The production sharing contract (PSC) has become a cornerstone of upstream petroleum exploration and production in Nigeria, particularly for offshore and inland basin resources. PSCs offer a distinct contractual framework that encourages foreign investment by allowing international oil companies (IOCs) to bear the financial and operational risks of exploration and production. These contracts enable resource ownership to remain with the state while granting IOCs a share of the produced crude oil to recoup costs and generate profit. This arrangement has replaced the joint venture contracts (JVCs) previously used, addressing challenges such as the Nigerian government's inability to meet cash call obligations under the JVC system. Despite its advantages, Nigeria's PSC framework is plagued by fiscal and regulatory uncertainties, particularly concerning taxation and cost recovery. Disputes between the Nigerian National Petroleum Corporation (NNPC) and IOCs frequently arise, creating an adversarial rather than collaborative relationship. Key issues include ambiguities in the Deep Offshore and Inland Basin Production Sharing Contracts Act and the Petroleum Profits Tax Act, conflicting court decisions on cost consolidation and recovery, and a lack of transparency in fiscal regimes. These challenges hinder Nigeria's ability to maximize revenue from its petroleum resources while undermining investor confidence.
This study examines the fiscal framework governing PSCs in Nigeria, exploring the underlying legal and policy issues. It highlights the critical need for reforms to address ambiguities, promote transparency, and establish a coherent tax regime. The research underscores the importance of striking a balance between national interests and creating a favorable investment climate in Nigeria's upstream petroleum sector.
TABLE OF CONTENTS
Title i
Declaration ii
Certification iii
Dedication iv
Acknowledgement v
Table of Statutes vi
Table of Cases x
List of Abbreviations xiii
Table of Contents xiv
Abstract xxii
CHAPTER ONE
GENERAL INTRODUCTION
1.1 Background of the Study 1
1.2 Statement of the Research Problem 6
1.3 Aim and Objectives of the Research 8
1.4 Scope and Limitations of the Research 9
1.5 Research Methodology 9
1.6 Literature Review 10
1.7 Justification of the Research 20
1.8 Organizational Layout 20
CHAPTER TWO
CONCEPTUAL ANALYSIS OF PRODUCTION SHARING CONTRACTS IN NIGERIA
2.1 Introduction 24
2.2 The Concept and Features of Production Sharing Contracts 25
2.3 History of Production Sharing Contracts in Nigeria 29
2.3.1 The 1973 Production Sharing Contract 30
2.3.2 The 1993 Model Production Sharing Contract 33
2.3.3 The Post 1993 Model Production Sharing Contracts 39
2.4 General Outline of Production Sharing Contracts 40
2.4.1 Recital/Preamble 40
2.4.2 Definitions 40
2.4.3 Scope 41
2.4.4 Term 41
2.4.5 Exclusion of Areas 42
2.4.6 Work Programme and Expenditure 43
2.4.7 Management Committee 44
2.4.7.1 Powers and Duties of the Management Committee 44
2.4.7.2 Appointment and Membership of the Management Committee 46
2.4.7.3 Procedure of Meetings of the Management Committee 48
2.4.7.4 Decision making Procedure of the Management Committee 49
2.4.7.5 Emergency Decision Making Procedure of the Management Committee 51
2.4.7.6 Sub-Committees of the Management Committee 52
2.4.8 Rights and Obligation of the Parties to the Production Sharing Contract 53
2.4.8.1 Rights and Obligations of the Contractor 53
2.4.8.2 Rights and Obligations of the Corporation 56
2.4.9 Recovery of Operating Costs and Crude Oil Allocation under the Production
Sharing Contract 57
2.4.10 Valuation of available Crude Oil under the Production Sharing Contract 61
2.4.11 Payments under the Production Sharing Contracts 64
2.4.12 Title to Equipment under the Production Sharing Contract 64
2.4.13 Employment and Training of Nigerian Personnel under the Production Sharing
Contract 66
2.4.14 Books and Accounts, Audit and Overhead Charges under the Production
Sharing Contract 68
2.4.14.1 Books and Accounts 68
2.4.14.2 Audits 68
2.4.14.3 Home Office Overhead Charges 69
2.4.15 Bonuses 70
2.4.15.1 Signature Bonus 70
2.4.15.2 Production Bonus 71
2.4.16 Royalty and Taxes 71
2.4.
