Annette Ikponmwonba | August 17, 2026
Key Points
- Federal Government introduces a 70:30 contractor-government profit-oil reset
- New greenfield projects must reach Final Investment Decision by December 31
- Government also offers production tax credits of up to $3 or $4.50 per barrel for qualifying oil projects
Main Story
The Federal Government has introduced a profit-oil reset that gives contractors a 70% share and the government 30% for qualifying new deep offshore developments, even where older production in the same contract area has reached a higher government share, 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, 2026, and gazetted by the Federal Government.
Under the order, an approved Profit Oil Reset applies only to the eligible new project, allowing its profit-oil sliding scale to restart at 70:30 in favour of the contractor. Existing production in the same contract area will retain its applicable profit-oil ratio.
The incentive is restricted to greenfield crude oil or non-associated gas projects for which a Final Investment Decision had not been taken when the order commenced.
Qualifying projects must take FID on or before December 31, 2029, although extensions may be granted where force majeure prevents compliance with the deadline.
The order also requires eligible developments to be ring-fenced for cost recovery and tax purposes. Once a reset is approved, the government and contractor must execute an addendum to the relevant Production Sharing Contract within 30 days.
Beyond the profit-oil reset, the government 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, while projects with higher reserves can receive up to $4.50 per barrel.
For qualifying deep offshore gas projects, the tax credit is up to $1 per thousand standard cubic feet for projects with lower hydrocarbon liquids content and up to $0.50 per thousand cubic feet for projects with higher liquids content.
What’s Being Said
Professor Emeritus of Petroleum Economics, Wumi Iledare, welcomed the investment objective but said the incentives should be assessed against the value they create for Nigeria.
“The more important petroleum economics question is: How much incremental value will the tax remission create for Nigeria relative to the economic rent and government revenue forgone? That is the test that should guide our assessment of DOEO 2026.” Wumi Iledare, Professor Emeritus of Petroleum Economics.
Iledare said an incentive should generate additional investment and value rather than simply transfer economic rent from government to projects that would have proceeded without the concession.
What’s Next
- The Nigeria Revenue Service is expected to publish implementation guidelines within 45 days, covering applications, economic valuation, computation, monitoring and ring-fencing
- Qualifying projects must meet the FID deadline of December 31, 2029, subject to approved extensions for force majeure
- Government and approved contractors must execute the required Production Sharing Contract addendum within 30 days of a Profit Oil Reset approval
The Bottom Line:
The 70:30 reset materially improves the fiscal terms available to new deep offshore developments by preventing mature production in an existing contract area from automatically determining the economics of a new project. The policy’s success, however, will depend on whether the improved terms generate genuinely additional investment and production rather than simply reducing government revenue from projects that would have proceeded anyway.
