Federal Government Issues New Tax Incentives To Boost Deep Offshore Oil And Gas Investment

The Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026

On August 6, 2026, President Bola Ahmed Tinubu, GCFR, signed the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026 (“the Order”), pursuant to powers conferred under Section 3(1)(e) of the Petroleum Industry Act, 2021, and Section 77(1) of the Nigeria Tax Administration Act, 2025. The Order was published as S.I. No. 37 of 2026 in the Federal Republic of Nigeria Official Gazette No. 150 of August 10, 2026.

The Order introduces a structured tax credit regime designed to de-risk investment in Nigeria’s deep offshore oil and gas assets, at a time when global capital continues to be highly mobile across competing offshore basins. Below, we set out the key features of the Order and what they mean for stakeholders in the sector.

1. Who Does It Affect?

The Order applies to holders of deep offshore petroleum mining leases and oil mining leases, both existing leases (where a Final Investment Decision, or “FID”, is made between the Effective Date and December 31, 2029) and future leases awarded after the Effective Date. It is of direct relevance to international and indigenous oil companies, their financiers, and contractors operating (or seeking to operate) in Nigeria’s deep offshore terrain.

2. The Standard Production Tax Credit (“Standard PTC”)

A tax credit is now available on crude oil and non-associated gas produced from qualifying project developments, at the following headline rates:

Future leases (and licences derived from them) attract a further US$1.00/barrel on top of the applicable rate for crude oil (this additional credit does not extend to gas). Where the fiscal oil price falls below US$50/barrel in a given month, the applicable credit for that month is reduced by half. Note also that no Standard PTC is available on non-associated gas at all where the HCL content of the field exceeds 100 bbl/mmscf.

3. Supplementary Production Tax Credit and Profit Oil Reset

1. Qualifying greenfield developments may access a Supplementary PTC, assessed by the Nigeria Revenue Service (“the Service”) on a case-by-case basis, subject to an aggregate cap of US$11.50/barrel (oil) and US$8.00/boe (gas), inclusive of the Standard PTC.
2. A Profit Oil Reset is also available for eligible developments, allowing the profit oil sliding scale to restart at a 70:30 Contractor-Government split for the new project. Critically, the Profit Oil Reset is only available where the applicable profit oil sliding scale in the relevant contract area has already progressed beyond the 70:30 split through existing production elsewhere in that same contract area — it is not a general incentive available to any qualifying greenfield development.
3. Both incentives are reserved for greenfield projects where FID has not yet been taken as at the Order's commencement date, and must be taken on or before December 31, 2029.
4. Missing the FID deadline does not necessarily forfeit the Standard PTC entirely: a lessee unable to meet the deadline due to force majeure may apply to the Nigerian Upstream Petroleum Regulatory Commission for an extension; and where no extension is sought or granted, the Standard PTC still applies, but at 50% of the otherwise applicable rate.

4. Nigerian Content Requirement

Access to the Supplementary PTC and Profit Oil Reset is conditional on all project activities being performed in Nigeria, save for activities on the critical path (e.g., long-lead items) or activities that are more than 10% costlier to execute locally — and even then, only in compliance with an NCDMB-approved Nigerian Content Plan. This is a significant compliance touchpoint for operators and their contractors.

5. Application Process and Timelines

1. Applications for the Supplementary PTC/Profit Oil Reset are submitted to the Service, accompanied by a full open-book economic model.
2. The Service must respond — approving or refusing the application — within 45 days of receiving a complete application.
3. Implementation guidelines (covering documentation, valuation methodology, and reporting requirements) are to be published by the Service within 45 days of the Order's commencement date.
4. Where a Profit Oil Reset is approved, the Concessionaire and Contractor must execute a PSC addendum within 30 days, and file it with the Service, the Commission, and the Office of the President within 14 days thereafter.

6. Safeguards and Claw-Back

The Order includes robust anti-abuse provisions. Where the Service determines that a Supplementary PTC was obtained through misrepresentation, concealment, artificial arrangement, or breach of an approval condition, it may withdraw the approval, recompute tax payable, recover the credit, and impose penalties — without prejudice to any other civil, criminal, or regulatory action.

7. Effective and Commencement Dates

Notably, the core Standard PTC provisions (paragraphs 1–5 and 12–15) are backdated to take effect from February 28, 2024 (the “Effective Date”), while the Supplementary PTC, Profit Oil Reset, and related application/eligibility provisions (paragraphs 6–11 and 16) take effect from the Order's commencement date, August 6, 2026.

Our Take

This Order signals a deliberate policy shift toward making Nigeria's deep offshore terrain more fiscally competitive against other frontier basins. For operators sitting on undeveloped deep offshore discoveries, this materially changes the FID economics. The December 31, 2029 FID deadline applies to the Supplementary PTC and Profit Oil Reset for all qualifying greenfield developments, and separately governs the full-rate Standard PTC for existing leases (subject to the force majeure extension and 50% fallback noted above); it does not, however, impose the same express deadline on future leases seeking only the Standard PTC. Clients should therefore not assume a uniform cut-off across every incentive under the Order, and should have their specific lease category and target incentive assessed individually. We recommend that affected clients review their project economics and FID timelines against this Order without delay.

Our Energy & Natural Resources team is available to advise on eligibility assessments, Supplementary PTC/Profit Oil Reset applications, Nigerian Content Plan compliance, and PSC addendum negotiations arising from this Order.