Abuja — FEDERAL Government's unilateral move to adjust the terms of the Production Sharing Contract (PSC) agreement which guides oil and gas exploration and production activities in Nigeria's deepwater sedimentary basin has threatened future investments in the sector.

Shell Nigeria Exploration and Production Company (SNEPCO) has also hinted that first oil from its Bonga field development may be delayed for a couple of months, while disclosing that new discoveries have been struck . Mr. Chima Ibeneche, the Company's Managing Director made the disclosure while speaking at the opening of the 9th annual Offshore West Africa conference and exhibition in Abuja yesterday.

He recalled that a bill before the House of Representatives seeks to review the Petroleum Act and the Deep Offshore and Inland basin Production Sharing Contract Act, adding that part of the implications of the proposal would be a unilateral increase in the Petroleum Profit Tax applicable to deepwater PSCs from 50 to 85 per cent.

Ibeneche explained that the PSC terms does not permit the Nigerian state to adversely affect the economic value of the contractor after signature. "Secondly, the proposal would send signals such as would severely jeopardise prospects for future investment in general and stunt if not effectively stall growth in the deepwater oil and gas industry at this most critical time.

"Attempting to align the onshore and deepwater tax rates overlooks the considerable disparity in the cost and risk structure obtainable in the different areas in a most flawed manner," the Shell boss pointed out.

He said any action perceived to threaten the sanctity of Nigerian contracts would do further harm to the attractiveness of Nigeria for investments, adding that this would be clearly undesirable.

"Not only would passage of such a bill imply that government is reneging on existing agreements and eroding the trust, but it would also render new projects unsustainable and liable to termination."

The Shell boss noted that the multinationals were already operating in a difficult environment with the socio-economic challenges thrown-up by well known ethnic crises and issues of criminality in the Niger Delta. On the company's Bonga field development, he pointed out that the target was for a mid year start up adding that there could be a couple of months delay.

He cited issues including the challenges associated with the size, complexity and deployment of novel technology in an environment without any existing deepwater infrastructure as having resulted in unanticipated growth in scope, schedule consequences and cost increases for the Bonga project.

"However, subsurface studies have continued in parallel with project execution. This has resulted in the discovery of additional reserves , mitigating the possible impact of cost increases and delays," he disclosed.