EVALUATING THE IMPACT OF PETROLEUM INDUSTRY ACT (PIA) ON PRODUCTION SHARING CONTRACT (PSC) IN NIGERIA PETROLEUM INDUSTRY

Abstract

Abstract
This paper examined the impact of the Petroleum industry Act (PIA) on production sharing contract PSC)
in Nigeria Petroleum Industry. The basic principle underlying the PSC is that the oil company causes the
whole cost of exploration stipulated by the contract and is rewarded if a commercial discovery is made. It
is followed with a share in production revenue determined by agreement. After several years of
experimenting the PSC regimes, Nigeria’s Petroleum was found to be enmeshed with several challenges
which include corruption, inefficiency, lack of transparency and accountability. To solve these problems,
Nigeria enacted a new regulatory Act, the petroleum industry act (PIA) effective 16th August 2021. The
paper reveals that the ambition of the government is to attain 40 billion barrels of reserves and production
levels of crude oil per day. The PIA also prescribes 30% of NNPC profits to fund exploration for frontier
basins. The PIA made provision for renewed PSC. The provision paved the way for resolution of lingering
disputes which created investment uncertainty and stifled new investments in the nation’s deep offshore
assets. In summary, the renewed PSC provided by PIA would provide several benefits such as improved
long term relationships with contractors, elimination of contractual ambiguities especially in relation to
gas terms, and enable contract renewals. The paper recommended that NNPC Limited should increase
Crude Oil supplies to local refineries and Dangote Refinery to increase refined products to enhance energy
security in Nigeria. The paper further recommended the reduction of taxes, royalty and signature bonus to
encourage investment in Nigeria’s petroleum industry