Participation dividend 

means a dividend paid by a resident licensee to a non-

resident company that owns at least 10% voting interest in the voting power of the
licensee;

Petroleum agreement means an agreement entered into by the GoU with another

person in accordance with the Petroleum (Exploration, Development and Production)
Act, 2013, or the Petroleum (Refinery, Conversion, Transmission and Midstream
Storage) Act 2013.

Petroleum development expenditure means the expenditure incurred by a licensee

in undertaking operations authorized under a petroleum production license.

Petroleum development operations means authorized operations under a

petroleum production license.

Petroleum exploration expenditure means expenditure incurred by a licensee in

undertaking exploration operations authorized under a petroleum exploration right.

Petroleum exploration operations means an authorized operation under

apetroleum exploration right.     

Petroleum operations means an authorized operation under a petroleum

agreement for petroleum exploration, development, production and export
including, planning, installation, transportation of petroleum, storage or
decommissioning, and for the construction of a pipeline or petroleum refinery.

Petroleum revenues means tax paid under the Income Tax Act on income derived
from petroleum operations, Government share of production, signature bonus,
surface rentals, royalties, proceeds from the sale of Government share of production,
any dividends due to Government, proceeds from the sale of Government’s
commercial interests and any other duties or fees payable to the Government from
contract revenues under a petroleum agreement.

Petroleum right means a reconnaissance permit, petroleum exploration right or a

petroleum production license.

Prescribed licensee means a person with whom the GoU has entered into a
petroleum agreement.

Resident contractor means a contractor that is a resident person. 

Resident licensee means a licensee that is a resident company.                

Service fee means any payment, including a premium or like amount, made as
consideration for the use of, or the right to use, any tangible movable property. It
includes an amount treated as a royalty.

Social infrastructure expenditure means capital expenditure that a licensee is

required to incur under a petroleum agreement on the construction of a public
school, public hospital, public road, or similar social infrastructure.

Underlying ownership means an interest held in the company directly or indirectly

through interposed companies, partnerships, or trusts by an individual or by a person
not ultimately owned by individuals.

 Part III: Income Tax Provisions

The income of a prescribed licensee is taxed at 30%. A licensee with a loss carried
forward for a contract area for more than one year of income will have the loss of the
earliest year allowed as a first deduction. A contract area, which is a development
area includes an exploration area provided the development area is wholly within the
exploration area.

Limitations of Deductions relating to Petroleum Operations

An amount is not treated as petroleum exploration or development expenditure to

the extent that the amount is not allowable as a deduction under Income Tax Act. A
deduction allowed to a prescribed licensee in relation to petroleum operations
undertaken in a contract area in a year of income shall not exceed the cost oil
derived by the licensee from those operations in that contract area for that year.

This implies where the total deductions of a prescribed licensee in a contract area
exceeds the cost oil for that year of income arising from that contract area, the
excess shall be carried forward to the next following year of income and shall be
deductible for that year of income against the cost oil for that year of income arising
from that contract area, until the excess is fully deducted or the petroleum
operations in the contract area cease. A licensee with a loss carried forward from a
contract area for more than one year of income will have the loss of the earliest year
allowed as a first deduction.

Petroleum Exploration Expenditure

The cost of acquiring a depreciable asset treated as petroleum exploration

expenditure is treated as belonging to a separate pool of depreciable assets and the
depreciation rate applicable to that pool is 100%. The cost of an intangible asset
treated as petroleum exploration expenditure shall be amortized at the same rate as
the assets of the petroleum exploration.  The cost of acquiring a depreciable asset
and an intangible asset not treated as petroleum exploration expenditure shall be
allowed a deduction for petroleum exploration expenditure in the year of income in
which the expenditure is incurred.