In response to the Nigerian government's move to classify drilling rigs as ships, Noble Corp. and Transocean Inc. are contesting the plan in a Nigerian court.
The plan would allow Nigeria to take 2% of the companies' Nigerian revenue generated by the rigs under the country’s taxes regulating coastal shipping. According to Dow Jones, both Noble and Transocean received letters last year asking for this fee.
Transocean would pay nearly $21.5 million annually from its 11 rigs offshore Nigeria. Noble would pay nearly $6.8 million from its six rigs. However, those figures would only remain the same if the companies do not seek more Nigerian contracts.
The companies are seeking "a declaration that our drilling operations do not constitute 'coastal trade,'" keeping their rigs from being classified as ships.
Raymond James analysts said that Nigerian government success in this attempted reclassification would be "clearly bearish for both companies, but instincts point to resolution as such a move would push available capacity out of the region at a time when Nigerian oil output faces internal problems."
If the companies were made to comply with Nigeria's shipping law, operations would be negatively impacted. It would require both companies "to incur additional costs of compliance," Noble said in its annual report.
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