FG offers 70:30 profit oil split for new fields

Nigeria's Federal Government has unveiled a significant fiscal incentive designed to revitalize deep offshore oil and gas exploration. The new Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026, signed by President Bola Tinubu, allows qualifying new developments to restart the profit-oil sharing scale at a favorable 70:30 split for contractors, even if older production in the same contract area already has a higher government share.

This "Profit Oil Reset" aims to make fresh deep offshore ventures more commercially appealing. By ring-fencing new projects, operators will not automatically inherit the more burdensome profit-sharing terms associated with mature production. The incentive is specifically for greenfield crude oil or non-associated gas projects where a Final Investment Decision (FID) had not been taken before the order commenced, with an FID deadline of December 31, 2029, though extensions are possible under force majeure.

Beyond the profit-oil reset, the government has introduced a Standard Production Tax Credit. Qualifying projects with reserves up to 400 million barrels can receive up to $3 per barrel, while those with higher reserves can get up to $4.50 per barrel. Future leases may receive an additional $1 per barrel under specified conditions. For deep offshore gas projects, the tax credit is set at up to $1 per thousand standard cubic feet for qualifying gas with lower hydrocarbon liquid content.

The order mandates that once a reset is approved, the government and contractor must sign an addendum to their Production Sharing Contract within 30 days. These measures signal a concerted effort to attract investment and stimulate activity in Nigeria's deep offshore sector, a critical area for future energy production.

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Where a Profit Oil Reset is approved, the applicable profit oil sliding scale shall restart only for the approved eligible project development, such that the allocation of profit oil ratios between Contractor and the Concessionaire shall commence at a ratio of 70:30 as between the contractor and government in respect of the eligible project development, notwithstanding that existing production elsewhere in the same contract area has already graduated the profit oil ratios to a higher step in the profit oil sliding scale.