On 4 November 2019, President Muhammadu Buhari assented to the Deep Offshore and Inland Basin Production Sharing Contracts Act Amendment Bill (the Act). The assent was communicated by the President via his official twitter handle.

The Act, amends the Deep Offshore and Inland Basin Production Sharing Contracts Act of 1999 by making changes to the royalty rates currently paid by firms operating in production sharing contracts (PSCs).


Following the passage of the Bill by both Houses of the National Assembly, the Bill was transmitted to the President for signing into law. The Bill which was adopted by both chambers of the National Assembly, provides for different bases for imposing royalty on oil production in the deep offshore, frontier and inland basin areas. The President has now signed this Bill into law.

The Act amends Section 5 of the Principal Act, which deals with the percentage of royalties to be paid. Under the Act, there are two bases for calculating royalties – field and price.

  • Field Basis: As against the four different rates available in the existing section, there would only be two rates, being 10% for deep offshore fields (greater than 200m water depth) and 7.5% for frontier/inland basin fields. The rate will be applied to the chargeable volume of crude oil and condensates produced in the relevant field.
  • Price Basis: The price basis is being introduced to allow for more flexibility based on the changing prices of crude oil, condensates and gas. Thus, Section 16 which called for periodic review of the royalty rates may no longer be relevant. The rates at this basis are as follows:

In addition to the amendment to Section 5, two new Sections (17 and 18) have been introduced. The new Section 17 empowers the Minister to direct the NNPC to review PSCs every eight years while Section 18 lays out the penalty for not complying with the entirety of the Act, which could be either a maximum fine of ₦500 million or imprisonment of no less than five (5) years, or both.


With the Presidential assent, the Act now has the full effect of the law. However, there are concerns that the increased royalty rates could deter future foreign investments into the Nigerian oil and gas sector. This is because the cumulative effect of existing taxes and levies coupled with the changes in royalty rates could make Nigeria one of the highest taxing countries for the oil and gas industry.

We will issue more details in our subsequent publications.

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