Impact of Petroleum Industry Act (PIA) on Production Sharing Contract (PSC) Cost Recovery Analysis in Oil and Gas Management Budgeting in Niger Delta, Nigeria

Abstract

The Petroleum Industry Act (PIA) which was passed in 2021 is a historic change to the oil and gas sector in Nigeria with profound effects on fiscal structures, governance and operations in the industry. This paper discuss the effect of the PIA on Production Sharing Contract (PSC) cost recovery analysis, especially under the management budgeting of oil and gas in the Niger Delta. The study examines the impact of reforms in fiscal aspects, governance frameworks, and transparency conditions that PIA has brought on the cost recovery process, investment choices, and revenue sharing between the Nigerian government and international oil companies (IOCs). The mixed-methods design was used, which included documentary analysis of the PIA and current PSC frameworks, and secondary data on trends in cost recovery before and after the implementation of the Act. The quantitative analysis was conducted on ground of descriptive statistics, regression analysis as well as paired sample t-tests to determine significant differences in cost recovery ratios, budget allocations and government take based on the pre and post-PIA regimes. The findings indicate that the recoverable cost margins are statistically significant (p < 0.05) reduced in the new structure, and the share of government revenue is moderately increased. Results also reveal that although the PIA increases regulatory transparency and responsibility, its cost recovery requirements and financial liabilities are stricter, and they are likely to change investment behavior and project sustainability in the long-term. The research has come to the conclusion that the successful implementation of the PIA is really the key to achieving a balance between the national revenue goals and the investor confidence and long-term oil and gas development in the Niger Delta. Policymakers, IOCs and the host communities are given recommendations on how to create a more transparent, efficient and win-win fiscal climate within the new regime.