The Federal Government has introduced a major fiscal incentive for new deep offshore oil and gas projects, allowing qualifying developments to reset the profit-sharing scale at 70:30 in favour of contractors, even when existing production in the same contract area has already shifted to a higher government share.

The provision is contained in the Deep Offshore Oil and Gas Projects Incentives (Tax Remission) Order, 2026, signed by President Bola Tinubu on August 6, 2026, and subsequently gazetted by the Federal Government.

A review of the official Gazette showed that the Profit Oil Reset is aimed at improving the commercial viability of new deep offshore projects by separating them from the higher profit-oil sharing levels applicable to older production within the same contract area, according to The PUNCH.

Under the order, an approved Profit Oil Reset allows the profit-oil sliding scale to restart for the qualifying project, with contractors receiving 70 per cent of profit oil and the government taking 30 per cent at the start of the new development.

The Gazette stated, “Where a Profit Oil Reset is approved, the applicable profit oil sliding scale shall restart only for the approved eligible project development, such that the allocation of profit oil ratios between Contractor and the Concessionaire shall commence at a ratio of 70:30 as between the contractor and government in respect of the eligible project development, notwithstanding that existing production elsewhere in the same contract area has already graduated the profit oil ratios to a higher step in the profit oil sliding scale.”

The provision means operators developing new greenfield projects within existing contract areas will not automatically be subjected to the higher government share of profit oil that applies to mature production.

However, the incentive is subject to specific eligibility criteria. Under the order, the project must be a greenfield crude oil or non-associated gas development, and a Final Investment Decision must not have been taken on the project before the order came into effect.

The Final Investment Decision must be taken on or before December 31, 2029. However, the deadline may be extended where force majeure prevents the operator from meeting the requirement.

The order also requires eligible projects to be ring-fenced for cost recovery and tax purposes. Once a Profit Oil Reset is approved, the government and contractor must execute an addendum to the relevant Production Sharing Contract within 30 days.

In addition to the profit-oil reset, the government introduced a Standard Production Tax Credit of up to $3 per barrel for qualifying projects with producible reserves of up to 400 million barrels. Projects with reserves exceeding that threshold may qualify for a tax credit of up to $4.50 per barrel.