Petroleum Fiscal Incentives – 2013
Finance Act 2 of 2013 amended the Petroleum Taxes Act to grant incentives under Part 1 – Petroleum Profits Tax (PPT) and Part II – Supplemental Petroleum Tax (SPT) with effect from 1/1/2013.
1. Petroleum Profits Tax
a) Incentive for Drilling Exploration Wells in Deep Horizon on Land or Shallow Marine Areas:
Section 15 of the Petroleum Taxes Act was amended to grant incentives for exploration wells drilled in deep horizon on land or shallow marine areas by increasing the expenditure to 140% before computing the capital allowances.
Accordingly, any person, who incurs capital expenditure in respect of the drilling of exploration wells in deep horizon on land or in shallow marine areas, shall be granted capital allowances on the exploration expenditure calculated by reference to 140% f such expenditure, subject to the following conditions:
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That the exploration wells be drilled at and beyond a true vertical depth (TVD) of 8000 feet on land or 12000 feet in shallow marine areas.
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That the exploration work in respect of the drilling of the wells be certified in writing by the Minister responsible for petroleum.
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That the expenditure be incurred from January 1st 2013 to December 31st 2017.
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That the cost of any exploration dry hole, finance , administrative and other indirect costs be excluded from such exploration expenditure.
Supplemental Petroleum Tax
a) Harmonistion of SPT Rates for Marine Areas
The distinction of Pre-1988 and Post-1988 SPT rates for marine areas was removed and one SPT rate will now apply for all marine areas with the exception of deep-water and new field development as shown below.
The SPT rate for marine areas was set at the base rate of 33% for prices ranging from US$ 50/bbl.–US$90/bbl. The formula used in determining SPT rates above US$90/bbl. will continue as will the SPT rates for land and deep.
b) Introduction of a Special SPT Rate for New Field Development.
A special SPT rate of 25% was approved for new field developments at prices above US$50 and up to US$90/bbl. Thereafter for prices above US$90/bbl.,and up to US$200/bbl., the SPT formula as currently exists will apply.
A new field is defined as an area within the Licence or contract area consisting of a petroleum reservoir or multiple petroleum reservoirs all grouped on or related to the same individual geological structural feature or stratigraphic conditions from which petroleum may be produced and where the total recoverable reserves are not more than 50 million barrels of oil equivalent and that comes into production after 1st January,2013. The recoverable reserves must be certified by the Ministry of Energy and Energy Affairs before commencement of production and at the beginning of each financial year.
Ministry of Energy and Energy Affairs
January 2013
New Scale of Supplemental Petroleum Tax Rates
(Applicable from 1/1/2013)
|
Prices (US$/bbl.) |
Marine |
Land Licences/Deep Water |
|
|
Marine |
*New Field Development |
||
|
P<$50.00 |
0.0% |
0.0% |
0.0% |
|
$50.00< P≤ $90.00 |
33.0% |
25.0% |
18.0% |
|
$90.00 |
SPT Rate = Base SPT Rate + 0.2% (P-$90.00) |
||
|
P>$200.00 |
55.0% |
47% |
40.0% |