NUPRC Signs Historic $1.08 Billion Deepwater Contract with TotalEnergies and Sapetro — ‘First Major Deal in a Decade’

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has signed a groundbreaking production sharing contract (PSC) with TotalEnergies and South Atlantic Petroleum (Sapetro) for petroleum prospecting licences (PPL) 2000 and 2001, marking the first major international deepwater award in over a decade. The $1.08 billion deal, featuring a $10 million signature bonus and performance-based incentives, represents a pivotal moment for Nigeria’s oil sector under the transformative Petroleum Industry Act (PIA) framework.

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Historic Deal Structure and Terms

Comprehensive Coverage and Partnership

The oil blocks, awarded during Nigeria’s competitive 2024 licensing round, span approximately 2,000 square kilometers in the prolific Niger Delta Basin. Under the joint operating agreement, TotalEnergies holds an 80 percent contractor interest, while Sapetro controls the remaining 20 percent, combining international expertise with Nigerian local content capabilities.

Performance-Based Financial Framework

The agreement includes a robust financial structure featuring a $10 million signature bonus and production-linked incentives. According to NNPC Limited Group CEO Bayo Ojulari, the contract includes performance bonuses of 2 million barrels or cash equivalent upon reaching 35 million barrels of production, and an additional 4 million barrels upon hitting 100 million barrels of output.

Cost Recovery and Profit Sharing

The PSC establishes a 70 percent cost recovery ceiling, providing operators with reasonable investment protection while ensuring the Nigerian Federation receives substantial returns. The agreement also includes comprehensive fiscal provisions covering royalties, taxes, and strict compliance with host community development obligations under the PIA framework.

Leadership Perspectives and Strategic Vision

NUPRC’s Transformational Agenda

Speaking at the signing ceremony in Abuja, NUPRC Chief Executive Officer Gbenga Komolafe described the agreement as marking “a new chapter” in Nigeria’s upstream oil and gas industry. He praised President Bola Tinubu for implementing crucial sector reforms, including 2024 executive orders on fiscal incentives, local content enhancement, and streamlined contract timelines.

“This PSC signals the start of a committed work programme that will help us unlock the untapped geological potential of our deepwater, expand our reserves, boost production, and strengthen Nigeria’s energy security,” Komolafe emphasized. He expressed confidence that the agreement would contribute significantly to Nigeria’s ambitious target of reaching 3 million barrels per day production.

NNPC’s Strategic Milestone

NNPC Limited Group CEO Bayo Ojulari characterized the contract as “unique in many respects,” highlighting its distinction as the first deepwater PSC awarded since the PIA’s enactment and the first to comprehensively address both crude oil and natural gas terms. This comprehensive approach reflects Nigeria’s commitment to maximizing value from its hydrocarbon resources while promoting gas commercialization and flare reduction initiatives.

TotalEnergies: A Six-Decade Partnership

Established Market Leader

TotalEnergies Managing Director Matthieu Bouyer expressed honor at participating in this historic award, noting it represents the first international company to secure deepwater assets in Nigeria in over a decade. With more than 60 years of operations in Nigeria and over 1,800 employees, TotalEnergies brings substantial expertise to the partnership.

“This moment comes after an open and transparent bid process. Today marks the beginning of what we hope will be a new chapter of value creation in Nigeria’s upstream sector,” Bouyer stated. The company’s extensive downstream network includes over 500 service stations across Nigeria, demonstrating its comprehensive commitment to the country’s energy landscape.

Operational Excellence Track Record

TotalEnergies has demonstrated exceptional operational capabilities in Nigeria, producing over 400,000 barrels of oil equivalent per day in 2024. The company made history in October 2024 by becoming the first exploration and production company in Nigeria to achieve zero routine gas flaring across all operations, aligning with the country’s environmental and sustainability objectives.

The company operates several significant assets in Nigeria, including the Akpo and Egina fields in OML 130, the Ikike and Amenam-Kpono fields in OML 99, and maintains a 15% interest in Nigeria LNG, which operates six liquefaction trains on Bonny Island.

Sapetro’s Strategic Growth Platform

Indigenous Expertise and Experience

South Atlantic Petroleum Managing Director Chukwuemeke Anagbogu emphasized that as the company’s current production assets mature, the new licenses provide a clear pathway to increasing reserve base and “assuring longer-term production growth.” With 30 years of operational experience in Nigeria, Sapetro brings crucial local market knowledge and regulatory expertise to the partnership.

The indigenous company’s participation exemplifies the PIA’s emphasis on local content development and Nigerian participation in the country’s oil and gas sector. Sapetro’s 20 percent stake ensures significant Nigerian involvement in the project’s execution and long-term development.

Sustainable Growth Strategy

Anagbogu expressed delight in the partnership, noting that the signing reaffirms Sapetro’s alignment with the government’s vision for responsible resource utilization, local content advancement, and inclusive economic progress. The blocks provide a strategic platform for sustained value creation for shareholders, stakeholders, and the nation.

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Nigeria’s Deepwater Renaissance

Production Targets and Capacity Building

The signing aligns with Nigeria’s ambitious production goals, as the Nigerian Upstream Petroleum Regulatory Commission has set a target of at least 2.1 million barrels per day by 2025, with longer-term objectives of reaching 3 million barrels per day by 2030. Current production stands at approximately 1.71 million barrels per day according to recent NUPRC data, comprising 1.507 million barrels per day of crude oil and 204,864 barrels per day of condensates.

Investment Climate Transformation

The contract represents part of a broader investment renaissance in Nigeria’s oil sector, which has attracted over $16 billion in commitments since 2023. This resurgence follows the implementation of the Petroleum Industry Act and President Tinubu’s executive reforms, which have created a more attractive investment environment for international operators.

Technology and Innovation Focus

The PSC emphasizes the deployment of cutting-edge technology and sustainable development practices. TotalEnergies commitment to delivering low-cost, low-emission projects aligns with Nigeria’s decarbonization objectives and global energy transition trends, while ensuring commercial viability and competitiveness.

Regulatory Framework and Policy Support

Petroleum Industry Act Implementation

The agreement represents the first major test of the Petroleum Industry Act 2021, which concluded a 20-year reform effort aimed at creating a more conducive environment for sector growth. The PIA established clear regulatory frameworks, fiscal terms, and host community development obligations that provide certainty for investors while ensuring fair returns for Nigeria.

NUPRC Secretary and Legal Adviser Olayemi Adeboyejo participated in the ceremony, emphasizing the commission’s commitment to transparent and efficient regulatory processes. The standardized PSC template developed under the PIA provides consistency and clarity for future licensing rounds and investment decisions.

Presidential Reform Initiative

President Tinubu’s transformative leadership has been instrumental in repositioning Nigeria as a viable investment destination. Executive Orders 40, 41, and 42 addressing fiscal incentives, local content enhancement, and contract efficiency have played critical roles in creating an enabling environment for international investors.

The introduction of performance-based tax incentives, including a 50% cost-saving rebate to operators, directly reduces operational costs and enhances project economics, making Nigerian deepwater projects more competitive globally.

Local Content and Community Development

Host Community Development Framework

The PSC includes comprehensive provisions for host community development in line with the PIA’s requirements. The agreement establishes clear obligations for community engagement, local employment, and sustainable development initiatives that ensure petroleum activities contribute meaningfully to local prosperity.

Under the PIA framework, 3% of the operating expenditure must be contributed to the Host Community Development Trust Fund, providing direct benefits to communities in the project area. This represents a significant improvement over previous arrangements and demonstrates Nigeria’s commitment to ensuring petroleum wealth benefits all stakeholders.

Nigerian Content Advancement

The partnership between TotalEnergies and Sapetro exemplifies the successful integration of international expertise with Nigerian capabilities. The agreement includes specific commitments to deepen local content, create quality jobs, and empower Nigerian businesses throughout the project lifecycle.

The contract requires the use of Nigerian services and products where technically feasible and commercially viable, supporting the development of local supply chains and technical capabilities in the offshore oil and gas sector.

Environmental and Sustainability Commitments

Decarbonization Alignment

Both TotalEnergies and Nigeria have made significant commitments to environmental sustainability and emissions reduction. The PSC includes specific provisions for associated and non-associated gas treatment to ensure optimal utilization, reduced flaring, and alignment with Nigeria’s gas commercialization agenda.

Nigeria has committed to eliminating gas flaring by 2030 and reducing methane emissions by 60% by 2031, positioning the country as a responsible producer in an increasingly ESG-conscious global market. TotalEnergies’ achievement of zero routine flaring in its existing Nigerian operations demonstrates the partnership’s commitment to these objectives.

Environmental Protection Framework

The agreement includes comprehensive obligations relating to decommissioning, abandonment, and environmental remediation fund contributions. These provisions ensure environmental protection throughout the project lifecycle and provide financial assurance for future restoration activities.

The PSC emphasizes the development and production of assets in line with decarbonization principles and the highest standards of sustainability, reflecting both companies’ commitment to responsible resource development.

Market Impact and Industry Implications

Investment Climate Confidence

The successful completion of the 2024 licensing round and execution of this landmark PSC sends a strong signal to international investors about Nigeria’s commitment to creating a stable and attractive investment environment. The transparent, competitive bidding process conducted in line with Section 73 of the PIA demonstrates the country’s adherence to international best practices.

The deal’s financial terms, including the performance-based incentive structure and reasonable cost recovery provisions, establish a template for future licensing rounds and investment decisions. This balanced approach ensures sustainable returns for investors while maximizing value for the Nigerian Federation.

Regional Energy Hub Positioning

Nigeria’s strategic location and existing infrastructure, combined with initiatives like the Nigeria-Morocco gas pipeline and expanded Nigeria LNG capacity, position the country as a regional energy hub for West and Central Africa. The additional deepwater production capacity will strengthen Nigeria’s role in regional energy security and export markets.

Technology Transfer and Capability Building

The partnership between TotalEnergies and Sapetro facilitates significant technology transfer and capability building within Nigeria’s oil and gas sector. The collaboration will enhance local technical expertise, project management capabilities, and operational standards across the industry.

Future Prospects and Development Timelin

Exploration and Development Schedule

The PSC establishes a defined minimum work program backed by performance guarantees, ensuring systematic exploration and development of the licensed areas. The agreement requires swift and technically sound exploration activities leading to early Final Investment Decisions, accelerating the timeline from discovery to production.

NUPRC expects the partners to leverage their combined expertise to deliver efficient exploration programs and commercially viable development plans that maximize recovery from Nigeria’s deepwater resources.

Production Integration Strategy

The new blocks integrate into TotalEnergies’ existing deepwater portfolio in Nigeria, including the producing Akpo and Egina fields. This integration enables operational synergies, shared infrastructure utilization, and optimized development strategies that reduce costs and enhance project economics.

The partnership with Sapetro provides local market knowledge and stakeholder relationships that facilitate smoother project execution and community engagement throughout the development process.

Challenges and Risk Mitigation

Security and Infrastructure

While Nigeria has made significant progress in addressing security challenges and oil theft in the Niger Delta region, ongoing vigilance and collaboration with security agencies remain essential for project success. The deepwater location of PPL 2000 and 2001 provides inherent security advantages compared to onshore and shallow-water operations.

Regulatory Compliance and Standards

The PSC’s comprehensive framework addresses potential regulatory challenges through clear guidelines on cost recovery, profit sharing, environmental compliance, and community development obligations. Regular monitoring and reporting requirements ensure adherence to all applicable standards and regulations.

Market Dynamics and Price Volatility

The agreement’s flexible fiscal terms and performance-based incentives provide some protection against oil price volatility while ensuring the Nigerian Federation benefits from upside potential during favorable market conditions.

Conclusion

The signing of the production sharing contract between NUPRC, TotalEnergies, and Sapetro represents a watershed moment for Nigeria’s oil and gas industry. As the first major international deepwater award in over a decade, the agreement validates the success of Nigeria’s petroleum sector reforms and demonstrates the country’s renewed attractiveness as an investment destination.

The partnership combines TotalEnergies’ global expertise and financial resources with Sapetro’s local knowledge and Nigerian content capabilities, creating a strong foundation for successful project execution. The comprehensive PSC framework addresses the interests of all stakeholders while promoting sustainable development, environmental protection, and community prosperity.

With Nigeria targeting 3 million barrels per day production by 2030 and seeking to attract $60 billion in new investments, this landmark agreement provides both a successful template and significant momentum for achieving these ambitious goals. The deal underscores NUPRC’s vision of making Nigeria the premier destination for upstream investment in Africa.

As exploration activities commence in the coming months, the success of this partnership will likely influence future licensing rounds and investment decisions, potentially catalyzing a broader renaissance in Nigeria’s deepwater oil and gas sector. The agreement represents not just a commercial transaction, but a strategic investment in Nigeria’s energy security, economic development, and sustainable future.

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By: Montel Kamau

Serrari Financial Analyst

2nd September, 2025