The Nigeria government has always had anticipate the global oil and gas industry by ensuring a dynamic

approach to drawing up rules and fiscal regimes which make the industry one of the most competitive and investor friendly throughout the world. In 1991, a Memorandum of Understanding (MOU) was signed between the Nigerian National Petroleum Corporation (NNPC), representing the Federal Government of Nigeria on one hand and the Operation Companies (OPCOS) - Shell, Mobil, Chevron, Agip, Elf, and Pan Ocean on the other. The intention of government then was to attract more investments than that already made. That major policy shift was also to ensure for the company a minimum profit margin of $2.30/bbl; after tax and royalties on the company's equity crude. With the shift, the companies were encouraged to embark on bullish exploration activities, which enable Nigeria's crude oil reserves to move from 18.0 billion barrels to 22billion barrels in 1992, barely a year after the policy decision was taken. Yet, the MOU contained inherent mechanism for review in a way that both parties (NNPC and its Joint Venture partners) are left satisfied even when the dynamics of the economy such as inflation and exchange rates set in. this is why in the companies reviewed the MOU to reflect prevailing economic realities. Peace in the Niger Delta Government realizes that investment can only thrive in a peaceful atmosphere. It is for this reason that the development of the Niger Delta area has been attracting the attention of the present democratic Dispensation. To this end, after sending a bill to the National Assembly and getting it passed, government has set up the Niger Delta Development Commission (NDDC) with a board of its own. The Commission is to ensure even and equitable development of the Niger Delta. This step is expected to ensure amity in the region and thereby offers a positive response to the problems which had often disrupted industry operations in the area. Petroleum Arrangement There are four different types of Petroleum Arrangements operating in the Nigerian Oil and Gas Industry. This arrangement preserves the Contractual framework within which the Nigerian National Petroleum Corporation on behalf of the Nigerian government and the Multinational oil companies conduct Petroleum Operations in Nigeria. The Petroleum Arrangement includes Joint Operating Agreement (JOA), Production Sharing Contract (PSC), Service Contract (SC), and Memorandum of Understanding (MOU). The development of these contractual agreements is a reflection of the readiness of the Nigerian government to respond to trends in he global oil and gas industry as well as tackle inherent problems emanating in old arrangements. For instance, the PSC is a responsible for some of the fears expressed over the JV more so as the nation was opening the Frontier areas such as the Inland basins and Deep/ Ultra Deep Waters. Joint Operating Agreements (JOA) The JOA is the basic, standard agreement between the NNPC and the operators. It sets the guidelines /modalities for running the operations. It is different from the MOU. While it contains the basic understandings on the Joint Ventures, the MOU is a response to the specifics of fiscal incentive. Some Highlights of the Revised 2000 MOU The revised MOU stated, stated interalia: ?It is the intention of parties to this Memorandum to encourage investment in the petroleum industry and maintain cost efficiency.? Some of the highlights of the MOU are: To encourage unit cost efficiency, a tax inversion rate of 35% shall be applied. Guaranteed notional margin of $2.50/ bbl, after Tax and Royalty to the company in its equity crude and a minimum of $1.25/ bbl after tax and Royalty on the NNPC Crude which it lifts under the MOU. The minimum guaranteed notional margin is premised on the fact that the Technical Cost (TC) of operations is not more than the notional fiscal technical cost, which is presently $4.00/ bbl.