Nigeria’s Deep Offshore Oil And Gas Projects Incentives (Tax Remission) Order 2026: What It Means For Investment And Project Development

INTRODUCTION

On 6th August 2026, President Bola Ahmed Tinubu signed the Deep Offshore Oil and Gas Projects Incentive (Tax Remission) Order 2026 (“the Order”), made pursuant to section 3(1)(e) of the Petroleum Industry Act 2021 and section 77(1) of the Nigeria Tax Administration Act 2025. For current and future holders of petroleum mining leases and oil mining leases in the deep offshore segment of the upstream petroleum sector. The Order could potentially unlock new investment by improving project economics and giving sponsors additional incentives to move qualifying deep offshore developments from discovery to Final Investment Decision (“FID”).

Our article examines how the Order could change the economics of deep offshore investment and project development, and what it means for sponsors, investors and Production Sharing Contract (“PSC”) Parties and other stakeholders.

THE APPLICABLE INCENTIVE STRUCTURE

1. Standard Production Tax Credit (“Standard PTC”)

The Standard PTC is a fixed dollar-per-barrel (or per-mscf, for gas) tax credit given to petroleum produced from qualifying deep offshore projects. The Order splits the eligibility and categories of lessees for Standard PTC into two: existing leases, where the lessee takes an FID between the 28th February 2024(“the Effective Date”) and 31st December 2029 and future leases, including those awarded after the Effective Date or derived from existing licences.

For operators managing FID timelines, two things matter in practice. First, if a force majeure event threatens the 2029 deadline, the lessee must apply to the Nigerian Upstream Petroleum Regulatory Commission (“the Commission”) for an extension, and the Commission must notify the Nigeria Revenue Service (“NRS”) within 14 days of granting it.¹ Second, missing the deadline without an approved extension does not disqualify the project outright; it simply halves the credit rate, provided the project still meets every other eligibility condition².

For existing leases, the lessee can make an FID within the prescribed period. However, where the lessee is unable to make the FID within the prescribed timeframe due to a force majeure event, it may apply to the Commission for an extension within which to make an application.³

The rate is calculated by reserve size and hydrocarbon type:

1.1. Computation Framework

The Order anticipates a scenario where the oil price falls to US$50 per barrel. In such circumstances, the incentives provided in product category 1 and 2 above shall apply at 50% of the applicable rate.⁴ For the avoidance of doubt, the Order limits the application of these incentives to crude oil produced from the relevant project development and expressly excludes production from any other field, lease or contract area. The tax credit is applied by increasing the contractor’s share of profit oil under the PSC.

Paragraph 4 of the Order further set a rule for profit gas sharing formular between the government and a contractor by establishing an ascending profit sharing formular for existing non-associated gas deep offshore PSCs, as follows:

• Up to and including 1 TCF — 20%
• Over 1 TCF, up to and including 3 TCF — 35%
• Over 3 TCF, up to and including 5 TCF — 45%
• Over 5 TCF, up to and including 7 TCF — 50%
• Over 7 TCF — 60%

It therefore follows that the objectives of the Standard PTC are twofold: to stimulate deep offshore investment, and to ensure exclusive benefits to PSC parties who are financing the development of production-oriented projects.

Footnotes

1 See Paragraph 1(i) the Deep Offshore Oil and Gas Project (Tax Remission) Order 2026

2 See Paragraph 3 the Deep Offshore Oil and Gas Project (Tax Remission) Order 2026

3 Ibid

4 See Paragraph 2 the Deep Offshore Oil and Gas Project (Tax Remission) Order 2026

To view the full article click here