The Federal Government has approved a new fiscal framework aimed at encouraging fresh investment in Nigeria’s deep offshore petroleum sector, with qualifying new developments eligible to begin on a 70:30 profit-oil sharing ratio in favour of contractors.
The policy is contained in the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026, signed by President Bola Tinubu on August 6, 2026, and subsequently gazetted by the government.
A key feature of the order is the introduction of a Profit Oil Reset for eligible new projects. Under the provision, a qualifying development can start its own profit-oil sliding scale, irrespective of the profit-oil level already applicable to older production within the same contract area.
At the initial stage of the reset, contractors will receive 70 per cent of the profit oil, while the government will take 30 per cent. The arrangement is intended to prevent new investments from being placed under profit-sharing terms that have become less favourable as existing fields mature.
The new provision is restricted to greenfield crude oil and non-associated gas developments that had not reached Final Investment Decision when the order commenced. For a project to qualify, its FID must be taken no later than December 31, 2029, although the deadline may be extended where force majeure affects the developer’s ability to meet it.
The government has also stipulated that approved projects must be separately ring-fenced for cost recovery and tax purposes. After a Profit Oil Reset is granted, the contractor and government are required to sign an addendum to the relevant Production Sharing Contract within 30 days.
The fiscal package extends beyond profit-oil sharing, with the government also offering production tax credits to qualifying developments.
Oil projects with producible reserves of up to 400 million barrels may qualify for a Standard Production Tax Credit of as much as $3 per barrel, while developments with reserves exceeding 400 million barrels may receive up to $4.50 per barrel.
An additional credit of up to $1 per barrel is available for qualifying future leases, subject to the requirements specified in the order.
The government has also provided incentives for deep offshore non-associated gas developments. Qualifying gas projects with lower hydrocarbon liquids content may receive up to $1 per thousand standard cubic feet, while those with higher liquids content may qualify for up to $0.50 per thousand standard cubic feet.
There is also provision for a Supplementary Production Tax Credit to be granted on a case-by-case basis. The total value of the standard and supplementary credits, however, cannot exceed $11.50 per barrel for oil projects or $8 per barrel of oil equivalent for non-associated gas projects.
Professor Emeritus of Petroleum Economics, Wumi Iledare, said the investment objective of the new incentives was welcome but argued that their effectiveness should ultimately be judged by the additional value created for Nigeria.
Iledare questioned whether the revenue and economic rent the government would forgo through the incentives would be justified by the additional investment and economic value generated.
He further pointed to the capital requirements and geological, cost and market risks associated with deepwater developments, noting that fiscal stability remains an important consideration for investors.
The economist also described the potential to attract up to $50 billion in investment as significant, including the approximately $10 billion Bonga Southwest project. He, however, cautioned that the success of the policy should not be measured solely by investment announcements.
The new order also places emphasis on local participation, requiring project activities to be undertaken in Nigeria except for critical-path activities or cases where domestic execution would cost more than 10 per cent above the alternative. Such exceptions must be covered by an approved Nigerian Content Plan.
The Nigeria Revenue Service is expected to issue detailed implementation guidelines within 45 days. The guidelines are expected to address how companies will apply for the incentives, economic valuation, computation procedures, monitoring and project ring-fencing.
To protect public revenue, the government has included clawback provisions in the framework. Tax credits can be withdrawn and recovered where they were obtained through false statements, misrepresentation, incorrect information or violation of the conditions attached to approval.
The new fiscal measures come as the Federal Government seeks to attract fresh capital into the upstream oil and gas industry and encourage the development of deep offshore projects requiring significant financial and technological investment.
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