WEST AFRICAN GAS PIPELINE PROJECT ACT  2005

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LAWS OF THE FEDERATION OF NIGERIA

WEST AFRICAN GAS PIPELINE PROJECT ACT  2005

______________________________________

EXPLANATORY MEMORANDUM

This Act provides for national legislation to implement the obligations of the Federal Republic of Nigeria under the WAGP Treaty and the International Project Agreement  of the West African Gas Project involving the Federal Republic of Nigeria and the Republics of Benin, Ghana and Togo.

___________________________________________

ARRANGEMENT OF SECTIONS

PART I-CORPORATE MATTERS

1. Local incorporation of the West African Pipeline Company, shippers, buyers and other persons, etc.
2. Registration as a foreign or external company, filing obligation, share transfers and charges.
3. Keeping of accounts and submission. of reports.

PART II- THE WAGP AUTHORITY·

4. Power of the WAGP Authority.
5. Steering Committee to perform initial functions.
6. Reporting and monitoring of the WAGP Authority.
7. Reliance on WAGP Authority actions and authorizations.
8. Government to be bound by the actions of the WAGP Authority.
9. Funding of the WAGP Authority.

PART III-LICENSING

10. Grant and conditions of pipeline licence.
11. Duration of the licence.
12. Mortgage of a licence.
13. Rights conferred  by licence.
14. Approval to operate.
15. No other licence required.
16. Electricity and telecommunications.
17. Transmission, export or import of natural gas.
18. Dealing in natural  gas by shippers and buyers,  etc.
19. Restrictions on transmission of natural gas during emergency period.

PART IV-WAGP REGULATIONS

20. Power of the Minister to make and implement the WAGP Regulations, etc.
21. Exclusive regulation of matters contained in the Second Schedule.
22. Power to amend and supplement.

PART V-FINANCIAL PROVISIONS

23. Agreed fiscal regime.
24. Non WAGP Regime.
25. Buyers, sellers, shippers and Project contractors.
26. Foreign currency and financial transactions.
27. Additional benefits and exemptions for Company.
28. Authority of the Nigerian National Petroleum Corporation.
29. Security and assets.
30. Performance guarantee.

31,     Waiver of immunity.

PART  VI-ENVIRONMENTAL  PROVISIONS

32. General environmental liability.
33. Exemption from liability for certain environmental damage.
34. Mitigation measures for certain environmental impacts existing before the commencement of the Project.

PART  VII-MISCELLANEOUS PROVISIONS

35. Empowerment to carry out the project.
36. Anti-trust provisions.
37. Ownership of pipeline system:
38. Insurance program.
39. Disapplication of other laws.
40. Inconsistency of this Act with other laws.
41. Interpretation.
42. Short Title.

SCHEDULES

FIRST SCHEDULE

SUPPLEMENTARY PROVISIONS RELATING TO AGREED FISCAL REGIME

SECOND SCHEDULE

SUBJECT MATTER OF THE WAGP REGULATIONS.

WEST AFRICAN GAS PIPELINE PR01Eer ACT, 2005

An Act to Provide for the Implementation of the Treaty on the West African Gas Pipe Line Project and International Project Agreement, and for Related Matters

PREAMBLES

Whereas [the] Federal Republic of Nigeria is a Party to the Treaty on the West African  Gas Pipeline” Project  (in this Act referred to as “the WAGP  Treaty”)  entered  into by the Republic of Benin,  the Republic of Ghana.  the Federal Republic of Nigeria  and the Republic  of Togo dated 31s1 January. 2003;

And whereas the Parties  to the WAGP  Treaty  entered into an International Project  Agreement with the West African Gas Pipeline Company Limited  pursuant to the provisions  of Article V II of the WAGP Treaty on 28th May, 2003;

And whereas the WAGP Treaty including the International Project Agreement has been ratified by Nigeria;

Now therefore, it is- Enacted by the National Assembly of the Federal  Republic of Nigeria –

PART I- CORPORATE  MATTERS

1-(1) The West African Gas Pipeline Company (in this Act referred  to as “The Company”)  shall-

(a)     perform the functions required to be  performed by  it under the  terms  of  the  International Project  Agreement in its own right; and

(b)     not be required  to incorporate a subsidiary in Nigeria or conduct its operations in Nigeria through a subsidiary by reason  only of-

(i)      the grant or exercise of the project  rights or the project authorizations;

(ii)     the establishment  in Nigeria  of a place of business for the purpose of the Project; or

(iii)    the implementation  of the Project.

(2)    Any shipper or buyer in Nigeria, in its own right. may-

(a)    acquire  natural gas for transmission through  the Pipeline System; or

(b)    contract with the Company to transport natural gas through the Pipeline System;  or

(e)    contract  with another  person  to transport natural gas through other pipeline facilities to the Pipeline  System, and shall not be required to incorporate or act through  a subsidiary  in Nigeria  by reason  only of that acquisition  or transmission.

(3)     Any person in Nigeria either in its own behalf or on behalf of another person, in his or its own right. may-

(a)    offer for sale, promote the sale of or sell natural gas  to be transported through  the

Pipeline System; or

(b)     deliver gas through  the Pipeline system; and shall  not be required to incorporate or act through a subsidiary in Nigeria by reason only  of that activity.

2.-(1) without prejudice to Section  I of this Act, the Company  shall establish a legal presence  in Nigeria and shall be exempted from  any requirement  in the Companies  and  Allied Matters  Act- to a foreign company or incorporate as a separate  local legal entity and the Commission shall maintain  a registration  for the  Company  as an external company.

(2)     In order to register as an  external company,  the  Company  shall deliver a statement to the Commission  containing the following information about the Company-

(a)     its name;

(b)     its country  of incorporation. its registration  number  and the  identity  of the register in its country of incorporation;

(c)     the address of its registered office in its country of incorporation;

(d)     copies of its constitutional  documents:

(e)     details of its directors and secretaries;

(f)      the amount of its authorised  and issued share capital;

(g)     the address of any office of the Company  in Nigeria; and

(h)     the name and address  of all persons  resident in Nigeria authorised to accept service on behalf of the Company in respect of the business of any branch of the Company in Nigeria.

(3)     The Company shall not be required to comply with any reporting  and filing requirements under any law or enactment  other than the following reporting requirements-

(a)     the Company  shall notify the  Commission  of any change to any information contained in the statement delivered under subsection (2) of  this section  within  28  days of the change occurring thereof;  and

(b)     the  Company  shaft  submit to the Commission audited financial reports prepared in accordance  with section 3 of this Act within 6 months of the end of each tax year.

(4)    Notwithstanding anything to the contrary contained in any enactment  or law, there shall be no restriction on the ownership  of any transfer of, or any transaction concerning, shares  in or the share capital of the Company and any sale, transfer.  pledge of or other transaction in  the share capital  of the Company or the share capital of a shareholder shall not be subject to any prior approval of any authority  in Nigeria nor shall it give rise to any right to suspend or revoke a project  authorisation or a project right nor to amend the terms or conditions  thereof.

(5)     If the Company creates  a mortgage,  charge or other  security interest over any property  situated in Nigeria, the Company  or the holder of the security interest  may register  the charge with the Commission  or with any other appropriate  registry,  in the same manner as a company incorporated in Nigeria.

(6)     In respect of a mortgage, charge or security interest registered as provided in subsection (5) of this section,  section 198 of the  Companies  and  Allied  Matters Act  shall apply  to the Company  in the same manner as a company incorporated in Nigeria.

3.-(1) The Company  and  any of its branches, places of business or subsidiaries in Nigeria shall keep bank accounts  in such currencies  as it considers  appropriate.

(2)     All financial statements and reports  to be prepared and submitted by the Company  or any of its  subsidiaries to any  applicable authority  in Nigeria shall be prepared in US dollars  in accordance with the accounting  principles.

(3)     The Company shall have no obligation to prepare or maintain or file financial reports in respect of any  branch, subsidiary or  place  of business in Nigeria or otherwise solely  in respect  of the  Company’s activities  in Nigeria.

PART II-THE  WAGP AUTHORITY

4. The WAGP Authority shall have the power to-

(a)    perform the functions assigned to it under the WAGP Treaty:

(b)    monitor compliance by the Company  with the WAGP Regulations;  and

(c)    exercise  the powers conferred on it under the WAGP Regulations.

5. The Steering Committee shall be  responsible for carrying out the functions of  the WAGP Authority prior to the WAGP  Authority having acquired the full authority to perform its functions.
6. The WAGP Authority shall in accordance with the WAGP Treaty report to and be subject to the direction of the Committee  of Ministers in respect  of any of its activities in or relating  to Nigeria
7. The Company  and  each  buyer, seller and  shipper shall be  entitled to act in reliance on the exercise by the WAGP Authority of the powers  conferred upon it by this Act, the WAGP Treaty  or the WAGP  Regulations.
8. The Government  shall  be bound by the  actions  and  decisions  of the WAGP  Authority to the  extent of the  powers conferred upon it by  this Act,  the  WAGP Treaty or the  WAGP Regulations
9. The Government shall have  the power to take all measures required of it under  the WAGP  Treaty or the international Project  Agreement.  or which  it considers  necessary, to provide funds and support the activities of the WAGP Authority as uie need arises.

PART III-  LICENSlNG

10.-(1)The Company  shall construct and operate the Pipeline System pursuant to a  licence granted by the Minister in accordance with the provisions of the Oil Pipelines Act and this Act.

(2)     Without prejudice to subsection (1) of this section,  the Company  shall construct the pipeline system  subject to any  building permit granted  by  the Town and  Country Planning Authority or Department having jurisdiction  over the area where the pipeline  traverses.

11. Notwithstanding anything to the contrary in the Oil Pipelines Act or any enactment or law, the  licence granted by the Minister for the Project shall be for a period of25 years in the first instance and may be renewed for a further period of 10 years at a time.
12. The Company may create a mortgage  using a licence granted pursuant to section 10 of this Act
13. A licence granted in accordance with section  10 of this Act shall, in addition to those rights set out in the Oil Pipelines Act, confer  upon the Company  and upon its officers, servants, agents  and the Project contractors the right-

(a)     to-enter upon (with all necessary equipment and vehicles); and

(b)     to take  non-exclusive  possession of and use  a strip of land or seabed or  subsoil  of a width  specified in the Approved Pipeline Development Plan either  side of the route  specified in the Approved  Pipeline Development Plan and thereon, thereover or thereunder to construct, maintain and operate the pipeline  system.

14.-(1) Notwithstanding that a licence  has been granted  pursuant to section  10 of this  Act,  Company  shall not commence  the commissioning  or operation of the pipeline system or any newly installed part thereof without a prior approval  to operate given by the WAGP Authority.

(2)     The Company in making an application for approval, and the WAGP Authority, in granting the approval to operate  under subsection  (1) of this section,  shall  follow such procedures  as may be agreed between  them.

15. Except as otherwise provided in this Act, no other licence or permit or authorisation is required  by  the Company  or  any  Project Contractor for the  construction and  operation of  the pipeline system.
16. The Company may-

(a)     construct, own and operate  an electricity  generating plant as part of the pipeline system; and

(b)     construct, own and operate  such communication  facilities, as set out in the Approved  Pipeline Development Plan.

17.-(1) No transit,  export  or import permit.  licence or other authorisation shall be required  by the  Company,  a buyer, a seller or a shipper solely for  the purposes  of-

(a)    export  of natural gas from Nigeria by means of the pipeline  system;

(b)    transit of natural  gas through Nigeria by means of the pipeline system; or

(c)     import of natural gas into Nigeria by means of the pipeline system.

18.-(1)No shipper or buyer, who-

(a)’    acquires natural  gas in Nigeria for transmission through the pipeline system;

(b)     ships natural  gas through  the pipeline system, or

(c)     ships natural  gas through other pipeline facilities to the pipeline system shall be required to obtain any licence or permit by reason  only of that acquisition or transmission.

(2)     No person  who, in Nigeria (either on its own behalf or on behalf of another person-,

(a)     offers  for sale or promotes  the sale of or sells natural gas to be transported  through the pipeline  system; or

(b)     delivers  gas through the pipeline system, shall be required to obtain any licence or permit by reason  only of that offer, promotion,  sale or delivery.

19. The transmission of natural gas through Nigeria or across  its territorial boundaries  may be restricted during a period of a national emergency declared by the President  in accordance  with the Constitution of the  Federal Republic of Nigeria 1999 and upon the cessation of such national emergency,  any restrictions  placed  on the transmission  of natural  gas through Nigeria  or across  its territorial boundaries shall cease.

PART IV- WAGP  REGULATIONS    

20.-(1)The Minister shall adopt and implement,  as delegated legislation, the WAGP  Regulations.

(2)     The WAGP Regulations made by the Minister pursuant to subsection (1) of this section, including any amendments  or supplements thereto, shall be-

(a)     consistent  with similar regulations adopted in the Republics of Benin, Ghana and Togo;  and

(b)    consistent with the WAGP Treaty and this Act.

(3)     The WAGP  Authority shall have exclusive power to administer and  enforce the  WAGP Regulations  in  Nigeria and may collaborate with  the  Minister or  any  relevant agency of Government.

21. Notwithstanding anything to the contrary in any enactment or law, any matter  specified  in the Second Schedule  of this Act relating  to the pipeline system and the Company,  shall be regulated in Nigeria  by this Act and the WAGP Regulations.
22. The Minister may amend or  supplement  the  WAGP  Regulations to the  extent  that  such amendment or supplement is consistent  with this Act and with the obligations of Nigeria under  the  WAGP Treaty.

PART V – FINANCIAL PROVISIONS

23. The  liability for and the calculation of and  method of assessment of tax payable by  the Company  and  each WAGP  Company  in relation  to WAGP  income otherwise referred to as the agreed fiscal regime, shall be  in accordance  with  the principles and  rules  set out  in the  First Schedule to this Act.
24. The Non-WAGP Regime shall not apply to any  WAGP  Company  in respect of WAGP activities or WAGP income except as set out in the First  Schedule to this Act.

25,       the-principles and  rules relating to the liability  for and  the calculation of  tax in the First Schedule to this Act  shall also apply to buyers,  sellers,  shippers and Project Contractors to the extent specified in the First  Schedule to this Act and the Non-WAGP  Regime applicable  to buyers, sellers,  shippers and  Project Contractors  in respect of their activities  as provided in -the  First Schedule to this Act shall be modified  in accordance  with the First  Schedule to this Act.

26.-(1)Each of the WAGP  Companies, the shareholders, the Project  Contractors,  the buyers,  the sellers  and  the shippers, and  their counterparts, shall  be entitled  (solely  in connection with  the Project, or the transportation of  natural  gas in, or the  sale of natural  gas  transported or to be transported through the pipeline system. or the provision of security for their obligations under agreements in respect  of the foregoing) to do the following, that is to-

(a)     open,  maintain and operate bank accounts in foreign currency both  inside and outside Nigeria  and receive payments of any kind (including  without  limitation  revenues in connection with the sale or transportation  of natural gas) directly  into all or any such accounts and retain the proceeds therein and make payments  from such accounts as it should think fit;

(b)     transfer foreign currency into Nigeria;

(c)     purchase  local currency at the most favourable rate available and in any event at a rate not less favourable than that which is generally  made available by the Central  Bank of Nigeria;

(d)     convert local currency into  foreign  currency at the most  favourable rate available and in any event at a rate not less  favourable than  that generally made available by the  Central Bank of Nigeria;

(e)     transfer,  export and hold foreign currency outside of Nigeria;

(f)      obtain and use letters of credit in foreign currency;

(g)     utilise foreign currency  in Nigeria without restriction,  other than local costs  incurred in Nigeria with suppliers  of goods or  services· who are  residents of Nigeria which shall be paid in Naira;

(h)     be  exempted  from any rule or  regulation of  Nigeria requiring the  repatriation or mandatory conversion  of foreign  currency into local or any other currency;

(i)      pay in foreign currency all salaries,  allowances  and other  benefits due  to any of their employees  in connection with or relating  to the Project, other than residents of Nigeria who are only engaged  in relation  to the Project  in Nigeria;

(j)      pay in foreign  currency any amount due to foreign Project Contractors, shareholders  or lenders in connection  with the Project;

(k)     make any other  payments  due  in connection with or relating to the Project  in foreign currency, other than costs incurred  solely in Nigeria with residents of Nigeria;  and

(l)      enter into  contracts with  each other  for services or the  sale of goods, and to make payment for such goods or services, in any foreign currency.

27. Notwithstanding anything to the contrary in any  enactment  or  law,  the  Company  shall  be entitled to-

(a)     borrow money or raise equity in foreign currency from any source, and  in each case, without the requirement  for any further  approval, consent or administrative  act of Nigeria or any State authority;

(b)     remit  to shareholders out  of Nigeria any dividend derived from the Company  or  its affiliate in Nigeria or  return  of capital  without any deduction,  withholding  or other  cost,  in each  case without the requirement for any further approval, consent or administrative  act of Nigeria or any State authority;

(c)     grant  security over any property of the Company or its affiliate in Nigeria or elsewhere to lenders or other creditors or potential creditors, including balances in local  and  foreign currency bank accounts  within  or outside Nigeria;

(d)    service or repay  foreign loans and pay associated  fees and indemnities  in any currency without being subject to any tax or withholding obligation or deduction;  and

(e)     remit to its lenders any principal, interest,  fees  or other  borrowing  costs  owed or payable by the Company or its affiliate in Nigeria without any deduction,  withholding or other cost,  in each case without the requirement  for ally further  approval, consent or administrative act by Nigeria or any State Authority.

28. The Nigerian National Petroleum Corporation  established pursuant to  the Nigerian National Petroleum Corporation  Act,  1990 (in this Act referred  to as  “the Corporation”)  shall have power to undertake any  commitment in any commercial  agreement  relating  to the Project to which it is a party.
29. In addition to the provisions of the Nigerian National Petroleum Corporation (Projects) Act, 1993, the Corporation  or any of its subsidiaries may charge any of its assets,  revenues and accounts as are  set aside for the  Project as  security for the  performance  of  its obligations under any agreement relating  to the Project to which it is a party.
30. The President of the Federal Republic of Nigeria  may in the name and on behalf of Nigeria in writing guarantee the performance  by  the Corporation  of  its undertakings under any  agreement relating to the Project to which the Corporation  is a party.

31.-(1)Subject to such exceptions  as may be contained in any commercial  agreement to which it is  a party,  Nigeria or the Corporation  unconditionally  waives any immunity  from suit, execution or other  legal process in connection  with any action  or proceeding  to obtain  or enforce an  arbitral award in relation to the Project.

(2)     The amount of any award obtained  against Nigeria or the Corporation under a dispute resolution procedure in any agreement relating to the Project  to which  it is a party  will constitute conclusive evidence of the existence and amount of the claim against it.

PART VI-ENVIRONMENTALPROVISIONS

32. The  Company, its affiliates.  shareholders  or the Project Contractors  shall be  liable  for any  environmental damage that occurs by reason of any of the Project activities.

33.-(1)The Company.  any  of its shareholders or their affiliates.  lenders  of the Company  or  the Project Contractors  shall not  be liable  for any  environmental  damage  that occurs other  than  by  reason of any of the Project  activities.

(2)     Any environmental  damage  or adverse environmental effects  identified  in the  environmental impact assessment  of the  Project  as existing prior  to the construction commitment  date  shall  be deemed to have  existed prior  to the commitment of the Project activities and shall not be deemed to have been caused by the Company,  its affiliates, shareholders  or its lenders  or Project contractors.

(3)     No buyer, seller or shipper shall be liable for any environmental damage that was not caused by its activities.

34. Notwithstanding any exemption  mentioned  in  section 33  of  this  Act. if  an  existing environmental damage  which occurred  prior to  the  construction  commitment date will  be  exacerbated by any environmental impact identified in the environmental impact assessment  carried  out  for  the Project.   the Company. its affiliates or  the Project Contractors shall  take appropriate mitigation or remediation measures to prevent the worsening of the existing environmental damage.

PART  VII-MISCELLANEOUS PROVISIONS

35. The Minister may, upon receipt of  a copy of a notice from the WAGP  Authority to  the Company given in accordance with  Article IV  2  (2)  (a) (xiii) of  the  WAGP Treaty, make Regulations  requiring as a matter of law the Company to comply with the provisions  of the Access  code.

36.-(1) Subject to the provisions of subsection (2) of  this section,  none of the  following shall constitute a breach of any  law  prohibiting or  restricting any  person from acting  in  concert or combination  in relation to competition in a market or the fixing of prices, that is-

(a)     the entry into the International Project  Agreement  by the Company  or the performance of its obligations thereunder;

(b)     the acquisition of natural gas in a State by a buyer or shipper  for transmission  through the pipeline system or the shipping of natural gas through the pipeline system or through  other pipeline facilities to the pipeline system by a buyer or shipper;

(e)      the  offer  for sale or  sale of natural gas  in a State by  a shipper or  seller which is

delivered out  of the  pipeline system or the delivery of natural gas into a State  through the  pipeline  system by a shipper or seller;

(d)     the formation  of the Company  by the shareholders;  or

(e)     the formation of a buyer  or seller  or shipper by the shareholders  or members  of any group or consortium.

(2)     Except in relation  to conduct specifically contemplated  in the International Project  Agreement  or the Access code, this subsection shall not-

(a)     permit or authorise unreasonable  discrimination against buyers or shippers;

(b)     permit the conduct by  the Company,  a buyer,  a seller or  a shipper  which constitutes unfair discrimination;  or –

(c)     permit a lessening of competition, or  other conduct which may otherwise  be regarded under competition  law as an abuse of a dominant market position.

37.-(1)The pipeline system when placed in, under  or over  land,  in accordance with the terms of the  licence, shall remain the property of  the Company,  notwithstanding any suspension, termination, cancellation or expiry of the licence.

(2)     No third party shall acquire ownership or interest in the pipeline system merely by the fact of its situation in, under or over land in which that third party  has an interest.

38. Notwithstanding anything to the contrary in any enactment or law, any WAGP Company or any shipper may arrange any  insurance coverage for its activities under this Act in any country of its choice.

39.-(1)Notwithstanding  anything to  the  contrary in any enactment  or  law and subject to  subsection (2) of this section, the Company  and the WAGP  Authority shall carry  out the Project in accordance with the provisions  of this Act.

(2)     The  following  enactments  or laws shall not  apply to any WAGP  Company,  buyer, seller, shipper and Project  Contractor in respect  of the Project, that is-

(a)     sections 17 (I) and  18 of the Oil Pipelines Act and any regulations made pursuant  to the  Oil Pipelines Act;

(b)     the Petroleum Act and all regulations  and statutory guidelines made thereunder;

(c)     the Export  (Incentives and Miscellaneous)  Act (as amended);

(d)     Wireless Telegraphy  Act (as amended)

(e)     Nigerian Investments  Promotion Commission  Act (as amended);

(f)      Investment and Securities Act.

40. Subject to the Constitution of the Federal Republic of Nigeria,  1999, if any other law in Nigeria is inconsistent with the provisions  of this Act for the purposes  of the Project,  this Act shall prevail and that other law shall to the extent of the inconsistency be consequentially  amended.

41.-(1)        In this Act, unless the context otherwise  requires-

“access code” means an access code applying to all gas transportation agreements  for transportation  of natural  gas in the pipeline system other than foundation gas transportation agreements, agreed by the Company and the WAGP Authority;

“accounting principles” means principles  for accounting  which are in accordance  with international accounting  standards, on  an  accrual basis  (as  opposed to  cash)  unless otherwise  specifically provided  in the International  Project Agreement,  with revenues  attributed  to the accounting  period in which  they  are earned, and costs  and expenses to the accounting period  in which  they  are incurred  without the need to consider when the amount is received  or disbursed  in connection  with a particular  transaction  and  costs and  expenses deemed to have  been  incurred, in the  case of physical  items,  in the accounting period when  title passes,  and  in the case of services, in the accounting period when such services are performed;

“administrative fees” means any fees, charges  or other imposts which are imposed or charged  for  services, materials  or rights provided or granted by any State or State authority”;

“affiliate”  means, with respect  to a person,  any  other  person  (or two  or more persons acting together) that directly or indirectly through one or more intermediaries,  controls,  is controlled by or is under  common control  with that person,  or who  possesses  or possess  directly or indirectly, the  power to direct or cause  the direction  of the management  and policies  of that person,  whether  through the ownership  of voting  securities, by contract,  by law or otherwise;

“agreed fiscal regime” means  the regime mentioned in Section  23 of this Act  and set out in the First Schedule to this Act;

“approval  to operate” means an  approval  to operate  the pipeline system  given  by  the WAGP  Authority to the Company  in accordance with the International  Project Agreement;

“Approved Pipeline  Development  Plan” means the Pipeline  Development  Plan which is approved  by the WAGP  Authority in accordance with  the International  Project  Agreement,  as it may be amended from time to time by the Company and the WAGP Authority;

“buyer”  means a purchaser from a shipper of a natural gas which has been or is to be transported through the pipeline system;

“commercial  agreements”  means the  gas  purchase agreements,  gas  sales  agreements,  gas transportation agreements, interconnection agreements and credit  security agreements defined  as Commercial Agreements  in the International  Project Agreement;

“Commission”  means  Corporate Affairs Commission  established  under Section 1-of the Companies  and Allied Matters Act 1990;

“Committee of Ministers”  means the committee established  in accordance  with  Article X (I) of the  WAGP  treaty;

“Company” means the West African Gas Pipeline Company  Limited;

“Constitution” means the Constitution of the Federal Republic of Nigeria 1999;

“construction  commitment  date”  has the meaning given to it in the International  Project  Agreement;

“Corporation” means the Nigerian  National  Petroleum Corporation established  under  the Nigerian National Petroleum  Corporation Act  1990 and any of its wholly owned subsidiaries;

“debt”  means any  actual  obligation  (whether present  or future,  secured or unsecured) for the payment or repayment  of money (excluding contingent liabilities, amounts  owing to trade creditors, and other  liabilities incurred in the ordinary course of business);

“ELPS” means the Escravos – Lagos Pipeline System located in Nigeria;

“enabling  legislation”  has the meaning given to it in the International  Project Agreement:

“environmental  impact assessment” has  the meaning given to it in the  international Project  Agreement and the Environmental Impact Assessment Act  1992;

“exempt goods list” means the list agreed by the Company and the WAGP Authority in accordance with Clause 29.13 of the International Project Agreement, and includes any amendments to that list agreed from time to time;

“fiscal laws”  means laws  in force in a State applying in respect  of the Project and  governing the fiscal topics addressed  in the Agreed  Fiscal Regime (including, to the extent applicable to this Act);

“foreign currency” means  any  freely convertible  currency, including  US dollars,  that is the lawful  currency of a State (other than the lawful currency  of any of the States);

“foundation gas transportation agreement” has the meaning given to it in the International Project Agreement;

“gas transportation agreement” means an agreement between a person  and  the Company  for the  transportation by the Company  on behalf  of that person  of natural gas through the pipeline  system:

“Government”  means the Federal Government of the Federal Republic of Nigeria;

“interest” includes all other forms of return  in respect  of a debt claim (other  than repayment of the debt) including,  for the avoidance of doubt,  discounts,  fees and charges;

“International  Project  Agreement”  means  the international project agreement made between the Republic of Benin,  the Republic  of Ghana,  the Federal  Republic of Nigeria, the Republic of Togo and the West African Gas Pipeline  Company concerning the West African  Gas Pipeline Project;

“Legislature” means the National Assembly of Nigeria;

“Minister”  means the Minister for the time being charged with responsibility for petroleum;

“natural gas”  means any hydrocarbons (or a mixture of hydrocarbons and other  gases) which at a temperature of 60 degrees  Fahrenheit and at atmospheric pressure  are predominantly  in a gaseous state;

“Nigeria”  means either the Federal  Republic of Nigeria or the territory of the Federal  Republic of Nigeria  as the context may require;

“Non-WAGP  Regime”  means the  legislation, regulations, principles of  interpretation and  application and  any other  features of the system of taxation  applicable either generally  or  specifically in Nigeria, as amended, modified or enacted from time to time, which  is not legislation  introducing, amending, modifying, re-enacting or consolidating the agreed fiscal regime;

“Pipeline  Development  Plan”  means the development plan  for the pipeline  system prepared in accordance with the International  Project Agreement;

“pipeline licences”  has the meaning given to it ill the International Project Agreement;

“pipeline system” means a Natural gas pipeline  running  from the ELPS, through Benin and Togo,  to a terminus  initially near Takoradi, Ghana to be developed,  built, operated  and  maintained by the  Company  under  the terms of the International Project  Agreement together  with ancillary  permanent  facilities which are  needed for the  construction and  operation thereof  (including compression stations, metering stations,  valve  stations, pig launching and  receiving  stations  and  Supervisory  Control and Data Acquisition systems (SCADA) and includes any extension or expansion.

“Project” or  “West African Gas Pipeline  Project” means the development  of specifications, feasibility  and market studies, design, financing, construction, ownership,  operation and maintenance of the pipeline system;

“project  activities”  means activities undertaken within  one  or more  of  the States by  a WAGP Company. the shareholders or the Project contractors  in connection with the implementation  of the Project;

“project  authorisations” means all rights, permits. licences, consents, permissions, exemptions and approvals (including those  identified  in detail in the Approved Pipeline Development  plan )  which are needed by a WAGP Company  or a Project contractor for the successful implementation  of the Project,  or to fulfill commitments made under the commercial  agreements or for the exercise of any of the rights of the  Company  under the International  Project  Agreement,  and includes the pipeline licences;

“Project Contractors” means any contractors, sub-contractors, advisers  or agents of the Company engaged in connection with the implementation  of the Project:

“Project  rights”  means all of me rights, entitlements and benefits conferred on the Company  by the International Project Agreement,  including the right  of the Company  to be  issued  the Project Authorisations  and  to implement the  Project  in accordance  with the  terms  of the  International Project Agreement;

“relevant  Minister” means the Minister of each  State from time  to time  having power to make  regulations under the enabling legislation;

“rules of procedure”  means the rules of procedure to be established  by the Relevant Ministers in  accordance with Article VI of the WAGP Treaty;

“SCADA”  means Supervisory  Control and Data Acquisition  System;

“sellers” means the sellers of natural  gas which has been or is to be transported through all or part of the pipeline system;

“shareholders” means-

(a)     the Chevron Texaco West African Gas Pipeline Company Limited;

(b)     the Nigerian National Petroleum Corporation;

(c)     the Shell Overseas Holding Limited;

(d)     the Tekoradi Power Company  Limited and subject to the exercise  of existing  options  to  take up shares in the Company;

(e)      Societe  Beninoise  de Gaz S.A.; and

(f)      Societe Togolaise de Gaz S.A.,

and their successors and assigns each a “shareholder”;

“shipper”  means a person  who enters into a gas transportation  agreement with the Company;

“State authorities”  means the Government  and each aspect thereof at every level, including central.  regional  and  local authorities or bodies. and  all non-judicial instrumentalities. statutory bodies,  taxing  authorities,  branches and  subdivisions of any  of the foregoing, and  any  entity  which is directly or indirectly controlled by Nigeria or one or more  State Authorities;  and includes the State Environmental  Protection Authorities,  the Tax Authority of Nigeria and the Technical Authority;

“State Environmental  Protection Authorities” include-

(a)     the Federal  Ministry of Environment:

(b)     the environmental  section  of the Department  of Petroleum  Resources of Ministry of Petroleum Resources;

(c)     the Lagos State Environmental  Protection Agency;

(d)     the Ministry of Environment and Physical Planning of Lagos Slate;

(e)     the Ogun State Environmental Protection  Agency;

(j)      the section  or department of the Office  of the Governor of  Ogun  State  having

responsibility for environmental  matters; and

(g)     the environmental section of the National  inland Waterways Authority;

“States” means Benin, Ghana,  Nigeria and Togo: each is a “State;

“Steering Committee” has the meaning given to it in the International Project Agreement;

“tax” or “taxes” means any existing or future taxes, levies, duties, customs,  imposts, contributions (such as social fund and  compulsory medical  insurance  contributions),  fees, assessments or other similar  Charges  payable to or imposed by  Nigeria-or a State Authority, but does (not) include Administrative Fees  to the extent that they do not exceed  a reasonable  amount  for the services, materials or rights provided  or granted;

“tax authority”  means-

(a)     in respect of Benin. the Direction Generale des Imports.

(b)     in respect of Ghana-

(i)      in respect of value added tax. the Value Added Tax Service.

(ii)     in respect of customs  and excise duties, the Customs, Excise and Preventive Service, or

(iii)    in respect  of Income  Tax  or any other Tax  matter,  the Internal  Revenue Service;

(c)     in respect of Nigeria-

(i)      in respect of income  tax and valued added  tax, the Federal  Inland  Revenue

Service,  and

(ii)     in respect of customs  and excise duties, the Nigerian Customs Service.  and

(d)     in respect of Togo,  the Direction Generale des Imports,  or in each case, their successor bodies;

“tax year” means a period  of one year  beginning  on 1^st  January and ending on 31st December;

“Technical Authority” means the Ministry of Petroleum Resources;

“US dollars” or “US$” means the lawful currency of the United States of America;

“WAGP activities” include any activity of the Company or any subsidiary of the Company which-

(a)     are engaged  in by the Company  or its subsidiary  in relation to the pipeline system, business or for the purpose  of furthering the West African Gas Pipeline system business; or

(b)     are agreed  by the Company and  the WAGP Authority  to be a WAGP Activity, but shall not include-

(i)       the operation of local distribution companies, or

(ii)     any other activity agreed by the Company and the WAGP Authority not to be a WAGP Activity;

“WAGP Company” means  the Company and any wholly owned  subsidiary  of the Company which  is the subject of a notification to the WAGP Authority  and the tax authorities in accordance with the International Project Agreement;

“WAGP Income” has the meaning given to it in paragraph 7 of the First Schedule to this Act;

“WAGP Treaty”  means  the treaty concerning the West African  Pipeline Project made between the Republic  of Benin, the Republic  of Ghana,  the Federal Republic  of Nigeria and the Republic  of  Togo concerning the West African Gas Pipeline  Project;

“‘WAGP Tribunal”  means the tribunal of that name established by the WAGP Treaty;

“WAGP Regulations” means  regulations governing  the construction and operation  of the pipeline  system (including  the matters referred to in the Second Schedule to this Act), to be adopted by the  Minister under this Act; and

“West  African  Gas Pipeline Authority”  or “WAGP Authority”  means the body  established under  the WAGP Treaty.

(2)     Any  term,  word  or phrase not specifically defined in this Act shall have the same meaning as in the International  Project Agreement.

42. This Act may be cited as the West African Gas Pipeline Project (Special Provisions, etc.) Act,  2005.

FIRST SCHEDULE

Section 23

SUPPLEMENTARY PROVISIONS RELATING TO AGREED FISCAL REGIME

PART  I  -GENERAL PROVISIONS RELATING TO AGREED FISCAL  REGlME

1.-(1) This  Schedule sets out the principles  and rules  relating to the liability for. and  the calculation  of, and  method  of assessment of, tax on the Company (including  in respect of each  other WAGP Company that is deemed  to be a branch of the Company in accordance  with paragraph 16 (3) of this Schedule  in relation to WAGP income.

(2)     For the purposes  of this Schedule all income  accrued  and  expenses  incurred  by any WAGP Company in respect  of WAGP  activities shall be deemed to be income  accrued and  expenses  incurred by the Company, and the Company shall accordingly  be liable to pay income tax in respect  thereof.

(3)     No WAGP Company other than the Company shall have any liability to income tax in respect of  WAGP activities.

(4)     The Non-WAGP regime shall not apply to any WAGP Company in respect of WAGP activities or WAGP income except as set out in this Schedule.

(5)     All Income tax liabilities of the Company, and payments made by the Company in respect of those liabilities shall be to the Tax Authority of Nigeria.

(6)     The WAGP Authority will participate in the determination of the liability of the Company to pay Income Tax as set out below.

(1)     The income tax liability of the Company shall be calculated by reference to tax years.

2.-(l) The  principles and  rules relating to the liability for and the calculation of tax on buyers, Other persons,  sellers, shippers and Project contractors  shall be as set out in this Schedule.

(2)     The Non-WAGP  regime  applying to such persons ill respect of any activities contemplated in this  Schedule shall  be modified in accordance with this Schedule.

(3)      If any WAGP Company undertakes any action, transaction or agreement (whether or not as a part of an arrangement  or series of arrangements) where the principal purpose is-

(a)     to obtain  for the Company  a relief (or increased relief) from, or repayment or increased repayment of, income tax on WAGP income imposed by this Schedule;  or

(b)     for the avoidance  or reduction  of a charge  to such a tax or an assessment  to such a tax,

the amount of the relief,  repayment or charge for the Company shall be the amount that would have been the case had the action, transaction  or agreement or arrangement or series of arrangements not been undertaken.

3.-(1)          For the purposes  of this Schedule-

“agreed  fiscal regime” means the fiscal regime  as set out in Section  23 of this Act and  this Schedule;

“applicable person”  means a WAG!’  Company or any other person (including Project Contractors, buyers,  sellers and shippers) to whom the agreed fiscal regime is intended to apply;

“applicable rate” means a rate of interest equal to 15 per cent per annum, compounding  annually;

“certification  system” has the meaning given to it in the International Project Agreement;

“completion date”  has the meaning given to it in the International Project Agreement;

“construction expenditure” has the meaning given to it in the International Project  Agreement;

“debt” means any actual  obligation (whether present or  future,  secured  or  unsecured) for  the payment or repayment  of money (excluding contingent liabilities, amounts owing’ to trade  creditors, and other liabilities incurred  in the ordinary  course of business);

“Dispute Resolution Procedure”  has the meaning given to it in the International  Project  Agreement;

“Eligible  Development  Costs” has  the meaning given to it in Schedule 16 of the International  Project Agreement:

“equity” means total assets,  including retained  earnings and other surplus  reserves, less total liabilities (including Debt), the resulting sum  equal to the  values  ascribed to common  stock,  preferred stock, capital  surplus  or paid  in capital  and  retained earnings or earned surplus, as disclosed in audited accounts;

“Fiscal Review Board” means the Fiscal Review Board established in accordance  with the WAGP  Treaty;

“fiscal start date” has the meaning given to it in the International Project  Agreement;

“income tax”  means amounts payable by  a WAGP  Company  in accordance with  Part  II of this Schedule;

“minor taxes” means taxes other than income tax, VAT and customs duties;

“Non-WAGP  regime”  means the  legislation, regulations, principles of interpretation and  application and  any other  features of  the  system of  taxation  applicable’ either  generally or  specifically in Nigeria, as amended,  modified or  enacted from time  to  time,  which is not  legislation introducing, amending, modifying, re-enacting or consolidating the agreed  fiscal regime:

“reservation charge” has the meaning given to it in the International  Project Agreement;  and

“WAGP Authority Charge” has the meaning  given to it in the International Project  Agreement.

PART II – INCOME TAX

4.-(1) Subject to the principles  and rules set out in this Schedule, and in particular  to paragraph 13  of this Schedule, the Company  shall be liable to pay to Nigeria, in respect  of each tax year, income  tax at the rate of 35 per cent of its taxable income attributable to Nigeria  in the tax year.

(2)     The  taxable income of the company  attributable  to Nigeria shall be calculated as set out below, following the apportionment between the States of WAGP  income, allowable expenses and capital allowances as set out in this Schedule.

(3)     In calculating  the amount due  in respect of income tax  from the  Company  to Nigeria, credit shall be given  for any amount in respect  of which an election is made by the Company  under this paragraph.

(4)     In this Part of this Schedule, “State liability” means-

(a)     an amount  of money which has been determined  under  the dispute  resolution

procedure to be owing by  Nigeria  to the  Company  under Clause 36.4  of the International Project Agreement;

(b)     an  amount of money which has  been  determined  in accordance  with  this Schedule to be owing by Nigeria to the Company  under the fiscal laws (whether laws implementing  the provisions of paragraph 11 of this Schedule or paragraph 35 of this  Schedule or  otherwise) and  in respect  of which no  further  appeal is permitted under  Part VII of this Schedule (whether as a result of the expiry of any time  limit or  otherwise) or  in respect  of which Nigeria has  confirmed that  no appeal will be made by it;

(c)     an amount of money which is deemed under subparagraph  (5) or (6) of this paragraph to be owed by Nigeria  to the Company;

(d)     an amount of money which has been determined under subparagraph  (7) of this paragraph to be owing by Nigeria  to the Company;  or

(e)      interest  on any  of  the above amounts arising  under Clause 44.3  of the International Project  Agreement  or paragraph  20 of this Schedule.

(5)     Where the Company claims that an amount is owing by Nigeria to the Company under the fiscal laws (whether” laws implementing the provisions of paragraphs 19. 25.  35 (2) and (4) of this Schedule or otherwise) including interest thereon arising under paragraph  20 of this Schedule, and in respect  of which a further  appeal  is permitted under Part 7 of this Schedule and  in respect  of which Nigeria has  not confirmed  that no appeal  will be made by it,  the Company  may give to the WAGP  Authority and  to the Tax  Authority of Nigeria written  notice  setting our particulars of the amount in question  and the  circumstances  ill which the liability arose.

(6)     If Nigeria disputes that any part of the amount  set out in the notice is owing to the Company,  it may within 30  days  of  receipt  of such notice  make application to the WAGP  Tribunal for  a determination  that such amount or a part of it is not owing by  Nigeria to the Company  and  if Nigeria does  not  make such  an application or does  not  make it in respect of the whole of the amount claimed,  then for the purpose of this Schedule the amount stated in the notice, or if Nigeria disputes only part  of the amount stated in the notice,  the balance of the amount claimed shall be deemed to be owing by Nigeria to the Company  and shall  be a State liability in accordance with  subparagraph  (1) of this paragraph.

(7)     If Nigeria  makes an application in accordance with  subparagraph  (6) of this paragraph to the WAGP Tribunal  for a  determination  that an amount is not owing by it to the Company and if-

(a)     the application is dismissed  in whole by the WAGP  Tribunal, the amount stated  in the notice shall be deemed to be owing and shall be a State liability;

(b)     the application  is dismissed in part by the WAGP Tribunal, the amount stated in the notice which relates to that part of the application which was dismissed shall be deemed to be owing and shall be a State liability; or

(c)     the WAGP Tribunal makes a determination that an amount is owing,  then that amount  shall be a Stale liability.

(8)     The Company may  by notice, given in a return,  elect to treat any part of a State liability as a credit  in the calculation of !he amount of income tax due  to Nigeria  in respect  of the tax year  to which the return relates and where a notice is given in accordance with this paragraph the  liability of  the Company  to income tax  for the  tax year to which the return relates  shall  be reduced accordingly.

5. The taxable income for any period shall be equal to the amount of WAGP income attributable to Nigeria for that period less ‘he aggregate of-

(a)     allowable expenses attributable to Nigeria for that period;

(b)     capital allowances  attributable  to Nigeria ill respect of that period; and

(c)     any allowable  losses available in Nigeria.

6. For the purposes of this Part of this Schedule-

(a)     “income” means any  receipts  or realised  gains  of a revenue nature,  determined  in  income and accordance with  the accounting principles and  for the avoidance of doubt,  income includes expenses, amounts recovered by  way  of  insurance claims, judicial or arbitral awards, recovered legal costs, rental or refunds, proceeds from  sale or exchange of plant or facilities or supplies,  or sale or licence  of intellectual  property, where under  the accounting principles such amounts would be treated as income; and

(b)     “expenses” means any  payment or outflow or depletion of assets  or incurrence of liabilities, other than distributions to equity participants.

7.-(1)          Subject to subparagraph  (2) of this paragraph,  the amount of WAGP  income for any tax  year is the aggregate of-

(a)     payments accrued by the Company  during that tax year that are derived  from natural  gas transportation operations which are WAGP activities;

(b)     income accrued during that tax year  in respect of any  debt  claims in which the

Company is the creditor;

(c)     any other  income incidental  to WAGP  activities accrued by the Company  during that  tax year;  and

(d)    any negative pool balance in respect of that tax year.

(2)    WAGP  income shall not include-

(a)     any amount accrued in respect  of  the disposal of any  capital  asset  other  than  as

provided  under subparagraph  (1) (d) of this paragraph;

(b)     any accrual in respect of the WAGP  Authority charge or any  part  of the WAGP

Authority  charge;

(e)     any  dividend or any  accrual  in respect  of any  dividend received from  any  WAGP

Company;

(d)    any amount accrued or payable to a WAGP Company  by a State under the International Project  Agreement  except  where and to the extent that the amount paid  is compensations  for or reimbursement  of lost WAGP income, or

(e)     any interest  or other income accruing prior  to the fiscal start date.

8.(1) Allowable expenses for a period means all expenses (other  than non-allowable  expenses)  Allowable which are incurred in that period  including accruals on any debt claims where the Company is the debtor wholly, exclusively and necessarily for the purpose of deriving WAGP  income:

Provided that expenses will be considered to be necessarily  incurred where  the Company believes  at the time  the expenses are incurred, mar  to incur  the expenses is reasonable and appropriate to enable, facilitate, develop or make more efficient the carrying out of WAGP activities or the deriving of WAGP  income.

(2)     For  the avoidance of doubt,  expenses shall not cease to be allowable expenses solely as a result of being incurred in respect  of related party transactions.

(3)     For the purposes of this Schedule, an expense shall be treated  as incurred  at the time at which and to the extent that an accrual in respect of such expense  is properly  recordable in the accounts of the  Company  in accordance  with  the accounting principles or in the case  of costs incurred by shareholders or their affiliates,  in the account  of that person in accordance  with  its accounting

9. Non-allowable expenses means all expenses, other than  allowable  expenses, which shall include-

(a)     expenses that are interest to the extent that-

(i)      the average ratio  of debt to equity  for the consolidated group during  the tax, year  exceeds 70:30 so that in calculating the amount of allowable expenses and  non-allowable expenses where this ratio  is exceeded the amount of  the interest expense shall be pro-rated between the two in accordance  with the amount of debt that  falls within  and exceeds this ratio respectively,

(ii)     such interest  expense is incurred  in an amount exceeding a reasonable commercial  return for a borrowing  between  unconnected  parties  Oil the same terms for the  same amount and entered  into at the same time and for the same period  and in the same currency as the  relevant  borrowing  by  the Company;  and for the purpose of determining  for the purposes  of this  paragraph whether  any  interest  expense exceeds such a reasonable commercial  return, if the Company  and the WAGP Authority agree on a mechanism  for determining reasonable interest rates  for the purposes of this paragraph, or if the WAGP Authority approves the terms of a finance facility, then any interest expense incurred under a facility which complies  with that mechanism  or under any facility the terms of which are so approved,  shall not be a non-allowable expense, or

(iii)    the debt  in respect of which the  interest  expense accrues is incurred for the principal purpose  of reducing the Company’s  tax liability;

(b)     any expenses incurred in providing business entertainment or gifts, other  than the cost of accommodation,  food  and  drink  attributable to any  employee  or director of any  WAGP Company  incurred in any of the Slates;

(c)     legal fees  or  other  costs  of proceedings  incurred in relation to arbitration or  any determination under  the International Project Agreement;

(d)    any expenses incurred  prior  to the fiscal start date;

(e)     any expenses already  taken  into account as a deduction in respect of any  tax liability  calculated by reference  to net profits or gains of any shareholder or affiliate of a shareholder in any State;

(f)     any expenses ill relation to any purchase of goods or services from any shareholder  or an affiliate of a shareholder  to the extent that the consideration  given exceeds the consideration which would be payable in an arm’s length transaction of substantially the same nature between unconnected parties;

(g)    the cost of any letter of guarantee  from shareholders  or affiliates  to the Slates which  is given in relation to the International Project Agreement;

(h)    fines and penalties imposed under  any law of a State;  and  the costs of indemnities to employees,  contractors  or agents of  any  WAGP  Company  in  respect of such affairs and  penalties;

(i)      any general overhead or general head office costs incurred  by shareholders  or affiliates and  re-charged to  any  WAGP  Company  not including any  amounts charged in respect of specific services supplied and  separately invoiced by such shareholders or  affiliates  to the extent these exceed 1.5 per cent of the Company’s  aggregate allowable expenses, excluding the amounts to be re-charged, for the relevant tax year;

(iv)    any depreciation for accounting purposes  in the value of any assets;

(k)     any Capital  Expenditure  or any debit  for accounting purposes arising by  reference to any Capital Expenditure;

(I)     any payment by the Company  to the WAGP Authority which is reimbursable through the WAGP Authority  charge;  and

(m)    any  payment  of, or on  account of  tax and  any  interest,  supplement  or penalty in  respect  of an underpayment of, or on account of tax.

10. Claimed reliefs in respect of Nigeria are the allowable losses available in Nigeria plus capital Reliefs, allowances claimed in the return in respect  of Nigeria for the relevant tax year.

11.-(1) If in any tax year the amount of allowable expenses attributable to Nigeria exceeds the amount of WAGP  income attributable to Nigeria, the excess shall be  an allowable loss  of the Company available in Nigeria  for that fax year.

(2)    An amount  of allowable loss mentioned in subparagraph  (1) of this paragraph  shall be carried forward and may be claimed by the Company in any of the nine subsequent  tax years in accordance with paragraph 5 and this paragraph  of this Schedule.

(3)    Where an amount of any allowable loss is claimed  and utilised  by the Company  in Nigeria in any subsequent tax year-

(a)     the amount of the taxable income of the Company  in Nigeria in respect  of that tax year  shall be reduced by the amount of allowable loss so claimed;  and

(b)     the amount of  that allowable loss that may be carried forward for use  in Nigeria in subsequent tax years  shall be reduced by the amount so used.

(4)     The Company  shall be  deemed  to claim  amounts of allowable loss  in chronological  order beginning with those that arose  in the earliest available tax year.

12.-(1)All eligible  development  costs,  and to the extent not included in the eligible  development costs, all allowable expenses incurred  by the Company prior to the fiscal start date less the sum of all WAGP income derived by  the Company  prior  to the fiscal start date,  including the amount of any interest income accruing  to the Company prior  to the fiscal start date, will be the amount of the capital account as at the fiscal start date.

(2)    At the end  of such tax year ending after the fiscal start date, the amount of the capital account of the  Company  shall be  adjusted by  adding the amount of  capital  expenditure  incurred by  the Company in that tax year  (other than capital expenditure  incurred prior to the fiscal start date,  and subtracting an amount  equal  to the aggregate of the disposal proceeds for that tax year  (but not so that the capital account may ever be a negative number).

(3)    To the extent that the aggregate  of the disposal proceeds  for any tax year exceeds  the amount of the capital account after adding the amount of capital expenditure  incurred by the Company  in that year but prior to adjustment  in accordance with Subparagraph (2) of this paragraph  in respect of the amount equal to the aggregate  of the disposal proceeds for that tax year or in accordance  with this paragraph,  the amount of  the excess (the  “negative pool  balance”) shall be  treated  as  WAGP  Income of the Company for the relevant tax year; and the  amount of the capital account shall be reduced to zero.

(4)    The Company may elect to claim an amount of relief (known as its “capital allowances”)  equal to no more than 25 per cent of the balance of its capital account at the end of the relevant  tax year “.

(5)    The amount of the capital  allowances shall be taken Into account in reducing the taxable  income of the Company  for the relevant  tax year as described  in paragraph 5 of this Schedule, and shall be deducted from the capital account  at the commencement  of the next succeeding  tax year.

(6)    The capital  allowances  mentioned in subparagraph  (5) of this paragraph shall not be claimed and the balance of the capital account shall not be reduced until the lax year or part thereof which falls after the end of the income tax holiday period, and in subsequent tax years.

(7)    The capital expenditure shall be-

(a)     the expenses of acquiring or improving any asset which is a capital asset; and

(b)     the expenses of capital services,  but, in each case, shall not include any expenses that do not  exceed US$ 10,000.

(8)    For purposes of subparagraph  (7) of this paragraph

(a)      an asset is a capital asset if that asset is acquired  not with a view to its sale for a profit, but for the enduring benefit  of the business of the Project;

(b)     a service is a capital service  if that service is not  provided to or acquired by the

Company  to be utilised  by  the Company  directly  for an onward supply of goods and services with a view to profit, but  is supplied for the enduring benefit of the business of the Project.

(9)    The Company will keep a ledger in US dollars recording  all capital expenditure incurred and the  capital asset in respect of which that capital expenditure  has been incurred.

(10) Where any  capital asset  is disposed of by  the  Company  (other  than  a disposal which is disregarded in accordance  with  subparagraph  (d) of paragraph  16 (3) of this Schedule), “disposal proceeds”  shall arise  in the  tax year  in which the disposal takes  place  and  the amount of the disposal proceeds shall  be the amount of the sale proceeds or  the value of other  consideration received for that capital asset.

13(1)          The income tax  holiday period shall be the  period  starting  on  the  fiscal start date,  and lasting for 60 months.

(2)    The Company  shall notify the WAGP Authority  and the Tax Authority  of Nigeria  promptly upon becoming aware of the first day on which a reservation  charge  is payable.

(3)    No income  tax shall be payable by the Company  in respect  of WAGP  income arising prior to the last day of the income  tax holiday period.

(4)     If a tax year begins before and ends after the last day of the income  tax holiday period, the amount of W AGP  Income  earned and  allowable expenses incurred in that tax  year  in the part periods before the last day and after the last day of the income tax holiday period shall be calculated on a pro rata basis by apportionment  of the total WAGP Income and allowable expenses of the tax year between the two periods according to the number of days  falling before  that last day  and the number of days falling after.

(5)    The  maximum  capital  allowances claimable in respect of the period after the last day of the tax holiday period  shall be pro-rated downwards  in the same manner.

(6)    The income tax payable in respect  of taxable income arising during  the tax year  in question shall be calculated  only  by reference to WAGP Income and allowable expenses apportioned  to the period after the last day of the income tax holiday period.

14(1)          All WAGP  income, allowable expenses and  capital  allowances  for a tax  year  shall  be apportioned  between each State in proportion to that State’s  apportionment  percentage  for that tax  year  determined  in accordance  with  subparagraph  (2) of this paragraph irrespective of where or how such WAGP  income might have been earned or accrued or expenses incurred.

(2)     In each  tax year.  the apportionment  percentage  of Nigeria shall be  derived according to the following formula-

APS =  45 x ( Ls ÷ Lt + ( RCS  ÷ RCT) + 2.5.

where:

APS = the apportionment  percentage of Nigeria in the  tax year,  expressed as a percentage;

LS = the length of pipeline comprised in the pipeline system  situated within Nigeria  as ”  at January  1 in that tax year, which has been commissioned  for which purpose  the length of the pipeline within  Nigeria  shall be determined  by the as-built survey

carried out by the Company and the length of lateral pipelines shall be included;

LT= the total length of pipeline comprised  in the pipeline system as at 1^st of January  in that tax year which  has been commissioned  for which purpose the length of the pipeline shall be determined by the as built survey carried out by the Company, and the length of lateral pipelines shall be included;

RC = the sum of the quantities of reserved capacity  which. are reserved  at any time for  transportation  of natural gas as at the 1st of January in that tax year, for delivery out of the pipeline system in Nigeria; and the total sum of the quantities of reserved  capacity which are reserved at any time for transportation of natural  gas as at the 1^st  of January in that tax year.

(3)     The  Company shall, not later than the 10^th of January  in each tax year, notify  the WAGP  Authority and the Tax  Authority of Nigeria of its calculation of the apportionment percentage  of each State for that tax year.

(4)     The  WAGP  Authority shall, not  later than  the 3Ist January  in that tax year referred  to in subparagraph (3) of this paragraph,  notify the Company, on behalf of all of the Tax Authorities, whether it accepts the correctness  of such calculation.

(5)      If the WAGP  Authority notifies the Company  that all of the Tax  Authorities  accept  the correctness  of the calculation, or if the WAGP Authority fails to notify the Company by  the 31st January, then the  apportionment  percentages for that tax year  shall be as  calculated  by  the Company.

(6)    If the WAGP Authority notifies the Company that one or more Tax  Authorities  do not accept  the correctness of the calculation,  the dispute resolution  procedure shall be used to determine  the apportionment percentage to apply for that tax year and pending  the final determination under  the dispute resolution procedure, the apportionment percentages which  applied during  the previous  tax year shall continue to apply.

(7)    Upon the final determination of the apportionment percentages under dispute  resolution procedure,  there shall be an adjustment between  the States (and if applicable, between  the States and the Company)  of any  monies paid  by or to the Company,  without  penalties  or  Interest (including any supplement or Interest as set out in paragraph  20 of this Schedule,  or any penalties set out under Part VI of this Schedule).

(8)    The apportionment percentages to apply  in any  tax year, or the method of determining the apportionment percentages, may be adjusted by the States by written notice signed by each relevant Minister and delivered to the Company prior to that tax year:

Provided, however that-

(a)     the total of the apportionment percentages to apply in a lax year  shall always equal

100 per cent;

(b)      if a methodology  is to be used  to determine  the division  of the apportionment percentages between  the  States,  the  apportionment  percentages shall  be  readily ascertainable not later than the 1^st January  ill the tall year concerned; and

(c)     If on the 1st January in a tax year adjusted apportionment  percentages which the

States  intend  to apply  in that tax  year  are not readily  ascertainable in accordance  with subparagraph  (b) of this paragraph, then the apportionment  percentages which applied  in  the previous tax year shall continue  to apply.

15.-(1)As  from  the  commencement  of the tax year  in which the fiscal start date  occurs. the Company shall submit returns for each tax year (each a return  and together, the returns)  as set out  in this Schedule to this Act.

(2)    The returns will comprise the  audited company  accounts of the  Company  (prepared in accordance with the accounting  principles)  together with tax accounts showing the appropriate tax  adjustments to the financial  statements.

(3)     The returns will include the results of the Company irrespective  of the State to which they relate and the results  of each other WAGP Company that is deemed to be a branch  of the Company under  this Schedule and shall be  prepared in accordance with the bases and assumptions in paragraph 16(3) of this Schedule.

(4)     The returns shall set out the WAGP  income. allowable expenses and capital  allowances for that tax year  and  the apportionment  in accordance  with  paragraph 14 (I)  of this Schedule of those  amounts to each State  and  shall include  a calculation  of the Company’s  liability to income tax in  each State for that tax year and the basis of that calculation.

(5)     The Company shall maintain its accounting  records  and “present its financial statements income tax computations and returns in US dollars.

(6)     The Company shall keep its original financial statements, income tax computations, returns and  all reasonably necessary supporting documentation  in premises situated within  one of the States at the choice of the Company.

(7)     The Company shall submit one  return  to the WAGP Authority and one to the Tax  Authority of Nigeria within six months of the end of the tax year,  the final date of such six month period being  the filing date.

(8)     The Tax Authority of Nigeria together  with the Tax Authorities of the other  States shall jointly review the returns in conjunction with the WAGP  Authority and  prepare a single  combined  assessment on the basis of the information  contained ill the returns.

(9)     The combined  assessment  shall show  the calculation of the taxable income of the Company  in each  State for the tax year  in question,  and the liability of the Company  to each  State for income tax in respect of the tax year  in question,  having credited any amounts to be credited in accordance with  this  Schedule, and shall constitute a tax assessment (referred to in this  Schedule as “the assessment”) by each individual State for the amounts so assessed in respect of that State.

(10)    The WAGP Authority shall, on behalf  of the Tax Authority in each State,  issue the combined assessment to the Company within  90 days of the filing date:

Provided that, if the Company  has not been provided with reasonably adequate information to justify the claims  and calculations in the Returns,  the WAGP Authority may, within 30 days of the filing date, request  such further  information as it may reasonably  consider  it necessary to justify me claims  and  calculations in the returns  in which case the  issue of the combined assessment shall be not later than-

(a)     ninety days following the filing date:

(b)     thirty  days after  the Company  provides such  further information.  such  later date

being the assessment due date.

(11)   If the Company fails to submit  returns  in accordance  with  subparagraphs (1) to (7) of this paragraph not later than the date  failing 12 months after the filing date. the Tax  Authority in Nigeria  together  with the Tax  Authorities in the other States may jointly in conjunction  with the WAGP Authority prepare  a combine assessment on the basis of the information they are aware.

(12)   The combined assessment prepared  in accordance with subparagraphs (8), (9) and (10) of this paragraph shall constitute a tax assessment  by each individual  State for the amounts so assessed  in respect of that State.

(13)   If. after the notification of a combined  assessment prepared  pursuant  to subparagraph (II) of this paragraph,  the Company  submits  returns  in accordance  with subparagraphs (1) to (7) of this paragraph, the  returns  shall be assessed  in accordance with  this Schedule and  following such assessment, Subparagraph (12) of this paragraph  shall cease to have effect and this Schedule shall apply  as if no combined assessment or assessment had been  issued pursuant to this Part of this Schedule.

(14)    If no assessment is issued in accordance with subparagraph (10) of this paragraph  not later  than the assessment due date, then the Company shall be deemed to have been assessed by the Tax Authority  of Nigeria,  exactly  in accordance with the return filed by the Company and such deemed  assessment shall constitute the assessment by Nigeria accordingly.

(5)     An Assessment of liability to income tax of the Company shall only be made  in accordance with subparagraphs (10), (11) or (14) of this paragraph  and shall not be made by the Tax Authority of Nigeria  otherwise  than in accordance with those paragraphs.

(16)   An Assessment made under subparagraphs (10), (11) or (14) of this paragraph shall be without  prejudice  to the power  for an amended or altered Assessment to be made  following an audit, in accordance with paragraph  17 (4), (5) and (6) of this Schedule.

16 (1)         The Company  shall promptly  notify the WAGP Authority  and the Tax  Authority of Nigeria in writing when any wholly owned subsidiary of the Company engages in WAGP Activities.

(2)    The Company and any  subsidiary  in respect of which the Company  gives a notice under  this paragraph (together  referred  to as “the Consolidated Group”) shall be treated as a consolidated entity for the  purposes of calculating the  liabilities to income tax  of the members of  the Consolidated Group under this Schedule.

(3)     For all purposes of Part II of this Schedule. each  of the members of the Consolidated Group other than  the Company  shall, with  respect  to the tax Year  in which notice  is given  under subparagraph (1) of this paragraph  and each Subsequent tax year  be deemed to  be a brunch of the Company in respect of WAGP  income,  allowable expenses and claimed reliefs and in particular- ‘

(a)     all income  accruing to any other WAGP Company  shall be treated as if it is or was accrued by or to the Company;

(b)     all allowable expenses incurred  by any other  WAGP  Company shall be treated as if

they are or were incurred  by the Company;

(c)     the belief, intent or purpose  of the Company shall be the same as that of the WAGP

Company concerned  had no consolidation taken place;

(d)     any  payments to  or receipts  from another  member  of the  Consolidated Group

including,  for the avoidance of doubt, dividends,  any  indebtedness between members of the Consolidated Group and  all supplies  and or disposals  between  members of the Consolidated Group shall be disregarded;

(e)     any asset that is or was acquired.  held or improved by any WAGP Company  shall be  treated as if it is or was acquired, held or improved by the Company;

(f)     any  indebtedness of  or  10 ally  WAGP  Company  (other  than  any indebtedness

disregarded pursuant to subparagraph  (3) (d) of this paragraph)  shall be treated as if it is or was indebtedness of or to  the Company,

(g)    any  goods or  services, other  than  any  goods or  services  disregarded  pursuant to subparagraph  (3) (d) of this paragraph) provided to or acquired  by any W AGP Company  shall  be deemed to be provided to or acquired by the  Company,  and any goods or services, other than  any  goods or services  disregarded  pursuant to subparagraph  (3) (d) of this paragraph) provided by any WAGP Company  shall be deemed to be provided by the Company;

(h)    any  action,  transaction or omission of any  WAGP  Company  shall be  treated  as an action, transaction or omission of the Company;

(i)      any allowable loss that would have  arisen  to any member  of the Consolidated  Group other  than the Company  but  for the bases and assumptions  set out in subparagraphs  (3) (a) to (h) of this paragraph  shall be treated as an allowable  loss of the Company;  and

(j)     each WAGP Company  other  than the Company  shall have no liability to income  tax in respect  of WAGP activities  or WAGP  income.

(4)    The Company  shall  submit returns and  assessments  shall be  issued  to  the Company,  in accordance with the bases and assumptions set out in subparagraph  (3) of this Schedule.

17(1) The  WAGP  Authority may. on  behalf  of and  as agent of the Tax Authority of Nigeria  request  further  information and conduct an audit of any return  at any time during  the period of six  amended years from the filing date for that return.

(2)    Except as  otherwise provided in Subparagraph  (I) of this paragraph,  no  audit  of the  Company shall be conducted by the Tax Authority of Nigeria.

(3)     The  WAGP  Authority shall  be empowered  to act on behalf  of and  as agent of the Tax  Authority of Nigeria in dealing  with the Company on a dispute as to an assessment or the outcome of an audit and any agreement  reached between the WAGP  Authority so acting  and the  Company shall be binding on the Tax Authority  of Nigeria.

(4)    The  Company  may. at any  time  during  the  six years  following the filing dates  submit amended  returns  for a tax year.  one  to each  of  the W AGP Authority and  the Tax  Authority of Nigeria in which case the Tax Authority of Nigeria shall issue an amended assessment  or more than one amended assessments  in accordance with  paragraph  15 (8) and (9) of this Schedule within 90 days of receipt of the amended  return,  or if it fails 10do so, paragraph  15 (14) shall apply.

(5)    The WAGP Authority acting  for and on behalf of the Tax Authority  of Nigeria,  may issue  an altered  assessment to the Company  if it considers that a previous assessment was incorrect  in any manner.

(6)    If there is a dispute as to an assessment,  then any agreement  reached to resolve that dispute  shall,  in the absence of  fraud,  be  binding on the  WAGP  Authority and  the  Tax  Authority of Nigeria,  and no assessment  shall be issued which is inconsistent with such agreement.

18. All payments in respect of income tax shall be made in US dollars.

19.(1)         Within 30 days  of the commencement  of each  tax year.  the Company  will deliver  to the Interim  WAGP  Authority, an estimate of its income tax liability in respect  of taxable  income including,  Payments where applicable, as a result  of paragraph  16 (3)  of this Schedule for  that tax year’  and  the Company  may vary any such estimate at any time during the year  by written  notice to the WAGP Authority.

(2)    The Company  shall make installment payments not later than each of the 31st March, the  30th June and the 30th September in each tax year and each payment  shall be of an amount  so that the Company  following that payment has paid or is deemed to have paid an amount  of income tax  in respect  of taxable income in Nigeria equal  to the estimated income tax in respect of taxable income in Nigeria for the tax  year multiplied by  the product of 25 per  cent and  the number  of installment payment  dates that have  then fallen due; and a final installment payment shall be made  not later than the 31st December.

(3)     The Company shall, at the same time  as filing its returns  for each  tax year,  pay a further installment payment  equal to the amount of further income tax if any, Which the returns  indicate  is owing by the Company.

(4)    An adjusting payment, if any,  shall  be due within  30  days  from the  date  on which the assessment is issued  from  the Company  to Nigeria if the result of the assessment is that further  income tax is owing  by the  Company  to Nigeria.  or from Nigeria to the Company  if the result of the assessment is that the Company  has overpaid installment payments for the tax year  in question.

(5)    Any  supplement  due from the Company  under paragraph  20 of this  Schedule shall also be due on that date  and in the event  that the adjusting  payment is due from  Nigeria  to the Company  and  any supplement  is due from the Company  to Nigeria,  the amounts shall be netted  off and only the remainder shall be due.

(6)    If an income tax liability of the  Company  is adjusted  following the issuance of an  amended assessment or an altered  assessment or following an appeal by the Company  or a State. a further  adjusting payment.  if any, shall be due from or as the case may be, to the Company within  30 days from the date of which the amended or  altered assessment is issued or, as the case may be, the date on which judgment is given by the relevant appellate  body  together with interest  at the applicable rate from the date on which the  amended or altered assessment  or decision on appeal is made.

20(1)          Where, for any tax year the amount of income tax due from the Company  in Nigeria on the basis of the return for the tax year in question  exceeds the product  of l.05, and the aggregate of the  installments paid by the Company  in Nigeria for the tax year  in question pursuant to paragraph 19

(2)    of this Schedule. the Company  shall pay,  in accordance with paragraph  19 (4) of this  Schedule, to Nigeria a supplement of an amount equal to 10 per cent of that excess.

(2)    Interest payable in US dollars will be payable  at the applicable rate on all other amounts owing by the Company  to Nigeria or by Nigeria to the Company under the fiscal laws and no interest shall be due  in respect of over or under payment  of installments under  paragraphs 19 (2) or  (3) of this Schedule.

21.-(1)No amount  in respect” of taxes will be required to be withheld or deducted from-

(a)     the dividends declared by the  Company  or any  dividends declared by  any  WAGP

Company  which are disregarded  pursuant  to paragraph  16 (3) (d) of this Schedule;

(b)     subject  to subparagraph  (2) of this paragraph, the payments by or to the Company  in respect  of interest, principal  or fees, charges or costs in respect of debt or any such payment  by or to any WAGP  Company  that  is disregarded pursuant to paragraph  16 (3)  (d) of  this Schedule;

(c)     the payments  in respect  of  branch profits or  repatriation of branch capital  of the

Company  or any such payment  by or to any WAGP Company that is disregarded pursuant to paragraph 16 (3) (d) of this Schedule;

(d)    the payments made for sales  of natural  gas which has  been  or is to be  transported through or consumed  in the pipeline system; or

(e)      the payments to a Shipper Of  the Company  for transportation of natural  gas through the pipeline system or  any  such  payment by  or to  any  WAGP  Company  that is disregarded pursuant to paragraph 16 (3) (d) of this Schedule.

(2)    If the Company makes any payment  of interest to a person who is not resident in any of  the  States in respect of debt owed by the Company  which was incurred  other  than in connection with  the funding of construction expenditure or working capital or other costs  incurred by the Company prior  to the  completion  date  or refinancing  of debt  originally incurred in connection  with  the  funding of construction  expenditure  or working capital  or other  costs  incurred by the  Company  prior to the completion  date, then-

(a)     the payment  of interest shall be made subject to a withholding in respect of taxes of the lender  of 10 per  cent of the gross payment;

(b)     the amount  of the withholding shall be paid by the Company  to the Tax  Authority of Nigeria in proportion  to the apportionment  percentages  of Nigeria applying in the tax year  in which the withholding is made and

(e)     the amount so paid to the Tax Authority of Nigeria shall be a final tax  on income in Nigeria in respect  of that interest.

(3)    Where  the Company  receives services from a contractor within any of the States. the Company shall  require a separate invoice in respect of the  services that  are rendered  in Nigeria or a breakdown  showing the amounts invoiced in respect of services rendered in Nigeria .

(4)    The Company shall  upon receiving such services mentioned  in subparagraph (3) of  this paragraph apply a 6 per  cent withholding  in respect of the  invoiced amount and shall  pay to the  contractor the net amount  and  to the Tax  Authority in Nigeria the amount withheld in respect  of services rendered  in Nigeria.

(5)    Notwithstanding subparagraph (4)  of this paragraph.  no  withholding  shall  be  applied to services that  are not  rendered  in Nigeria nor  in any of the  other  States nor will there  be  a  withholding  in respect of goods supplied to the Company whether supplied in conjunction  with services or otherwise.

(6)    Where a withholding is applied  under subparagraph  (5) of this paragraph the treatment of the withholding  for the relevant contractor shall be as follows, that is-

(a)     where the contractor  is a resident of Nigeria. the withholding will be a refundable  credit against taxation on income of that contractor  in Nigeria; and

(b)     where the contractor  is not a resident of Nigeria, the withholding  will be a final tax on income in Nigeria.

(7)     For  the  purposes  of this  paragraph of  this Schedule, a service shall  be  considered  to be rendered and received  where the supplier of the services actually performs  the services.

22. The Company shall notify the Tax  Authority of Nigeria  whenever  to its knowledge  it makes a  payment of a dividend an interest payment to a resident of Nigeria.

23-(1)         A buyer seller  or shipper who is not a resident  of Nigeria  shall not be subject to taxation  on its income in Nigeria  unless  it carries on business in Nigeria through a permanent  establishment situated in Nigeria.

(2)    Where a buyer seller  or shipper carries  on  business through a permanent  establishment  as specified in subparagraph  (1) of this paragraph, his income may be taxed  in Nigeria but only  so much thereof  as is attributable  to that permanent  establishment.

(3)    A buyer, seller or shipper who is a resident of  two or  more States  shall be  deemed to be  a resident only of the State in which his place of effective management is situated.

(4)    A buyer, seller or Shipper which is a resident of any State shall be Subject to taxation on income only in that State unless  it carries 011business in another Slate through a permanent establishment situated in that other State.

(5)    If the buyer, seller or shipper  carries on business  as aforesaid, the income of that buyer, seller  or shipper may be subject to taxation  in that other State but only so much thereof  as is attributable to that permanent establishment in that State.

(6)    The amount of the income of that buyer, seller, or shipper that is attributable to that permanent establishment in that other State, and therefore  subject to taxation in that other Slate, shall not also be subject to taxation in the State of residence.

(7)    In this Part of this Schedule, the following expressions shall have the following meanings-

“resident”  means, in respect of a State, a person  which  under  the laws of that State is liable to taxation in that State by reason of its incorporation or registration in that State, or by reason  of its place of management being  in that Slate; but does not include a person liable to taxation  in that State in respect only of Income  from  sources  in that State or capital  situated therein; and

“permanent establishment” means, in respect of a State, a fixed place of business in that State through which the business of an enterprise is wholly or partly carried  on,

and a person shall not be regarded as a resident or having  a permanent establishment in a State, by reason  only  that the person  holds  an interest in another person  which is a resident of or has a  permanent establishment in that State.

(8)     Any question of apportionment  of income or  expenses of profits  to any  permanent establishment shall be determined in a manner  consistent  with the provisions  of Article  7 of the  United  Nations Model Double  Taxation  Convention of June 2001.

PART Ill – VALUED  ADDED  TAX

24. (1) The Non-WAGP regime in respect of Value Added Tax (in this Schedule referred to as “the  VAT”) in Nigeria shall apply but with the following adaptations.

(2)     In this Part, references to Nigeria include references to any State Authority having  authority  in relation to VAT.

(3)     All supplies of goods or services which are imported from outside Nigeria for the purpose of  construction of the pipeline system shall be exempt for the purposes of VAT:

Provided that, in the case of goods-

(a)     the relevant goods are  items of plant, equipment, machinery or other materials  to

be used in the construction of the pipeline system  and  are listed on or are to be part of items listed on the exempt  goods list; and

(b)     they have  been  certified  under  the certification  system as qualifying for this

exemption.

(4)     The VAT in respect of supplies of goods or services rendered in Nigeria shall to the extent           that the relevant expenditure is capital expenditure be zero rated.

(5)     A supplier of goods or services shall be entitled to rely on a certificate given under the certification system as evidence that its supply is zero-rated.

(6)     The VAT in respect of supplies  of services  rendered  in Nigeria  by contractors  without  a permanent business  establishment in any  State to a WAGP  Company, where such  supplies  of services are not zero-rated  or exempted in accordance with subparagraph (3) of this paragraph  shall be chargeable in accordance with the Value Added Tax Act.

(7)     Where the foreign contractor  is registered for the purposes  of VAT ill Nigeria, the relevant WAGP  Company  which  is deemed  under  paragraph 26  of this Schedule  to be part of the VAT  Consolidation  shall make payment of that VAT directly  to that foreign contractor and  may assume that the relevant foreign contractor is bound to account to Nigeria.

(8)      Where the  payment mentioned  under sub-paragraph  (7) of this schedule is not  made, the  relevant  WAGP  Company  which is deemed under  paragraph 26 of this Schedule to be part of the VAT Consolidation shall withhold that VAT from  the payment  to the foreign Contractor and  shall  account for that VAT to Nigeria.

(9)     Natural gas  imported for  transit, or  for consumption  in the  course  of the  pipeline system  operations will be exempted  from VAT and natural  gas imported for sale will be subject to existing Valued Added Tax Act in Nigeria:

Provided that the treatment shall be comparable  to the treatment of competing fuels.

(10)   The sale of natural  gas in Nigeria for export  through the pipeline system and the provision of  services in Nigeria  to facilitate the delivery of such  natural  gas into the pipeline  system shall be  zero  rated and all natural  gas transportation services  in respect  of the pipeline system shall also be zero rated.

(11)   For the purposes of VAT,  supplies of services shall be rendered where the supplier of services actually  performs the services and  supplies of goods rendered where title to the relevant goods  passes.

25.-(l)         The Company,  shall be  entitled  to refunds of all VAT paid  or  deemed pursuant to  subparagraphs  (I) and (2) of paragraph  26 of this Schedule to be paid by it in respect  of supplies of goods and services  to  it or  such supplies  deemed  pursuant to  subparagraphs  (1)  and (2) of paragraph 26 of this Schedule.

(2)     The  Company  shall submit to the Tax Authority in Nigeria  a VAT return  in respect  of each  month not later than the 30th day of the subsequent  month.

(3)     The Tax  Authority in Nigeria will,  within  30  days  of the  submission of the  VAT return,  reimburse the Company,  in the currency or currencies in which the Company made the payments  concerned an amount equal  to the VAT refund  due  in respect of the supplies  received during the period to which that return  relates.

(4)     Any amount of VAT refund not  reimbursed to the  Company  concerned within 30  days  of submission  of a VAT return  by the Company  shall bear interest at the applicable  rate from that date until the date of actual payment  or effective  date of a credit as set out below.

(5)      If the Tax  Authority in Nigeria fails to refund  an amount due in respect  of such  a period  of  account, following the Company  having made all reasonable  efforts to recover that amount from the State Authority in question  the Company  may claim a credit  in respect  of that payment due in the calculation of income tax payable  in Nigeria by  the Company  in accordance with  subparagraph  (I) of this paragraph.

(6)      If the Company claims a credit in accordance with paragraph  4 of this Schedule,  Nigeria shall cease to owe that amount to the Company under this paragraph with effect from the time when, due  to the credit,  it pays a lesser  amount of income  tall than it would otherwise have paid.

26.-(1)The Company  shall,  to the extent that it has  not already done  so  in accordance  with paragraph  16 (1) of this Schedule, give notice  in writing  to the WAGP  Authority, and  to the Tax  Authority of Nigeria  of the name  and registered office of any other WAGP  Company  carrying out  WAGP Activities within  its jurisdiction.

(2)     The  Company  and all other  WAGP  Companies  operating in Nigeria shall for the purposes of VAT Consolidation, be deemed to be a single entity for the purposes of calculating  their  liabilities to, and  rights to a refund in respect of VAT under this Schedule and  their other rights and obligations under this Part 3 of this Schedule.

(3)     For all purposes  of this Schedule, the business carried on by each of the WAGP Companies that  are members  of the VAT Consolidation  shall, with respect to the VAT period in which a notice is given in accordance  with  subparagraph  (I) of this paragraph  and each subsequent  V AT period, be treated  as carried on by the Company  and in particular-

(a)      any supply of goods or services by any member of the VAT Consolidation  to another  member of the VAT Consolidation  shall be disregarded;

(b)     any other goods  or services  supplied by or to a member of the VAT Consolidation shall  be treated as supplied by or. as the Case may be, to the Company; and

(e)     any payments of VAT made by any member of the VAT Consolidation shall be treated  as a payment by the Company.

(4)     The Company shall submit a VAT return and the Tax Authority of Nigeria shall make payments to the Company  in accordance  with the bases and assumptions  set out in this Part of this Schedule.

PART IV -CUSTOMS  DUTIES

27.-(1)The Non-WAGP Regime in respect of customs duties  in Nigeria shall apply  subject to the  provisions of this Part of this Schedule.

(2)     For  the purposes  of this Part  “customs  duties” includes all customs and  excise duties,  all import and export  duties and all similar charges,  fees, taxes,  levies and duties.

(3)     In this Part,  a reference to Nigeria includes  a reference to any State Authority  having authority  in relation to customs duties.

28.-(1)Any goods imported for use on the pipeline  system shall be exempt from  customs duties:

Provided that-

(a)     the relevant goods are items of plant,  equipment,  machinery  or other  materials to be used  in the construction of the pipeline system and are listed or are to be part  of items  listed on the exempt  goods list; and

(b)     they  have been certified under the certification system as qualifying for  this

exemption.

(2)      If subsequent to the importation of any asset without the payment of duty in accordance with the application of  subparagraph  (1) of this, paragraph, that  asset is utilised  within  any  of the  States other  than for the purposes of the pipeline system, then the amount of duty will become  due  from the WAGP  Company  concerned  that would have been due  if the exemption had not been available on the initial importation.

29. Each WAGP Company shall pay local or national clearance  fees, registration fees and any other  fees in relation to the importation  of capital assets.
30. No customs duties will be levied in respect of the import or export of natural gas.

PART V -OTHER TAXES

31. No  taxes on income or  profits  or gains  or any other  corporate income taxes  other  than  as described in Part H of this Schedule and no taxes on capital gains will be payable by any  WAGP Company  in respect of W AGP Income or Income derived from WAGP activities or income falling within paragraph  7 (I)  (b) of Part II of this Schedule.
32. The Non-WAGP regime in respect of payroll taxes  and national insurance or social  security contributions in respect  of employees of any WAGP Company shall apply to that WAGP Company.
33. Each WAGP Company shall be liable to pay administrative fees of general application but to the extent that administrative fees exceed an amount that is regular and necessary for the services materials  or rights provided or granted  them shall be taxed.
34. Any gains arising from the sale of Securities as a consequence of the exercise of the rights set out in Clause  6 of the International Project  Agreement.  or the proceeds of such sale, shall not be company  subject to taxation.
35. (1) The WAGP Companies  shall, in respect of WAGP activities,  be liable to taxes on income or .- Any other  profits or gains to VAT and to customs  dunes as set out in Parts  Il , III and IV of this Schedule,  but not otherwise.

(2)     Each WAGP Company  shall be Subject to all minor taxes within the Non-WAGP  regime but to the extent  that  the combined payments  of all WAGP  Companies  in respect  of minor taxes to  Nigeria  and to any Tax Authority of Nigeria  in a tax year in aggregate-exceeds  in respect  of WAGP Activities an amount equal to US$50.000  adjusted  for inflation as set out in subparagraph  (3) of this paragraph, the amount of that excess shall be a debt owing by Nigeria to the Company.

(3)     The amount of $50.000 shall be adjusted for inflation as follows, that is-

AA  =  $50,000 x Ly -:- Lo

Where-

AA  =  The adjusted amount for the tax year  in question.

Lo  =  The  average of the inflation  index  for the twelve  calendar months up to

and  including the 31st October prior to the calendar  year  in which FID

occurs.

Ly =  The average  of the inflation  index  for the twelve  calendar months up to

and including the 31st October prior to the calendar year for which the calculation is being made.

(4)     Where the Company  considers that in a tax year, it or any other  WAGP Company  has paid in Nigeria  in a tax year, minor taxes  in excess  of the adjusted  amount determined in accordance with subparagraphs  (2) and (3) of this paragraph the Company  shall submit to Nigeria, with a copy to the W AGP Authority, a statement specifying all minor taxes paid during  the tax year  and its calculation  of the amount of the excess.

(5)     Nigeria  shall, within  30 days  of the submission of such return, reimburse the Company,  in the currency or currencies in which the Company  or other W AGP  Company  concerned made the  payments, an amount equal to the amount due from Nigeria  under  Subparagraphs (2) and (3) of this  paragraph.

(6)      Any  amount not reimbursed  to the Company  concerned within 30 days  of submission of  such return by the Company  shall bear interest at the applicable rate from that date until  the date of actual payment.

(7)     Where Nigeria fails to refund an amount due in respect of such. a  period of account,  following the Company having  made all reasonable  efforts to recover that amount from Nigeria the  Company may claim a credit  in respect  of that payment due in the calculation of income tax payable in Nigeria  by the Company,  in accordance with paragraph 4 (3) in Part II of this Schedule.

(8)     If the Company claims  a credit  in accordance with  this Act, Nigeria Shall cease to owe that  amount to the Company under this paragraph with effect  from the time when, due to the credit,  it  pays a lesser amount  of income tax than it would otherwise have paid.

PART VI-PENALTIES

36.(1)         The Tax Authority  of Nigeria may impose penalties on the Company in accordance with this  Part  of this  Schedule but  may not  otherwise impose penalties on  the Company or any  WAGP  Company. ‘

(2)     The Tax  Authority of Nigeria may impose in accordance  with  this Part VI  a fixed  penalty payable by the Company  to such Tax Authority  if the Company fails to submit a return by the filing  date for that return.

(3)    The fixed penalty payable under paragraph  6 (2) will be-

(a)      US$400, if the return is submitted within three months after the filing date; or

(b)     US$800, if the return  is submitted later than three  months after the  filing date  but  within 12 months after the filing date.

(4)    The  Tax Authority of Nigeria may impose in accordance  with  this Part. VI a further penalty  payable by the Company  to such Tax Authority  in addition to a fixed penalty if the Company  fails to submit a return within  twelve months after the filing date for that return.

(5)    The further penalty  imposed by the Tax Authority shall be 20 per cent of the unpaid  income tax  being the amount  of the income tax liability of the Company  in Nigeria for the tax year concerned  less the sum of the installments paid pursuant  to paragraph  19 (2) for the tax year to which  a return relates.

(6)    The  further penalty payable pursuant to subparagraph  (5) of this paragraph shall be calculated  by reference to the assessment  of Nigeria under  subparagraphs  (8), (9) or (11) to (14) of paragraph  15 of this Schedule,  and shall be subject to adjustment if the amount of such assessment is adjusted or altered whether under subparagraphs  (4),  (5) or  (6)  of paragraph  17 of  this Schedule,  or otherwise.

37.-(1)The Tax Authority of Nigeria  may impose  in accordance  with Part VI, a penalty payable  by the Company  to such Tax Authority if the Company  knowingly and with an intention to deceive such Tax Authority-

(a)     submits  a return that contains material errors  or omissions; or

(b)     submits incorrect company  accounts with any return that contains material errors  or omissions.

(2)    Where the Company discovers that there  has been a material error or  omission in a return or any company accounts submitted to the Tax  Authority of Nigeria that was not included  knowingly and with an intention  to deceive such Tax Authority, the Tax Authority of Nigeria may impose in accordance  with this Part VI a penalty unless the Company  remedies the error or omission within a  reasonable period.

(3)    Where the  Company  discovers that there  has been a material  error  or omission in a return  or any company accounts submitted  to the Tax  Authority of Nigeria’ whether  or  not knowingly  and  with an intention to deceive and  the error  or omission is notified  by  the  Company  to such Tax Authority before  such Tax Authority issues a notice under  paragraph 40 (1) below in respect  of that  error  then the Tax Authority of Nigeria may not impose a penalty  and any subsequent notice under paragraph 40 (1) by such Tax  Authority in respect of that error shall be invalid.

(4)    The  amount of a tax-related penalty  payable by  the Company  under this paragraph  shall not exceed the amount  by which the amount of the liability  of the Company  to income tax in Nigeria  for the tax year to which the return relates  and according  to the return  including the material  error or omission by the Company  is less than the amount  of the liability of the Company  to income tax in Nigeria for the tax year to which the return relates and would have been payable  if the return had not contained  the error or omission concerned.

38.–(1)The Company  shall keep and preserve records necessary for the completion  of each return in accordance  with paragraph 15 (5) and (6) this  Schedule.

(2)    If the Company fails to comply with  Subparagraph (1) of this paragraph, the Tax  Authority of Nigeria may  impose on the Company a penalty not exceeding  US$ 10,000.

39.-(1)The  Tax Authority of Nigeria may impose in accordance with this Part, a fixed penalty payable by  the Company  to such  Tax  Authority if the Company  fails to submit  a VAT return  on  or  before  the due date  for that V AT return.

(2)    The fixed VAT  penalty payable  under  this Schedule shall be-

(a)     US$250,  if the VAT  return  concerned  is submitted within  30 days after the  due  date  for that VAT  return  under Part 3 of this Schedule; and

(b)     US$500,  in any  other case.

40.-(1)In order to impose a fixed penalty, a further  penalty or a tax- related penalty on the Company  in accordance  with the  provisions of this Part, the Tax  Authority of Nigeria  shall serve a notice in writing on the  Company  within 6 years of the  filing date  for  the return to which the penalty relates.

(2)    In order  to impose a fixed VAT penalty  on  me Company  in accordance  with the provisions  of this Part  of this  Schedule,  the Tax Authority  of Nigeria shall serve a notice  in writing on  the Company  within  3 months of the due date for the V AT return  concerned under paragraph 2S (2) of this Schedule.

(3)    Where  the Tax Authority of Nigeria serves a notice  upon the Company, it shall specify the grounds for imposing  the penalty, the amount  of Ute penalty and the  date which shall  not be  less than thirty  days after  the date  on which the notice  is received by  the  Company  on  which, in the absence of any appeal,   the Company is to make payment of the penalty.

PART II- APPEALS

41. Subject to the right to appeal to the WAGP Tribunal as set out below, the Fiscal Review  Board shall have exclusive jurisdiction to hear applications  filed by any applicable person  for review of a  decision or action or inaction  of Nigeria, the Tax Authority  of Nigeria, any other State Authority or the  WAGP Authority  in relation to the application of  the agreed fiscal  regime  (including  Non- WAGP  Regime  matters which are  modified  by  the  implementation of the Agreed Fiscal Regime), including the specific applications set out in this Part.

42.-(1) Any WAGP  Company  or any other applicable person  who is aggrieved or dissatisfied by a decision or action or inaction  of Nigeria, the Tax Authority  of Nigeria. any other State Authority or the  WAGP  Authority  in relation to the  application of the  fiscal laws, may apply to  the Fiscal Review Board, and beyond  it to  the WAGP Tribunal  as set out in this Part, for a review of or to appeal that decision or  action or inaction or  for a  direction to Nigeria. the  Tax Authority  of Nigeria, other  State  Authority or WAGP  Authority  in respect  of such matter. in accordance with this Part.

(2)    The right of appeal or review under  this Part shall extend to all matters  covered by the Agreed Fiscal Regime,  including Non-WAGP  Regime matters which are modified by the implementation of the agreed fiscal regime.

(3)    Nigeria or a  State  Authority which is aggrieved or  dissatisfied by  a decision of the  Fiscal Review Board may appeal the decision of the Fiscal. Review Board in accordance with this  Part but where the matter being appealed is a matter  arising under  Part II of  this Schedule (other than an appeal in relation to the application of paragraph  4, or in respect  of matters covered in paragraphs 21  and  23_of this  Schedule),  then  all appeal shall lie only if all States Or the equivalent State Authority in all States  joins in the appeal.

43.-(1)        Any applicable person who is dissatisfied with-

(a)     any Assessment or any amended or altered assessment issued  by the Tax authority  of Nigeria;  or

(b)     the failure of Nigeria  to issue an amended assessment following  the submission of amended returns in accordance with Part II of this Schedule may appeal to the Fiscal  Review Board  by written  notice  to the WAGP Authority. copied  to the Tax Authority of Nigeria.

(2)    Any applicable person who  is dissatisfied with any  imposition  of a withholding or deduction  contrary  to paragraph 21  of this Schedule or the failure of Nigeria  to treat any withholding in  accordance with paragraph 21 (6) of this Schedule. may appeal  to the Fiscal Review Board  by  notice in writing  to the WAGP Authority.  copied to the Tax Authority  of Nigeria.

(3)    The notice  required  to be given under this paragraph. shall be given-

(a)     in the case of subparagraph (1) (a) of this paragraph  within  30 days  of the date  on which the assessment, amended assessment  or altered assessment  is issued; or

(b)     in the case of subparagraph (1) (b) of this paragraph  within  135 days of the submission of the amended returns as referred  to in paragraph 17 (4) of this Schedule; or

(c)     in the case of subparagraph  (2) of this paragraph.  within 30 days of the date on which the Tax  Authority of Nigeria seeks to impose the withholding or deduction or the date  on which Nigeria fails to treat the withholding in accordance with Part II of this Schedule.

44.(1)         If any applicable person  is dissatisfied with-

(a)     any refund of VAT by Nigeria or a state Authority  including  as to the amount of any

interest due;

(b)     any refusal by Nigeria  or a State Authority to make a repayment of VAT including  as to the amount of any interest due;

(c)     any requirement of Nigeria or a State Authority that VAT be paid or charged; or

(d)    any refusal in whole or in part by Nigeria  Of a State Authority to allow a credit  for Tax in respect of VAT paid and not refunded, may appeal to the Fiscal Review Board  by written  notice  to the W AGP Authority,  copied  to the Tax Authority of Nigeria  and to any other State Authority involved.

(2)    Such notice  mentioned in Subparagraph (1) of this paragraph  must be given within 60 days of the matters  giving  rise to the dissatisfaction of the applicable person came to its attention.

45.-{1)If any applicable person  is dissatisfied with any imposition of any customs  duties pursuant  to Part IV of this Schedule by Nigeria.  may appeal to the Fiscal Review Board by written  notice to the WAGP  Authority, copied to the Tax Authority of Nigeria.

(2)    Such notice must  be given within 60 days of the date on which the matters giving  rise to the dissatisfaction  of the applicable person came to its attention.

46.-(1)If any applicable  person is dissatisfied with  any imposition of any Tax  by Nigeria  or a State Authority  contrary  to the provisions of the fiscal laws or by the failure of Nigeria or a State  Authority or the WAGP  Authority to comply with  the fiscal laws  or  to correctly apply  the Non-WAGP  regime  as modified by the implementation or  the agreed fiscal regime,  it may appeal to the Fiscal Review  Board by written  notice to the WAGP Authority, copied to the Tax  Authority  of Nigeria and any other  relevant  State Authority.

(2)    The notice mentioned in subparagraph (1) of this paragraph  shall be given within 90 days on the  date on which Nigeria seeks  to impose the Tax concerned or the  final decision of Nigeria or the State Authority which gives rise to the dissatisfaction.

47. -(1)If any applicable person is dissatisfied with any imposition of any penalty under  Part VI of this Schedule for any demand  for interest  by the Tax  Authority of Nigeria under paragraph  20 (2) of this Schedule or any refusal of the Tax Authority of Nigeria or Nigeria  to pay interest pursuant  to paragraph  20 (2) of this Schedule, it may appeal to the Fiscal Review Board by written notice to  the WAGP  Authority, copied to the Tax  Authority of Nigeria.

(2)     The notice mentioned  in subparagraph  (1) of this paragraph  shall be given within 30 days of the  date on which the Tax  Authority of Nigeria seeks to impose the penalty  or the interest or the date on which the interest was due and payable  by such Tax Authority.

48.-(1)The Fiscal  Review  Board shall  conclude, on  the basis  of the  information and  evidence  submitted to  it, what the  correct amount of Tax due  from, or  repayment  of  Tax  due to, the applicable person  should be, being  satisfied on the balance  of probabilities, a decision of the Fiscal Review Board shall constitute  an administrative  decision of the Tax Authority  of  Nigeria.

(2)     The decisions of the  Fiscal  Review Board shall be binding on the parties to its proceedings, shall be recognised  as final, effective and immediately enforceable  as of their notification within the domestic legal and fiscal  systems of Nigeria  and as against any State Authorities  of Nigeria  (to the extent Nigeria was  a party  to or regularly joined in the proceedings)’  subject to the parties’ right to  appeal to the W AGP Tribunal as set out below.

49. The  WAGP  Tribunal shall have exclusive jurisdiction  to hear  and  determine the appeals and applications provided for it in this Schedule.

50.-(1)Any party  in  proceedings  before the  Fiscal  Review Board may  apply to the WAGP Tribunal if they are dissatisfied with  the findings of the Fiscal Review Board so far as that finding is a finding of law, but shall not be so entitled if that finding is a finding of fact.

(2)     Whether a finding is a finding of law or of fact shall be the decision  of  the Fiscal Review  Board acting reasonably  and in good faith and taking into account the submissions of each party.

(3)     Any such decision may be appealed against  to the WAGP Tribunal  by any of the parties before the Fiscal Review Board.

(4)     Nigeria may also bring an application to the WAGP Tribunal in accordance with paragraph 4 (6) of this Schedule.

51.-(1)The  WAGP  Tribunal shall conclude, on the basis  of the information  and  findings  of fact  submitted to them, what the  correct  amount of  tax due  from or  repayment  of tax  due  to. the applicable person should be being satisfied on the balance of probabilities.

(2)    The WAGP Tribunal shall reach its determination fairly,  in accordance  with  the  facts. the governing law and all relevant  agreements  including, for the avoidance of doubt,  the International Project  Agreement  and  if the WAGP  Tribunal is unable  to agree  unanimously on its decision.  a majority decision shall apply and shall be binding on the parties.

(3)    The decisions of  the WAGP  Tribunal shall be binding on  the parties  to its proceedings.  and  shall be recognised  as final, effective and immediately  enforceable as of their notification within the domestic legal and fiscal  systems of Nigeria  and as against any State Authorities  of Nigeria  (to the extent Nigeria was a party  to or regularly joined in the proceedings).

52. The procedures for the conduct of appeals or applications to the Fiscal Review Board or the WAGP Tribunal shall be as set out in the WAGP Treaty and the Rules of Procedure.
53. (1)Where an applicable person is appealing a liability to tax only in part, it shall make payment  in respect of the pan  of the liability to tax that is not disputed and such payment shall be taken into account by the Fiscal  Review Board or WAGP  Tribunal, as the case  may  be, in assessing the amount of any  liability to tax and  interest, if any  due  under  subparagraphs  (5) to (7) of this paragraph following its judgment.

(2)    In the conduct of an appeal, no party to the appeal shall be obliged to disclose any document which it reasonably considers contains legal advice provided by a legal adviser including for the avoidance of doubt.  any legal adviser  employed as such by such party  in respect of the appeal  or otherwise and shall be entitled to disclose parts only of documents where part of such document  is  relevant  to the appeal but parts are not, or parts contain  legal advice that the party concerned shall not be obliged to disclose, and parts do not.

(3)    The parties to proceedings before the Fiscal Review Board or WAGP Tribunal  shall be free to settle the appeal by agreement of all such parties  on  such terms  as they  see fit at any time, including during  the hearing, in which  case the appeal  and  the hearing shall, to the extent of the settlement,  come to an end and no further appeal shall be available.

(4)    Any agreement made pursuant to subparagraph (3) of tins paragraph shall not be effective unless it is made in writing signed  by the  appropriate representative of all the parties  to the proceedings.

(5)    The  Fiscal  Review Board and the WAGP  Tribunal may in reaching its judgment, grant  to a party or parties  to the hearing  a right to receive from the other party or parties  a payment in respect of the costs of the first party or parties.

(6)    The Fiscal Review Board and the WAGP Tribunal may also order that Interest is payable at a rate not exceeding the Applicable Rate for any period it considers to be reasonable.

(7)    Any amount of costs or interest under this paragraph 53 of this  Schedule received by a party  to such a proceeding shall not be taxable in the hands  of that party and no payment by a party  of an amount  awarded  under this paragraph shall be deductible as an allowable expense.

SECOND  SCHEDULE

Section 21

SUBJECTMATIER OF  THE WAGP REGULATIONS

1. The WAGP Regulations shall-

(a)     be consistent with the International Project  Agreement;

(b)     adopt the Agreed Design Standards as defined  in the International  Project  Agreement;

(c)     accord with internationally acceptable industry standards; and

(d)     accord  with recognised good practice applicable to high pressure natural gas pipelines.

2. The  WAGP  Regulations shall not govern  the environmental  standards which shall be applied  to  the pipeline  system and  implemented  in the construction and operation of the pipeline  system,  or the procedures  for obtaining  environmental  approvals, which standards and procedures shall remain  the subject matter  of the prevailing environmental legislation applying in each State.   3.          The WAGP  Regulations shall include  without limitation,  regulations addressing the following  matters-

(a)     standards and  procedures for  the design and  construction of  the pipeline system

incorporating the Agreed Design Standards;

(b)     standards and  procedures for the testing  and  commissioning  of the pipeline system  incorporating the Agreed Design Standards;

(c)     standards and  procedures for the operation and  maintenance  of the  pipeline  system including for the repair, testing  and checking of the pipeline  system, for internal and external corrosion, incorporating the Agreed Design Standards;

(d)     standards  of and procedures  for measurement  to be used in the pipeline system;

(e)     health  and safety requirements and practices for the pipeline system;

(f)      environmental  operating requirements.  including handling of leaks and discharges;

(g)     qualifications  and experience  required  for operating personnel and companies;

(h)     requirements for periodic  reporting to the WAGP Authority;

(i)      rights of inspection to be granted to the WAGP  Authority;

(j)       a regime providing for the imposition of penalties on the Company  for certain breaches of the W AGP Regulations  in the operation  of the pipe line  system and for continuing  events  of  default by the Company  under  the International  Project  Agreement;

(k)      procedures to deal with an emergency  situation,  including the circumstances in which the Company  may be required to suspend  its operations for reason of risk to health, safety or the environment;

(l)      procedures  for the  termination or resumption  of operation of the pipeline system

including procedures  for abandonment;

(m)    to the extent  not included in the Rules  of Procedure. procedures for the conduct of hearings  of the WAGP Authority  where appropriate.  under the WAGP Regulations; and

(n)     to the extent not included in the Rules of Procedure. procedures for review  by the

Committee of Ministers  and the Fiscal Review  Board and appeals to the W AGP Tribunal  in accordance with the WAGP Treaty.

4. The W AGP Regulations shall provide for-

(a)     all drawings,  plans, designs and  other technical documents made  or prepared  by the Company  for the purposes of the Project. and any plans for the fabrication  or construction  of the pipeline  system which have been approved by the Steering Committee or its delegates prior to the establishment  and empowerment  of the WAGP Authority  shall be deemed  to have been duly approved by the WAGP Authority;

(b)     all actions, other than those identified in subparagraph (a) of this paragraph, taken in accordance with the International Project Agreement or this Act by the Steering Committee or its delegates prior to the establishment  and empowerment  of the WAGP Authority  which  are  functions  of the WAGP Authority shall be deemed to have been  duly taken  by the WAGP Authority;

(c)     any drawings, plans, designs and other technical  documents made  or prepared  by  the Company  for the purposes of the Project, and any plans for the fabrication  or construction  of the pipeline  system,  which  have been  approved by the W AGP Authority or its delegates or  deemed to have been  so approved  by operation of subparagraph (a) of this paragraph  prior to the entry into force of the WAGP Regulations,  which  are approvals provided for in the WAGP Regulations, shall be deemed to have  been approved under the WAGP Regulations upon  their entry into force; and

(d)     all actions  taken by  the WAGP  Authority or deemed to have  been  so taken  by operation  of subparagraph 4 (b) of this paragraph prior to the entry into force of the WAGP Regulations. which are actions  provided for in the WAGP  Regulations. shall be deemed to  have been duly taken under  the W AGP Regulations upon their entry into force.

I  CERTIFY, IN ACCORDANCE WITH SECTION  2(1)  OF THE AUTHENTICATION  ACT, CAP. A2,  THE LAWS  OF THE FEDERATION  NIGERIA  2004, THAT THIS IS A TRUE COPY OF  THE  BILL PASSED BY

HOUSES  OF THE NATIONAL  ASSEMBLY.

NASIRU IBRAHIM  ARAB,

CLERK TO THE NATIONAL  ASSEMBLY

20^TH DAY OF JUNE, 2005

I CERTIFY THAT THIS BILL HAS BEEN CAREFULLY COMPARED BY ME WITH THE DECISION REACHED BY THE NATIONAL ASSEMBLY AND FOUND BY ME TO BE TRUE AND CORRECT DECISION OF THE HOUSES AND IS IN ACCORDANCE WITH THE PROVISIONS OF THE ACTS AUTHENTICATION ACT CAP. A2, THE LAWS OF THE FEDERATION OF NIGERIA, 2004.

NASIRU IBRAHIM ARAB,

CLERK TO THE NATIONAL ASSEMBLY

22^ND DAY  OF JUNE, 2005

I ASSENT.

CHIEF OLUSEGUN OBASANJO  GCFR

PRESIDENT OF THE FEDERAL REPUBLIC OF NIGERIA

22^ND DAY of June, 2005