- 15 Marks
ATAX – Nov 2018 – L3 – Q7 – Petroleum Profits Tax (PPT)
Report on classification of mineral rights acquisition, development, and production costs in Nigeria's upstream oil and gas sector.
Question
The Petroleum Industry Governance (PIG) Bill, recently passed into law by both chambers of the Nigerian National Assembly, has rekindled interest among local and foreign investors in Nigeria’s oil and gas industry. A Chinese billionaire-investor, Mr. Wu Chen, while browsing the internet, came across the PIG Bill and the Petroleum Profits Tax Act (PPTA) Cap P.13 LFN 2004 (as amended). He downloaded and studied them but could not understand a particular section of the Act relating to the classification of costs in the upstream sector.
Mr. Chen then contacted his associate in Nigeria, Mr. Li Yen, to help find a reputable tax consultancy that could provide professional advice on the matter. The report is to be submitted to Mr. Chen’s subsidiary company in Nigeria, Wu Integrated Limited, Victoria Island, Lagos.
Required:
As the newly appointed tax consultant to Mr. Chen, write a report on the classification of costs in the upstream sector of the oil and gas industry in Nigeria. Specifically, your report should explain the following:
- (a) Mineral rights acquisition costs (5 Marks)
- (b) Development costs (5 Marks)
- (c) Production costs (5 Marks)
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