On 28 February 2024, the Nigerian government published the Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order 2024 in the Official Gazette.
The announcement outlines various new incentives for the oil and gas sector, which took effect on 28 February 2024.
The incentives include introducing tax credit incentives for non-associated gas (NAG) greenfield developments in onshore and shallow water locations, where first-time commercial gas productions are expected on or before 1 January 2029.
The tax credits will be based on the level of hydrocarbon liquids (HCL) content:
- For HCL content up to 30 barrels per million standard cubic feet (SCF), a gas tax credit is available at US$ 1.00 per thousand cubic feet or 30% of the fiscal gas price, whichever is lesser;
- For HCL content above 30 barrels per million SCF but does not surpass 100 barrels per million SCF, the gas tax credit is available at US$ 0.50 per thousand cubic feet or 30% of the fiscal gas price, whichever is lesser;
- For other Greenfield NAG projects, where the first commercial production is after 1 January 2029, the gas tax credit is available at US$ 0.50 per thousand cubic feet or 30% of qualify for a gas tax allowance. This is set at USD 0.50 per thousand SCF or 30% of the fiscal gas price, whichever is lesser—on the condition that the HCL content does not exceed 100 barrels per million SCF.
The gas tax credit is available for up to 10 years; after that, it will become a claimable gas tax allowance based on the rates specified above.
Another incentive mentioned in the declaration is the midstream capital and gas utilization investment allowance. This stipulates a gas company to receive a gas utilization investment allowance of 25% of the qualifying expenses on plant and machinery for new and ongoing projects in the midstream oil and gas sector.
A company is eligible for gas utilization investment allowance after the provided tax-exemption period has expired under section 39(1) of the Companies Income Tax Act.
This gas utilization investment allowance:
- can be deducted from a qualified company’s assessable profits starting from the year the relevant plant and machinery are purchased;
- will not be considered when determining the remaining qualifying expenses incurred on such plant and machinery.
