An oil worker in Nigeria. Picture: BLOOMBERG/GEORGE OSODI
An oil worker in Nigeria. Picture: BLOOMBERG/GEORGE OSODI

London — Nigeria has ordered foreign oil and gas companies to pay nearly $20bn in taxes it says are owed to local states, industry and government sources said, in a move that could deter investment in Africa’s largest economy.

In a letter sent to the companies earlier  in 2019 via a debt-collection arm of the government, the Nigerian National Petroleum Corp (NNPC) cited what it called outstanding royalties and taxes for oil and gas production.

Royal Dutch Shell, Chevron, Exxon Mobil , Eni, Total and Equinor were each asked to pay the central government between $2.5bn and $5bn, said the sources.

Norway’s Equinor, which produced around 45,000 barrels per day (bpd) of oil in Nigeria in 2017, confirmed the request.

“Several operators have received similar claims in a case between the authorities in Nigeria and local authorities in parts of the country,” an Equinor spokesperson said.

Exxon “is currently reviewing the matter”, a spokesperson for the US company said. Shell, Total, Eni and Chevron declined to comment, as well as  Nigeria’s presidency, petroleum ministry and NNPC.

The charge came after the central Nigerian government and local states settled a dispute over the distribution of revenue from hydrocarbon production.

The sides agreed  in 2018 that Abuja would pay the states several billion dollars, three company and government sources said. The oil companies were expected to dispute their respective payment claims.

“Equinor sees no merit to the case,” the company spokesperson said.

A source at another company said: “This looks like an internal dispute between the federal and local governments. The central government is simply trying to shift to the IOCs [international oil companies] money it owes.”

It was unclear whether the move was linked to the upcoming presidential election in Nigeria, the most populous African country.

Fresh challenge

The tax demand adds a fresh challenge to energy companies investing in Nigeria, Africa’s biggest oil and gas producer, which have been negotiating production-sharing agreements with the government to develop and operate giant offshore fields.

Oil theft,  huge oil spills and corruption further complicate operations in the country.

Nigeria, a member of the Organisation of the Petroleum Exporting Countries, produced around 2.1-million bpd of oil in 2018, compared with 1.86-million bpd in 2017, NNPC says.

Nigeria uses several types of contracts with energy companies — including the establishment of joint ventures and production sharing — the two most common partnerships for international oil companies in the country.

The companies pay the government in the form of royalties and tax as well as providing the state with oil and gas.