Media recommend 2 percent royalty on offshore drilling above 1000 Meters water depth

Media professionals covering the oil and gas sector have recommended two percent  royalty to government for offshore crude oil drilling over 1000 nautical miles.

The journalists who are participants in the Master's Class for Oil and Gas Reporting at the Pan Atlantic University, made the recommendation while studying the Petroleum Industry Bill that has been with the National Assmbly since 2012.

For long the International Oil companies have been exploiting the country's crude for free at offshore drilling over 1,000 nautical miles water depth.

The journalists' position on the issue was based on the fact that most of the country's crude production and reserve are in Offshore and not collecting royalty at such offshore depth would amount to denying the country of benefits from oil.

One of the journalists  said, "It is unfair to have no zero royalty where we have the bulk of the oil".

The journalists also recommended that the sharing of exploited crude oil between government and  IOCs should be mid-way between the drilling head and the external terminal.

However, they believed that the Nigerian government should put security in place to protect the oil pipelines from vandalism which has been the head ache of IOCs.

The PIB is said to be debated again in no distant time  at the National Assembly, because the government wants to sign the PIB this year to enable the implimantation of the new oil reform.

Meanwhile, the Federal government has been advised to factor in the impact of climate change on water depth in determining the percentage of royalty accrued from crude oil drilling, which is calculated based on depth of drilling.

An oil revenue consultant Oyinda Adedokun who gave the advice in a lecture entitled, “ Revenue flow, allocation and management of oil and gas”  said, climate change causes the water level to increase or decrease at some points of the year, thus making it difficult to determine the exact depth of water.

Adedokun  said, to play safe, the water level should be measured regularly and the average taken for the calculation.

The royalty on oil is based on the depth of water with oil companies exploiting crude for free at depths over 1000 nautical miles.

According to the Fiscal Arrangements on Royalty on  and production amendment regulation, 1969, Petroleum drilling in Nigeria, shows that at 100 miles water depth , the IOC’s pay 18.5%; between 101 -200 meters they pay16.5%; 201-500meter they pay 12%; 501-800meter they pay 8%, 801-1000 they pay 4% and over 1000meters they pay 0 percent.