Nigeria Introduces Deepwater Oil and Gas Tax Incentives, Aiming to Leverage Over USD 50 Billion in Investment

en.Wedoany.com Reported - In August, Nigeria officially implemented the Deep Offshore Oil and Gas Projects Incentives (Tax Relief) Order 2026, providing new tax relief arrangements for eligible deepwater oil and gas development projects. Nigerian National Petroleum Company (NNPC) stated that the policy is expected to leverage more than USD 50 billion in deepwater oil and gas investment, with a focus on large offshore projects that have long been in the development preparation stage, including Bonga Southwest/Aparo, Zabazaba, and Owowo. Under the latest policy framework, eligible existing lease projects must reach a final investment decision (FID) by December 31, 2029.

The new policy establishes tiered production tax credits for deepwater crude oil projects. Projects with recoverable reserves of no more than 400 million barrels are eligible for a standard credit of USD 3 per barrel; projects with recoverable reserves exceeding 400 million barrels may receive a credit of USD 4.5 per barrel, subject to a cap of 20% of the fiscal oil price and cumulative production limits. Non-associated natural gas projects may receive a tax credit of up to USD 1 per thousand cubic feet, capped at 30% of the fiscal gas price, with an applicable cumulative production ceiling of up to 5 trillion cubic feet. When the fiscal crude oil price falls below USD 50 per barrel, the credit amounts will be reduced accordingly.

Bonga Southwest/Aparo has become one of the faster-moving deepwater projects under this policy framework. On August 24, NNPC and the OML 118 contractors—Shell Nigeria Exploration and Production Company, Esso Exploration and Production Nigeria (Deepwater), and Nigerian Agip Exploration—signed supplemental agreements to the production sharing contract (PSC) and the dispute resolution agreement, implementing the fiscal and commercial terms already approved by the Federal Government. The project is expected to involve a full-lifecycle investment of approximately USD 15 billion to USD 21 billion.

The project has completed Pre-FEED and is preparing to enter the FEED stage, but still needs to go through procedures including partner, technical assurance, and corporate governance processes. Competitive contractor selection for the project's FPSO has been completed and a preferred bidder identified; the FPSO concept will next advance into FEED. The final EPCI contract award remains subject to partner, regulatory, and internal approvals. Once completed, the project is expected to reach peak crude oil production of approximately 175,000 barrels per day and natural gas production of approximately 140 million standard cubic feet per day.

Bonga Southwest/Aparo had already received approval in March for fiscal incentives for the project's FID. NNPC disclosed at the time that the project was expected to attract approximately USD 20 billion in investment and was planned to become Nigeria's first new deepwater production sharing contract asset to reach FID since 2008. Following the signing of the supplemental PSC and dispute resolution agreements in August, the project's fiscal and commercial conditions have been further implemented, with the next stage focusing on FEED, deeper FPSO engineering, and the final investment decision.

NNPC has also included Zabazaba and Owowo among the key projects under this round of deepwater incentive policy. The Zabazaba-related resources are located in Nigeria's deepwater area. NNPC's 2026 Gas Master Plan shows that the Zabazaba–Agbami–Nwa-Doro gas resource cluster has approximately 6 trillion cubic feet of 2P resources, and no committed gas volumes have yet been established. At this stage, neither project has disclosed an FID milestone comparable to that of Bonga Southwest/Aparo.