Nigeria Unlocks Deepwater Oil Investment with Landmark Tax Relief Order
Nigeria has taken a decisive step to revitalise its stalled deepwater oil and gas sector by introducing a new fiscal regime designed to attract billions in investment. President Bola Tinubu’s approval of the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026, signed on August 6 and gazetted on August 10, replaces the protracted, project-by-project negotiations that have hampered development for over a decade. This new framework offers a fixed, published set of tax credits and profit-sharing terms, aiming to provide the certainty that has eluded international oil companies (IOCs) when weighing Nigeria against more attractive investment destinations.
The federal government estimates this policy shift could unlock as much as $50 billion in investment, with Shell’s approximately $10 billion Bonga South West project earmarked as an immediate beneficiary. For years, Nigeria’s technically rich but high-cost deepwater fields have been overlooked in favour of opportunities in Guyana, Brazil, and Namibia, while regional competitors like Angola enhanced their fiscal terms. The new order directly addresses this by offering predictability, a key factor for attracting long-term capital, as President Tinubu stated.
BusinessDay’s analysis reveals the tax relief extends to numerous undeveloped deepwater assets. ExxonMobil’s Owowo, Bosi, and Uge fields, Chevron’s Nsiko development, and TotalEnergies’ Ina shallow-water project are now positioned for potential Final Investment Decisions (FIDs). Eni’s ZabaZaba/Etan field, one of the largest undeveloped deepwater discoveries, stands to be a significant prize. Qualifying projects will receive a Standard Production Tax Credit of $3 to $4.50 per barrel, with an additional $1 per barrel for future leases. A discretionary Supplementary Production Tax Credit, assessed by the Nigeria Revenue Service, could bring the total relief to $11.50 per barrel for oil and $8 per barrel of oil equivalent for gas, though these credits are halved if oil prices fall below $50 per barrel and are non-refundable.
Crucially, the order resets the production-sharing contract (PSC) terms for eligible new projects. Previously, the government’s profit share increased as fields matured, discouraging new developments within existing contract areas. The new regime allows new projects to restart at a more favourable 70:30 split favouring the contractor, treated separately for cost recovery. To secure these standard incentives, companies must reach FID by December 31, 2029, a deadline designed to accelerate investment decisions.
In return for these fiscal concessions, the framework imposes stricter local content requirements. Companies seeking supplementary credits or the PSC reset must prioritise project execution within Nigeria, unless it incurs more than a 10 percent cost increase or involves critical long-lead items. This emphasis aims to bolster domestic engineering, fabrication, marine logistics, and project management capabilities, fostering job creation and strengthening local supply chains.
The effectiveness of this new regime will be closely scrutinised. The Nigeria Revenue Service’s 45-day timeline for ruling on supplementary credit applications presents a compliance hurdle. The progress of the Bonga South West project towards FID will serve as the market’s initial gauge of Nigeria’s success in rebuilding investor confidence and resolving its long-standing credibility challenges in the deepwater sector.
