Nigeria Offers Tax Breaks to Lure $50B in Offshore Oil Projects

BREAKING NEWSAugust 12, 2026 at 9:45 AM UTC

TLDR

Nigeria introduces tax credits up to $11.50 per barrel for deepwater oil and gas projects to attract $50 billion investment.
New Incentives Order by President Bola Tinubu aims to revitalize delayed projects and standardize incentives across developments.
Shell's Bonga South West project, requiring $10 billion, to be the first beneficiary, with incentives in place until Dec. 31, 2029.

Nigeria is offering tax credits of as much as $11.50 per barrel to attract up to $50 billion into deepwater oil and gas projects. President Bola Tinubu approved the Deep Offshore Oil and Gas Projects Incentives Order on Aug. 11, replacing project-by-project negotiations with rules that apply across qualifying developments. Gas projects can receive credits of as much as $8 per barrel of oil equivalent.

The first project expected to use the framework is Shell’s Bonga South West development, which could require about $10 billion and reach a final investment decision in 2027. Shell has considered the project for almost 20 years. Nigeria wants the new terms to revive projects delayed by costs, policy changes and competition for capital from other oil-producing countries.

For deepwater fields with reserves of no more than 400 million barrels, the standard credit is $3 per barrel or 20% of the fiscal oil price, whichever is lower. Larger projects can receive $4.50 per barrel under the same test. Extra credits can lift the total benefit to the $11.50 ceiling. The incentives run through Dec. 31, 2029.

The framework also allows eligible projects to reset the profit-oil split to 70:30 between contractors and the government. Projects can be ring-fenced for cost recovery and tax purposes. NNPC can amend production-sharing contracts where required, while companies will be asked to use Nigerian engineering, fabrication, marine logistics and technical services where possible.

Nigeria is seeking to reverse a decline in upstream investment and production after years of crude theft, pipeline damage and policy uncertainty. Output has fallen from more than 2 million barrels a day to about 1.6 million. The government is betting that fixed rules and tax relief will make stalled offshore fields compete for capital against projects in Angola, Namibia and Mozambique.

Key Takeaways

The main change is not the size of the tax credit but the move from one-off negotiations to a framework that investors can apply across projects. Deepwater developments cost billions of dollars and can take years before production starts, so companies need to know the tax and production-sharing terms before committing capital. Nigeria has tried to restart offshore investment before. Incentives announced in 2024 and cost credits introduced in 2025 did not lead to a wave of project approvals. The new order tries to address that by setting eligibility rules, tax ceilings and timelines while allowing projects to recover costs separately. Bonga South West will be the first test. A tax incentive does not guarantee Shell will approve the project, which still depends on costs, partners and expected returns. If it moves forward, it could show that Nigeria can compete again for deepwater capital after losing projects to other African markets. The $50 billion target will require several projects, not one field. Nigeria must also balance lower tax collections with the jobs, production and export revenue that new developments could generate. The framework lasts until the end of 2029, giving the government a limited window to turn announced incentives into final investment decisions.

Nigeria