Nigeria has introduced a new fiscal framework aimed at reviving investment in capital-intensive deep offshore oil and gas developments, with the government estimating that the measures could unlock as much as $50 billion in new investment.
President Bola Tinubu’s Deep Offshore Oil and Gas Projects Incentives Order (State House) replaces reliance on project-by-project negotiations with defined tax incentives, eligibility conditions and implementation procedures intended to give investors greater certainty. The approximately $10 billion Bonga South West development is expected to be one of the first major projects to benefit from the new framework.
Key Overview
- Nigeria has introduced a new deep offshore tax-remission framework aimed at unlocking up to $50 billion in investment.
- The framework is expected to support a pipeline beginning with the approximately $10 billion Bonga South West project.
- Existing deep offshore leases must generally reach Final Investment Decision by December 31, 2029 to obtain the full standard incentive.
- Qualifying crude-oil projects can receive production tax credits linked to each barrel produced, subject to project size and other conditions.
- Additional incentives include Supplementary Production Tax Credits and a Profit Oil Reset for qualifying developments.
- Projects receiving supplementary incentives are expected to maximise engineering, fabrication, marine, technical and project activities within Nigeria.
- The policy is designed to attract capital while increasing local jobs, contracts, technical skills, domestic supply-chain activity and government revenue.
Nigeria Reworks the Economics of Deep Offshore Investment
The new framework tackles one of the biggest challenges facing Nigeria’s offshore petroleum industry: the difficulty of converting large discovered resources into commercially viable projects.
Deepwater developments typically require billions of dollars of upfront capital and long development periods. Investors therefore compare fiscal terms, production costs, regulatory certainty and expected returns across competing countries before committing capital.
Under the new rules-based framework (State House), Nigeria is attempting to make those economics more predictable while moving away from negotiations tailored separately to individual projects.
Existing leases that reach Final Investment Decision by December 31, 2029 can qualify for the full Standard Production Tax Credit. Projects missing that deadline without an approved force-majeure extension can still qualify for 50% of the applicable standard rate if they meet the remaining eligibility requirements. (State House)
The deadline creates a clear incentive for operators holding undeveloped deepwater assets to move projects towards investment decisions rather than leaving discoveries dormant indefinitely.
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How the New Tax Incentives Work
For qualifying crude-oil developments with producible reserves of up to 400 million barrels of oil equivalent, the standard production tax credit is set at the lower of $3 per barrel or 20% of the fiscal oil price, applying up to cumulative production of 150 million barrels.
For developments exceeding 400 million barrels of producible reserves, the corresponding incentive is the lower of $4.50 per barrel or 20% of the fiscal oil price, applicable up to cumulative production of 500 million barrels. Future qualifying leases can also receive an additional $1 per barrel under specified conditions.
The incentives are designed to remain responsive to project economics. When the applicable fiscal oil price falls below $50 per barrel, the standard oil production tax credits are reduced to 50% of their normal rate.
Qualifying developments may also apply for supplementary credits determined on a case-by-case basis. The combined Standard and Supplementary Production Tax Credits are capped at $11.50 per barrel for oil developments and $8 per barrel of oil equivalent for qualifying non-associated gas projects.
Bonga South West Could Become an Early Test
The policy has immediate implications for the long-delayed Bonga South West development, which the government values at approximately $10 billion.
The broader framework followed engagement between Tinubu and Shell chief executive Wael Sawan. Earlier discussions had focused heavily on creating investment-linked incentives capable of moving Bonga South West towards Final Investment Decision, but the government subsequently widened the approach into a framework applicable to multiple qualifying offshore developments.
Nigeria had already approved targeted incentives for Bonga South West (Reuters) earlier in 2026 as authorities sought to accelerate a new cycle of deepwater investment.
The latest order therefore broadens that strategy beyond one project and gives other developers a clearer pathway for assessing the economics of future offshore investments.
Local Content Is Built Into the Incentive Structure
The framework is not solely about reducing project taxes. It also links access to supplementary incentives with execution inside Nigeria.
The order requires activities connected with qualifying developments to be performed domestically, subject to defined exceptions. Work can be performed outside Nigeria where it sits on the project’s critical path or where domestic execution would be more than 10% more expensive after considering logistics, duties and other relevant costs. Such exceptions must still comply with an approved Nigerian Content Plan.
That requirement is intended to channel offshore investment into domestic engineering, fabrication, marine logistics, technical services and project-management businesses rather than allowing most of the economic activity generated by projects to take place overseas.
A Bid to Restore Nigeria’s Deepwater Competitiveness
The policy comes after several years in which Nigeria has sought to rebuild investor confidence through fiscal and regulatory reforms.
The government argues that predictable rules can make the country’s offshore resources more competitive for internationally mobile capital, particularly as oil companies increasingly concentrate spending on projects with stronger economics and clearer regulatory environments.
Nigeria’s latest offshore framework (Reuters) is therefore ultimately a test of whether targeted fiscal relief can translate into Final Investment Decisions, increased production and stronger local economic activity.
For the government, attracting $50 billion would be only part of the measure of success. The larger objective is to ensure that new offshore investment translates into higher production, stronger revenues, Nigerian jobs, local contracts and technical capabilities that remain in the economy long after individual projects begin producing.
Sources: The State House / Reuters / Nigerian Tribune
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