening of the signing ceremony of the contract, Chief Festus Okotie-Eboh announced that in addition to the terms of the agreement, the company has also volunteered to pay a royalty of 12} per cent, on the value of oil won instead of the flat rate of 4s a ton which has being payable to date.—Reuter.