The Federal Government has set a ceiling of $11.50 per barrel for combined production tax credits on qualifying deep offshore oil projects, as President Bola Tinubu’s new fiscal framework seeks to unlock up to $50 billion in offshore investment, beginning with the approximately $10 billion Bonga South West development.

The reform, contained in the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026, replaces project-by-project negotiations with transparent eligibility criteria, defined implementation processes and a broader investment framework for qualifying developments.

Under the new regime, qualifying deep offshore oil developments with producible reserves not exceeding 400 million barrels will receive a Standard Production Tax Credit of $3 per barrel or 20 per cent of the fiscal oil price, whichever is lower, up to cumulative production of 150 million barrels.

The State House said the reform followed Tinubu’s engagement with the Chief Executive Officer of Shell Plc, Wael Sawan, during which the President directed the development measures to unlock the next wave of the country’s deep offshore investment pipeline.

It said the government subsequently moved away from project-specific solutions and developed a framework applicable across multiple categories of qualifying developments.

The Presidency said the framework was also designed to strengthen Nigerian industrial capability by maximising project execution within the country wherever commercially and technically feasible.

According to the statement, this covers domestic engineering, fabrication, marine logistics, technical services and project management, to increase investment and production while creating skilled jobs and deepening local supply chains.

“The countries that attract long-term investment are not necessarily those with the greatest natural resources. They are the ones that provide the greatest certainty. This reform reflects our determination to build an investment environment defined by clear rules, strong institutions and enduring partnerships. We are creating the conditions for capital to flow, for Nigerian businesses to grow, for our people to prosper and for our natural resources to deliver lasting national value,” Tinubu said.

For projects with producible reserves above 400 million barrels, the Standard Production Tax Credit rises to $4.50 per barrel or 20 per cent of the fiscal oil price, whichever is lower, up to cumulative production of 500 million barrels.

Future leases will also qualify for an additional Standard Production Tax Credit of $1 per barrel from the commencement of production.

However, where the fiscal oil price falls below $50 per barrel in any month, the applicable tax credit for that month will be reduced to 50 per cent of the prescribed rate.

The framework further provides a Supplementary Production Tax Credit for qualifying projects, to be determined on a case-by-case basis according to the economic profile of each development.

The combined Standard and Supplementary Production Tax Credits, however, cannot exceed $11.50 per barrel for oil projects and $8 per barrel of oil equivalent for non-associated gas developments.

For non-associated gas projects, the Order provides a Standard Production Tax Credit of $1 per thousand standard cubic feet of gas sold or 30 per cent of the fiscal gas price, whichever is lower, up to cumulative sales of five trillion cubic feet, where hydrocarbon liquids content does not exceed 30 barrels per million standard cubic feet.

Another major incentive in the framework is the Profit Oil Reset. Where approved, the profit oil sliding scale for an eligible project will restart at a 70:30 ratio between the contractor and government, even where existing production elsewhere in the same contract area has already moved to a higher government share.

The eligible development will also be ring-fenced for cost recovery and tax purposes.