Nigeria ties tax incentives to performance to revive upstream oil sector

Nigeria introduces a tax credit capped at 20% for oil operators meeting cost reduction targets, with a focus on gas and offshore projects.

Partagez:

Nigerian President Bola Tinubu signed a new executive order on May 30 establishing a set of tax incentives linked to operational efficiency in the upstream oil sector. Named the Upstream Petroleum Operations Cost Efficiency Incentives Order 2025, the measure now ties tax advantages to measurable cost reductions across onshore, shallow water and deepwater projects.

Companies that meet performance benchmarks set by the government may benefit from a tax credit of up to 20% of their annual tax liability. This mechanism is part of a broader strategy aimed at boosting Nigeria’s competitiveness amid growing regional competition and declining interest from major international firms in conventional oil projects.

Regional competition and declining appeal

Before Bola Tinubu took office in 2023, Nigeria faced a steep drop in oil investments, with annual upstream spending falling by 74% between 2014 and 2022, from $27bn to under $6bn. This decline weakened the country’s position in West Africa, as neighbouring nations implemented more competitive tax regimes to attract the same capital.

The new measure complements a series of reforms launched since 2023. These include a 25% tax rebate on investments in gas infrastructure and streamlined procurement procedures, which helped Nigeria secure over $5bn in investments through three major final investment decisions in early 2024.

Focus on gas and offshore segments

In February, three presidential directives revised the fiscal framework for non-associated gas and deepwater offshore projects. These included new tax credits, fiscal deductions for infrastructure, and targeted incentives for segments previously deemed less attractive to investors. In October, the reforms extended downstream with value-added tax exemptions on several products.

The goal is to secure $10bn in targeted investment for deepwater gas exploration and scale up infrastructure for gas transport and exports. This strategic direction aligns with the global perception of natural gas as a transition fuel, increasingly favoured under current market conditions.

“President Tinubu highlighted the importance of coordination between government agencies. If achieved, it could significantly improve Nigeria’s investment appeal,” said Clementine Wallop, Sub-Saharan Africa Director at Horizon Engage.

Donald Trump announced that the United States will no longer oppose Chinese purchases of Iranian oil, immediately triggering a drop in global crude oil prices and profoundly reshaping international energy trade partnerships.
Research firm S&P Global Commodity Insights lifts its outlook for the fourth straight year, betting on three point five mn barrels per day from 2025 despite lower prices.
Enbridge plans to expand its infrastructure to increase oil transportation from the American Midwest to the Gulf Coast, anticipating rising exports and addressing current market logistical constraints.
US commercial crude inventories significantly decline by 3.1 million barrels, widely surpassing initial forecasts and immediately pushing international oil prices higher.
The UK could have hydrocarbon reserves twice as large as current official estimates, according to Offshore Energies UK, highlighting the impact of fiscal policies on forecasts and the economic future of the North Sea.
Following US strikes in Iran, international energy companies partially evacuate their teams from Iraq as a precaution, while Lukoil maintains its entire personnel on southern oilfields.
Chinese independent refineries remain cautious amid rising Iranian crude prices driven by escalating Iran-Israel tensions, potentially threatening access to the strategic Strait of Hormuz.
Gazprom, affected by a historic $6.9bn loss in 2023, is offering Pakistani state-owned firm OGDCL its petroleum assets in Nigeria to strengthen its presence in Asia’s energy market, according to Pakistani sources.
Donald Trump urges control of oil prices following U.S. military action against Iranian nuclear facilities, amid escalating tensions around the strategic Strait of Hormuz, threatening to significantly impact global markets.
PermRock Royalty Trust announces a monthly distribution of $539,693 to unit holders, impacted by reduced oil volumes and prices in April, partly offset by increased natural gas sales.
Permian Basin Royalty Trust announces a reduced distribution for June due to ongoing excess costs at Waddell Ranch properties and lower volumes from Texas Royalty Properties.
Three months after starting production, Norway’s Johan Castberg oil field, located in the Barents Sea, reaches its full capacity of 220,000 barrels per day, significantly increasing energy supplies to Europe.
The Middle East conflict forces Iraq to delay certain oil developments, disrupting field operations despite temporary stability in production and exports amid growing logistical tensions.
New U.S. estimates reveal nearly 29 billion barrels of oil and 392 Tcf of technically recoverable natural gas on federal lands, marking significant progress since the last assessment in 1998.
The United Kingdom tightens sanctions against Russia's oil sector by targeting twenty tankers operating in the "shadow fleet" and Rosneft Marine, amid rising crude prices exceeding the G7-imposed price cap.
French manufacturer Vallourec will supply Qatar with premium OCTG tubes in a contract worth an estimated $50 million, supporting the planned expansion of oil and gas operations by 2030.
Long a major player in OPEC, Iran sees its influence on the oil market significantly reduced due to US sanctions, Israeli strikes, and increasing reliance on exports to China.
After several months of interruption following a major political upheaval, Syria's Banias refinery has shipped its first cargo of refined products abroad, marking a partial revival of its energy sector.
ExxonMobil and its partners have extended the production sharing contract for Block 17 in Angola, securing the continued operation of major infrastructure in a key offshore asset for Africa’s oil sector.
Egypt’s General Petroleum Company discovers a new oil field in Abu Sannan, producing 1,400 barrels per day, confirming growing interest in this mature Western Desert region.