Nigeria’s upstream oil and gas sector marked a significant milestone yesterday with the signing of a new Production Sharing Contract (PSC) covering two offshore blocks awarded to the TotalEnergies–Sapetro consortium.
Speaking at a signing ceremony in Abuja, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said beyond the provisions of the Petroleum Industry Act (PIA) and terms of oil blocks, President Bola Tinubu has insisted that idle and unexplored oil blocks must be relinquished and re-auctioned.
The PSC signed covers the execution of the contract covering petroleum prospecting licences (PPL) 2000 and 2001, spanning roughly 2,000 square kilometres in the prolific West Niger Delta Basin.
TotalEnergies will operate the blocks with an 80 per cent interest, while indigenous partner Sapetro holds 20 per cent. The contracts were awarded in Nigeria’s 2024 licensing round, the first fully consolidated licensing process since the PIA’s enactment.
NUPRC Chief Executive, Gbenga Komolafe, said non-performing and unexplored assets would no longer be allowed to lie dormant. He recalled that the President, on assuming office, pressed regulators to explain why Nigeria’s production-to-reserve ratio remained low despite abundant hydrocarbon resources.
That presidential directive, Komolafe noted, gave the Commission the political backing to enforce relinquishment provisions contained in the PIA.
The principle is that oil blocks left idle or underexplored will be returned to the licensing basket for reallocation. The newly-signed PSCs are also notable for their alignment with reformed fiscal and governance frameworks, which were developed under Section 85 of the PIA and Regulation 23(1) of the 2022 Petroleum Licensing Round Regulations. The contracts introduce several firsts for Nigeria’s deepwater sector.
They are the first PSCs to comprehensively cover both crude oil and natural gas, reflecting a deliberate push to monetise non-associated gas and reduce routine flaring.
Fiscal provisions include a $10 million signature bonus, production bonuses linked to output thresholds of 35 million and 100 million barrels and profit-oil and profit-gas splits tied to cumulative production and sales.
Cost recovery is capped at 70 per cent, ensuring steady revenues for the Federation, while royalties, taxes, and host community development obligations are explicitly defined.
For NNPC Limited, which acts as concessionaire on behalf of the Federation, the PSCs are a strategic opportunity to expand deepwater output and showcase Nigeria as an investment destination.
Group Chief Executive Bayo Ojulari stressed that the contracts address gaps of the past and create a platform to move toward Nigeria’s target of producing 3 million barrels per day by 2030.
Achieving that target, he argued, would require not only exploration and development of new blocks but also significant new capital inflows — up to $60 billion over the next five years.
The PSC terms, Ojulari noted, are designed to incentivise performance through clearly defined milestones and to ensure that value flows steadily to the Federation.
Beyond fiscal terms, the contracts also embed obligations around environmental remediation, decommissioning, and gas commercialisation, consistent with decarbonisation and energy-transition plans.
While, French major TotalEnergies has operated in Nigeria for more than six decades, with deepwater projects such as Egina and Akpo to its name, Managing Director of the company in Nigeria, Matthieu Bouyer, sees the PSC as an opportunity to deploy the company’s offshore expertise in a manner consistent with its global strategy of pursuing “low-cost, low-emission” developments.
With over 400,000 barrels of oil equivalent per day already operated in Nigeria, TotalEnergies said the new blocks remained high-impact prospects that could be advanced quickly. Bouyer said the preparations are already underway for the consortium’s first well, with an emphasis on speed and technical responsibility.
