Three different sets of fiscal terms have governed Block 245 since 1998: a 2003 PSC signed by Shell; the 2005 Model PSC that applied Nigerian contractor Malabu, and the current terms applicable to Eni and Shell based on a 2011 Resolution Agreement and an associated 2012 Production Sharing Agreement.

The rights to Block 245 have been the subject of substantial controversy and legal action. This analysis represents the first public domain assessment of the impact of these different sets of fiscal terms on potential revenue for the Government of Nigeria.

Under our base case assumptions, and assuming a future oil price of $70 per barrel, the 2003 PSC terms would generate $14.3 billion in government revenue over the lifespan of the project. In contrast, the 2011 RA terms would generate $9.8 billion. The potential reduction of between $4.5 billion is due to the removal in the 2011 RA and the 2012 PSA of the central feature of the production sharing system: a share of Profit Oil for the government.