Nigeria has secured a production-sharing contract with TotalEnergies and South Atlantic Petroleum for two deepwater offshore blocks, under a novel legal structure designed to prioritise gas development alongside oil. The agreement spans units PPL 2000 and PPL 2001—a territory of some 2,000 square kilometres in the Niger Delta Basin—and marks Nigeria’s first PSC under its transformative Petroleum Industry Act of 2021.
The PIA, enacted in 2021, acknowledges the differing economic dynamics of oil and gas sectors, offering incentives including tax credits, production allowances, and investment support specifically for gas projects. Regulators intend to use this PSC as a model for future contracts that favour gas development, especially in deepwater and frontier acreage.
Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, described the PSC as a policy milestone aligning with the PIA’s vision to drive a transition towards a gas‑powered economy. The deal includes a $10 million signature bonus, bonuses tied to production achievements, minimum work guarantees, profit‑sharing mechanisms, and environmental safeguards such as decommissioning and host‑community funds.
Nigeria’s gas output stood at approximately 1.31 million barrels of oil equivalent per day in July 2025, compared with crude and condensate output of 1.86 million barrels—highlighting the growing significance of gas production. The nation retains substantial natural gas reserves of around 210.5 trillion cubic feet, nearly matching its crude reserves.
Despite these strengths, the legacy of infrastructure shortfalls and regulatory gaps continues to hinder development. Gas flaring remains a concern, exceeding 7 percent of total production in July, although that figure dropped to a three‑year low. Industry experts caution that long‑term success depends on clear and efficient mechanisms for cost recovery, as well as broader reforms that bolster infrastructure and investment climate.
Analysts such as Ayodele Oni, a Lagos‑based energy lawyer, emphasise that “the real challenge lies in the detail of cost recovery, particularly the timing, scope, and administrative process.” Moreover, Mikolaj Judson of Control Risk underscores that without deeper structural change, investors will remain wary of Nigeria’s gas sector.
President Bola Ahmed Tinubu’s administration is pressing for significant expansion of domestic gas production, targeting up to 10 billion cubic feet per day by 2027. The TotalEnergies PSC inaugurates a framework designed to support this ambition, with licensing rounds and new contracts expected to follow its example—and potentially drive investment in exploration, infrastructure, and sustainable energy.
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