Section 118Interpretation

In this Part —

"accounting date" means the date on which a company usually prepares its accounting statement ;

"accounting period" in relation to a company engaged in upstream petroleum operations, means —

a period of one year commencing from 1st January and ending on 31st December of the same year,

any shorter period commencing on the day the company first makes a sale or bulk disposal of chargeable oil, domestic, export or both, and ending on 31st December of the same year, or

any period of less than a year being a period commencing on 1st January of any year and ending on the date in the same year when the company ceases to engage in petroleum operations, and in the event of any dispute with respect to the date of the first sale of chargeable oil above or with respect to the date on which the company ceases to engage in petroleum operations, the Commission or the Minister in chaerge of Petroleum Resources shall determine the same and no appeal shall lie ;

"adjusted profits" means adjusted profit as stated in sections 67 and 90 of this Act ;

"aggregate gas price" means the gas price determined under section 167(4) of Petroleum Industry Act ;

"appraisal well" means a well that, in the opinion of the Commission, is aimed at determining the size, distribution, characteristics and commerciality of a petroleum discovery ;

"assessable profit" means assessable profit as stated in sections 67 and 90 of this Act ;

"assessable tax" for the purposes of petroleum profits tax means assessable tax ascertained under section 90 of this Act ;

"associated gas" means :

natural gas, commonly known as gas-cap gas, which overlies and is in contact with crude oil in a reservoir ; and

solution gas dissolved in crude oil in a reservoir and emerging from the fluid as pressure drops ;

"Authority" means the Nigerian Midstream and Downstream Petroleum Regulatory Authority" established under the Petroleum Industry Act ;

"barrel" means a barrel of 42 United States gallons ;

"chargeable oil" means crude oil, condensate or natural gas liquids pr duced upstream of the measurement point as provided under section 65 (1)

of this Act ;

"chargeable profit" means chargeable profit as stated in sections 67 and 90 of this Act ;

"chargeable volume" in relation to a company engaged in upstream petroleum operations means the chargeable volume as set out in paragraph 2 of the Seventh Schedule to the Petroleum Industry Act ;

"Commission" means the Nigerian Upstream Petroleum Regulatory Commission established under the Petroleum Industry Act ;

"company" means any company or corporation, including Limited Liability Partnership, established by or under any law in force in Nigeria or elsewhere;

"condensate" means a portion of natural gas of such composition that are in the gaseous phase at temperature and pressure of the reservoirs, but that, when produced, are in the liquid phase at surface pressure and temperature ;

"contractor" means any petroleum exploration and production company which has entered into a production sharing contract agreement or arrangement with the holder of an oil prospecting licence or an oil mining lease within the Deep Offshore and Inland Basin ;

"crude oil" means, for the purposes of —

Part I of Chapter Three of this Act, petroleum, which is in liquid conditions upon production from a reservoir either in its natural state or after the extraction of water, sand or other foreign substance from it, but before any such oil has been refined or otherwise treated, other than oil extracted by destructive distillation from coal, bituminous shales or other stratified deposits ;

Part II of Chapter Three of this Act, any oil, other than oil extracted by destructive distillation from coal, bituminous shales or other stratified deposits, won in Nigeria either in its natural state or after the extraction of water, sand or other foreign substance therefrom but before any such oil has been refined or otherwise treated ;

"decommissioning and abandonment" means the approved process of cessation of operations of crude oil and natural gas wells, installations, plants and structures, including shutting down an installation's operations and production, total or partial removal of installations and structures where applicable, chemicals and all such other materials handling, removal and disposal of debris and removed items, environmental restoration of the area after removal of installations, plants and structures, and 'decommission' has a corresponding meaning ;

"deep offshore" means any area within the territorial waters, continental shelf or exclusive economic zone offshore of Nigeria having a water depth in excess of 200 metres ;

"disposal" and "disposed of" in relation to chargeable oil or gas owned by a company engaged in petroleum operations, means –

delivery or export, without sale, of chargeable oil or gas to an affiliate or other company ; and

chargeable oil or gas delivered or transferred, without sale, to facilities used for midstream operations ;

"downstream gas operations" means all activities entered into for the purpose of, distribution and supply of natural gas to retail customers, city gate reception terminals for natural gas, stations for the distribution, marketing and retailing of natural gas ;

"downstream petroleum operations" means downstream gas operations and downstream petroleum products operations ;

"downstream petroleum products operations" means all activities entered into for the purpose of distribution and supply of petroleum products to retail customers, tank farms for distribution of petroleum products, and stations for the distribution, marketing and retailing of petroleum products ;

"exploration well" means a well that in the opinion of the Commission is aimed at discovering petroleum in a separate field in which petroleum has not been previously discovered ;

"Federation Account" means the Federation Account as specified in the Constitution of the Federal Republic of Nigeria ;

"field" includes an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same geological structural feature, stratigraphic condition, a combination of both and refers to the underground productive formations or their vertical projection to the surface ;

"fiscal gas price" means the price established in paragraph 8(3) of the Seventh Schedule to the Petroleum Industry Act ;

"fiscal oil price" means the price established in paragraphs 8(1) and (2) of the Seventh Schedule of the Petroleum Industry Act ;

"frontier acreages" means any or all acreages in an area on land in Nigeria defined as a frontier in a regulation issued by the Commission ;

"frontier basin" means basins where hydrocarbon exploration activities have not been carried out or previous commercial discovery oil and gas have not been made or an area that is undeveloped and includes Anambra, Dahomey, Bida, Sokoto, Chad and Benue trough or as may be declared by the Commission through regulations ;

"Government" means the Federal Government of Nigeria ;

"Greenfield Non-Associated Gas Development" means all existing undeveloped non-associated gas rights and future non-associated gas rights granted under the licensing bid rounds conducted by the Commission ;

"holder" means any Nigerian company who holds an oil prospecting licence or oil mining lease situated within the deep offshore and inland basin under the relevant provision of the Petroleum Act ;

"host communities" means communities situated in or appurtenant to the area of operation of a settlor, and any other community as a settlor may determine under Chapter 3 of the Petroleum Industry Act ;

"host communities development trust" has the meaning given to it in section 235(1) of Petroleum Industry Act ;

"Inland Basin" means any of the following Basins namely, Anambra, Benin, Benue, Chad, Gongola, Sokoto and such other basins as may be determined, from time to time, by the Minister charged with responsibility for matters relating to petroleum ;

"intangible drilling costs" for the purposes of petroleum profits tax means all expenditure for labour, fuel, repairs, maintenance, hauling, and supplies and materials, not being supplies and materials for well cement casing or other well fixtures, which are for or incidental to drilling, cleaning, deepening or completing wells or the preparation thereof incurred in respect of –

determination of well locations geological studies and topographical and geographical surveys preparatory to drilling ;

drilling, shooting, testing and cleaning wells ;

cleaning, draining and levelling land, road building and the laying of foundations ; and

erection of rigs and tankage assembly and installation of pipelines and other plant and equipment required in the preparation or drilling of wells producing petroleum ;

"large-scale gas utilisation industries" means –

large-scale industries that use natural gas as a feedstock such as gas-to-liquid plants, petrochemical industries and fertiliser plants ; and

mini-LNG plants, power plants and such other industries as defined in regulations ;

"lease" means a petroleum mining lease ;

"lessee" means a holder of a lease ;

"licence" means a licence issued by the Commission or Authority in respect of any applicable upstream, midstream or downstream petroleum operations ;

"licensee" means a holder of a licence ;

"liquefied natural gas" for the purposes of petroleum profits tax means natural gas in its liquid state at approximately atmospheric pressure ;

"loss" means a loss ascertained in like manner as an adjusted profit;

"marginal field" means a field or discovery which has been declared a marginal field prior to 1st January 2021 ;

"marketable natural gas" means natural gas which meets specifications determined by the Authority for distribution to wholesale customers and retail customers —

for use as a domestic, commercial and industrial fuel ; and

as feedstock or industrial raw material ;

"measurement point" means —

a point determined in the field development plan under section 79 (2) of the Petroleum Industry Act, where petroleum is being measured and its value is the determined for royalty purposes ;

where the point has not been determined, a point directly downstream of the flow station in the petroleum mining lease ; and

where measurements take place outside the petroleum mining lease, a deemed measurement point in the petroleum mining lease based on a calculation procedure approved by the Commission adjusting from the points where petroleum is being measured ;

"midstream and downstream gas" means activities downstream of the measurement points of petroleum mining leases, whether or not related to the petroleum mining lease, with respect to the construction and operation of natural gas transport or transmission pipelines, including the related compressor stations, construction and operations of facilities to compress, transport and deliver compressed natural gas (CNG) ; construction and operations of gas processing facilities and central processing facilities, producing ethane, propane, butane and natural gas liquids and marketable natural gas ; construction and operation of underground or above ground facilities for the storage of natural gas, ethane extraction plants, construction and operation of gas to liquids (GTL) plants, construction and operation of lubricant, petrochemical and fertiliser plants, construction and operation of LNG plants, and related LNG terminals as well as storage and transport of LNG, acquisition, operation or chartering of LNG tankers for coastal and marine transportation, purchase and sale, trading, bartering, aggregating and marketing of natural gas transported by pipelines, compressed natural gas, LNG, methane, ethane, propane, butane, natural gas liquids and liquids from GTL plants with respect to wholesale customers and gas distributors and related administration and overhead ;

"midstream petroleum liquids operations" means activities downstream of the measurement points of petroleum mining leases, whether or not related to the petroleum mining lease, with respect to the construction and operation of facilities for upgrading of heavy oil, construction and operation of lubricant, petrochemical and fertiliser plants, construction and operation of petroleum liquids transport pipelines, including the related pumping stations ; acquisition, operation, leasing, rental or chartering of barges, coastal or ocean-going tankers, railcars and trucks for the transport of petroleum liquids, construction, leasing and operation of tank farms and other storage facilities and export terminals for petroleum liquids, construction and operation of refineries, purchase and sale, trading, bartering, marketing of petroleum liquids and related administration and overhead ;

"MMBtu" means millions of British thermal units ;

"MMcf" for the purposes of petroleum profits tax means one million cubic feet ;

"model contract" means a contract under section 85 of Petroleum Industry Act ;

"natural gas" means for the purposes of —

Part I of Chapter Three of this Act, all gaseous hydrocarbons, and all substances contained in it and as exist in natural state in strata, associated or not with crude oil, and are in a gaseous state upon production from a reservoir and excludes condensates ; and

Part II of Chapter Three of this Act, gas obtained in Nigeria from boreholes and wells and consisting primarily of hydrocarbons ;

"natural gas liquids" or "NGL" means hydrocarbons liquefied at the surface in separators, field facilities or in gas processing plants, and include ethane, propane, butanes, pentanes, and natural gasoline ;

"non-associated gas" means natural gas that is found in a reservoir which does not contain significant quantities of crude oil ;

"non-productive rents" means and includes the amount of any rent as to which there is provision for its deduction from the amount of any royalty under a petroleum prospecting licence or oil mining lease to the extent that such rent is not so deducted ;

"oil mining lease" means for the purposes of —

Part I of Chapter Three of this Act, an oil mining lease granted under the Petroleum Act, prior to the effective date of the Petroleum Industry Act ;

Part II of Chapter Three of this Act, a lease granted to a company, under the Nigeria Minerals and Mining Act, for the purpose of winning petroleum or any assignment of such lease ;

"oil prospecting licence" means an oil prospecting licence granted under the Petroleum Act, prior to the effective date of the Petroleum Industry Act ;

"onshore" means any land areas above the high-water mark, other than frontier acreages ;

"parties" for the purpose of Part III of Chapter Three of this Act, includes the Commission, any Nigerian company as the holder and the contractor ;

"permit" means an official certificate of permission to undertake an activity issued by the Commission or Authority ;

"person" includes a company and any unincorporated body of persons ;

"petroleum" means for the purposes of —

Part I of Chapter Three of this Act, hydrocarbons and associated substances as exist in its natural state in strata, and includes crude oil, natural gas, condensate and mixtures of any of them, but does not include bitumen and coal ;

Part II of Chapter Three of this Act, any mineral oil or relative hydrocarbon and natural gas existing in its natural condition in Nigeria but does not include liquefied natural gas, coal, bituminous shales or other stratified deposits from which oil can be extracted by destructive distillation ;

"petroleum exploration licence" means a licence under section 71 of Petroleum Industry Act ;

"petroleum mining lease" means a lease under section 81 of the Petroleum Industry Act ;

"petroleum operations" means for the purposes of —

Part I of Chapter Three of this Act, upstream, midstream and downstream petroleum operations ;

Part II of Chapter Three of this Act, the winning or obtaining and transportation of petroleum or chargeable oil in Nigeria by or on behalf of a company for its own account by any drilling, mining, extracting or other like operations or process, not including refining at a refinery, in the course of a business carried on by the company engaged in such operations, and all operations incidental thereto and any sale of or any disposal of chargeable oil by or on behalf of the company ;

"petroleum products" means materials derived from crude oil and natural gas processing such as ethane, propane, butanes, pentanes, liquefied petroleum gas, natural gas liquids, asphalts, gasoline, diesel, gas oil, jet fuel, transportation fuels, fuel oils for heating and electricity generation and such other derivatives ;

"petroleum prospecting licence" means a licence under section 72 of Petroleum Industry Act ;

"pipeline" means all parts of any tubular infrastructure through which petroleum is conveyed, including pipes, valves, pumping and compressor stations and other equipment appurtenant to pipes ;

"production sharing contract" means —

any agreement for the exploration, development and production of petroleum on terms under which the financial risk-bearing party shall recover costs and receives a share of the profits based on a share of production as established in the contract from the applicable area ;

for the purposes of Part III of Chapter Three of this Act, any agreement or arrangements made between the holder and any other petroleum exploration and production company or companies for the purpose of exploration and production of oil in the deep offshore and inland basins ;

"regulation" means rule or order having force of law issued by the Minister, Minister in charge of petroleum, the Service, Commission or Authority in accordance with this Act or any other relevant law ;

"rent" means an annual or other periodic charge made in respect of a licence or lease granted under the Petroleum Act or Petroleum Industry Act ;

"reservoir" means a subsurface rock formation containing an individual and separate natural accumulation of producible petroleum characterised by a single natural pressure system ;

"royalties" means the royalties specified in the Seventh Schedule to this Act,

"shallow water" means any area within the territorial waters, continental shelf or exclusive economic zone offshore of Nigeria up to and including a water depth of 200 metres ;

"signature bonus" means a payment made to Government with respect to the grant of a petroleum prospecting licence, petroleum mining lease, or similar payments ;

"terrain" for the purpose of Part I of Chapter Three of this Act means the area of any petroleum exploration licence, petroleum prospecting licence or petroleum mining lease ;

"terminal" means a terminal for petroleum liquids, pumping or booster station, or other installation or structure associated with a terminal, including storage facilities, other than a terminal situated within a port or the approaches within the meaning of the Nigerian Ports Authority Act ; and

"upstream petroleum operations" for the purposes of Part I of Chapter Three of this Act means the exploration for, appraisal of, development of and winning or 88 obtaining of petroleum in Nigeria by or on behalf of a company on its own account for commercial purposes, petroleum exploration operations, the drilling of exploration, appraisal and development wells, all activities upstream of the measurement points, related to the winning of petroleum through wells or mining from petroleum reservoirs, drilling, fracking, completing, treatment and operation of wells producing petroleum, construction and operation of gathering lines and manifolds for crude oil, natural gas and water, construction and operation of high and low pressure separators, construction and operation of facilities to treat crude oil and natural gas, flaring of natural gas, compression and reinjection of natural gas in reservoirs, construction and operation of facilities for the production of electricity or heat from natural gas or other fuels as energy source for the winning of petroleum, injection or re-injection of water into the reservoirs, construction and operation of pipelines and other facilities for the discharge of water, construction and operation of fixed or floating platforms or other vessels required for the winning of petroleum, construction and operation of fixed or floating storage facilities of crude oil in the licence area, transportation to and from the licence area of personnel, goods and equipment, metering of well stream fluids, metering of petroleum at the measurement points prior to transportation, sale and marketing of crude oil, natural gas or condensates or any of them at the measurement points and such other activities which by regulation are considered upstream petroleum operations, and related administration and overhead.