By Chidimma Okwara
In a significant development for Nigeria’s oil and gas sector, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has signed a Production Sharing Contract (PSC) with the Nigerian National Petroleum Company Limited (NNPC) and the TotalEnergies–Sapetro Consortium. This landmark agreement, which covers Petroleum Prospecting Licences (PPLs) 2000 and 2001, is the first deepwater PSC to be executed since the enactment of the Petroleum Industry Act (PIA) and the first major international award of its kind in over a decade.
The deal, which formally concludes the 2024 Licensing Round, was celebrated at a signing ceremony in Abuja. The two offshore blocks, spanning approximately 2,000 square kilometers in the prolific Niger Delta Basin, were awarded to TotalEnergies, which holds an 80% contractor interest, and its long-standing partner, South Atlantic Petroleum (Sapetro), which holds a 20% interest.
According to NUPRC’s Chief Executive, Engr. Gbenga Komolafe, the agreement marks a “new chapter” for Nigeria’s upstream sector. He stated that the deal signals the beginning of a committed work program aimed at unlocking the deepwater geological potential, expanding reserves, boosting production, and strengthening Nigeria’s energy security. Komolafe also lauded the supportive reforms of President Bola Tinubu, including Executive Orders on fiscal incentives, local content, and cost efficiency, which he said have helped attract crucial investment.
The contract is being hailed as unique and a testament to the success of the PIA. Engr. Bayo Ojulari, the Group Chief Executive Officer of NNPC Limited, highlighted that the PSC is the first to comprehensively cover both crude oil and natural gas, including robust gas terms that incentivize the monetization of non-associated gas. This is a critical step towards Nigeria’s gas commercialization agenda.
The fiscal terms of the agreement are designed to be performance-based, ensuring value for both the Federation and the investors. They include:
- A $10 million signature bonus.
- Production bonuses of 2 million barrels and 4 million barrels (or cash equivalent) upon reaching production milestones of 35 million barrels and 100 million barrels, respectively.
- A 70% cost recovery limit, providing a fair balance for all parties.
The deal is a crucial step towards Nigeria’s ambitious target of increasing its crude oil production to 3 million barrels per day and attracting an additional $60 billion in investments by 2030. The NUPRC has developed a new, standardized PSC template that aligns with the PIA, providing clarity, consistency, and fairness for the entire industry.
TotalEnergies, with over 60 years of operation in Nigeria, expressed its honor in being the first international oil company to be awarded an exploration block in a bid round in over a decade. The company’s managing director, Mr. Matthieu Bouyer, reaffirmed the company’s long-term commitment to Nigeria and its eagerness to swiftly and responsibly implement the agreed work program.
Similarly, Sapetro’s Managing Director, Mr. Chukwuemeke Anagbogu, noted that the new assets provide a clear path to increasing the company’s reserve base and assuring long-term production growth, aligning with the government’s vision for responsible resource utilization and local content advancement.
The signing of this PSC sends a strong signal to the global investment community that Nigeria is open for business and has a stable and transparent regulatory framework for the oil and gas sector. It is expected to usher in a new era of deepwater exploration and development, contributing significantly to the nation’s economic growth and energy security.
