By Moses Akin Aremu, General Editor
Seplat Petroleum Development Company Plc has responded to recent press coverage suggesting that the Company benefitted from improper tax waivers in relation to its grant of pioneer tax incentive by the government of Nigeria. The company declares it followed the prescribed process to apply and the incentive has helped in quintupling oil production, creating over 300 new jobs and in funding a robust community development.
“SEPLAT, in 2013, applied for pioneer status incentive through the Nigerian Investment Promotion Council (“NIPC”) as the government body responsible for investment promotion. The Company followed the prescribed process for application and provided all the information and documentation required in support of the application”, according to a statement signed by Austin Avuru, Seplat’s Chief Executive Officer.
Seplat, according to the statement, was one out of fifteen oil and gas companies that were granted the pioneer tax incentive.
“SEPLAT believes that it is an excellent example of the whole purpose of establishing the pioneer incentive scheme”, Avuru explained. “The Company has fully re-invested the tax savings from the grant and has delivered verifiable results thereto. SEPLAT is now a key supplier of gas to the domestic market which is the direct outcome of the pioneer incentive granted to SEPLAT and aims to continue to contribute meaningfully to the growth and development of the Nigerian economy.”
Avuru noted that the grant of pioneer status has made it possible for Seplat to boost oil and gas production, provide employment opportunities, impact on their communities and help grow the Nigerian economy.
“Gas production rose from an average of 90MMscf/d to a current level of around 200 MMscf/d with a target of 300 MMscfd by the end of 2015. This increase has been driven by an over $300 million investment in gas development over the tax holiday period.
“Oil production has grown from a daily average of 14,000 barrels in 2010 to the current daily rate of over 70,000 barrels. The statement also added that its royalty payments have gone up from an average of $40 million per annum in 2010 to US$147 million in 2014”.
The Company said it has continued to fund the NPDC/SEPLAT Joint Venture to drive these outstanding growths in oil and gas production despite being owed substantial sums in unpaid cash-calls from NPDC.
Seplat’s statement was set off by a media report, publishing excerpts of a letter from Ngozi Okonjo-Iweala, Nigeria’s minister of Finance and the Coordinating Minister of the Economy. The letter, addressed to Saratu Umar, Executive Secretary of the Nigerian Investment Promotion Council (NIPC), lamented that while oil companies were supposed to be taxed 65% in accordance with the Petroleum Profit Tax Act (PPTA), certain officials of NIPC had fraudulently listed such companies under the Industrial Development (Tax Relief) Act and handed them pioneer certificates.
She contended in the letter that Tax Relief Act remained a “subsidiary legislation” to the Companies Income Tax (CITA) she said was the “Principal Act.” The letter argued that “Pioneer status (tax holidays) was granted to companies whose products do not meet the requirements of the list of industries or products specified in the schedule to the Act.”
The minister, in the referenced letter, reportedly listed what she described as “a typical abuse of the Pioneer Status Policy” involving Seplat Petroleum Development Company (SPDC) and Nigeria Petroleum Development Company (NPDC), operators of the same oil fields previously operated by Shell Petroleum Development Company (SPDC).
“While SPDC disposed of its interest to Seplat, NNPC disposed of its interest to NPDC. Seplat, thereafter, was granted a tax holiday whereas NPDC continued to pay taxes from the operation of the same field,” noted the minister, stressing, “This confers an unfair advantage on Seplat”.
Seplat’s statement concluded that its utilisation of the incentive had a multiplier effect of our over $700 million in annual expenditure through Nigerian contractors, through whom over 1,000 jobs” have been added.