New fiscal rules allow qualifying greenfield projects to restart the profit-oil sharing scale, alongside tax credits of up to $11.50 per barrel for eligible developments…..
The Federal Government has unveiled a new incentive package aimed at attracting fresh investment into Nigeria’s deep offshore oil and gas sector, allowing qualifying new projects to restart the profit-oil sharing scale at 70:30 in favour of contractors.
The provision is contained in the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026, signed by President Bola Tinubu on August 6 and subsequently gazetted by the Federal Government.
Under the new framework, a qualifying development can receive a Profit Oil Reset, meaning it will not automatically inherit the higher government share that may already apply to older production within the same contract area.
Instead, once the reset is approved, the profit-oil sharing arrangement for the new project will begin at 70 per cent for the contractor and 30 per cent for the government.
The policy is designed to improve the economics of new deep offshore developments, particularly projects that require substantial upfront investment and long periods before production and cost recovery.
The Gazette makes clear that the reset applies specifically to the approved new development.
This means an operator seeking to develop a fresh field in a contract area where existing production has already moved to a higher government share would not necessarily have to apply the older, less favourable profit-oil ratio to the new project.
The new project would instead start from the initial 70:30 position and subsequently progress through the applicable sliding scale.
The development must be a greenfield crude oil or non-associated gas project, and a Final Investment Decision must not have been taken before the order came into effect.
Eligible projects must reach FID by December 31, 2029, although the deadline may be extended where force majeure prevents the operator from meeting it.
The project must also be ring-fenced for cost recovery and tax purposes.
Once a Profit Oil Reset is approved, the government and contractor are required to execute an addendum to the relevant Production Sharing Contract within 30 days.
The new fiscal package goes beyond the profit-oil reset.
The government has introduced a Standard Production Tax Credit of up to $3 per barrel for qualifying oil projects with producible reserves of up to 400 million barrels.
Projects with larger reserves may qualify for a credit of up to $4.50 per barrel.
Future leases can receive an additional $1 per barrel, provided they satisfy the conditions set out in the order.
For deep offshore gas developments, the tax credit will be as high as $1 per thousand standard cubic feet for qualifying gas with lower hydrocarbon liquids content, while projects with higher liquids content can receive up to $0.50 per thousand standard cubic feet.
The government has also created a Supplementary Production Tax Credit, which will be considered on a case-by-case basis.
However, the combined standard and supplementary credits cannot exceed $11.50 per barrel for oil projects or $8 per barrel of oil equivalent for non-associated gas projects.
The new order comes as the Federal Government intensifies efforts to revive investment in Nigeria’s upstream petroleum industry following years of weak capital inflows and production challenges.
The potential for the policy to unlock as much as $50 billion in investment, including the approximately $10 billion Bonga Southwest project, has been highlighted as one of the major opportunities associated with the new fiscal framework.
But Iledare stressed that the success of the policy should ultimately be measured by actual investment, production, government revenue and wider economic benefits rather than investment announcements alone.
The incentives do not remove existing expectations around domestic participation.
Under the order, project activities are expected to be carried out in Nigeria except where the activity is critical to the project’s development or would cost more than 10 per cent above the international alternative to execute locally.
Such exceptions remain subject to an approved Nigerian Content Plan.
The Nigeria Revenue Service is expected to issue implementation guidelines within 45 days.
The guidelines are expected to cover the application process, economic valuation methodology, computation templates, monitoring arrangements and the ring-fencing requirements for qualifying projects.
The government has also built clawback provisions into the new framework to protect against abuse of the incentives.
Tax credits may be withdrawn and recovered where they were obtained through false statements, misrepresentation, inaccurate information or breaches of the conditions attached to an approval.
With the new fiscal regime, the government is betting that a more attractive commercial structure can persuade international and domestic investors to commit fresh capital to Nigeria’s technically demanding deep offshore sector.
The bigger test, however, will be whether the incentives translate into new projects, higher production and greater long-term economic returns for Nigeria, rather than simply reducing the government’s share of revenue from developments that would have taken place anyway.
