Nigeria’s new production-sharing contract (PSC) with the French TotalEnergies (TTEF.PA) marks the first under a new law aimed at boosting the country’s gas output, Reuters reported.
The deal between TotalEnergies and its Nigerian partner, signed on September 1, covers exploration licences awarded last year for 2,000 square km in the Niger Delta Basin.
‘This PSC with TotalEnergies represents a policy shift in line with the PIA. The deal aims to unlock Nigeria’s gas potential and support the transition to a gas-powered economy,’ said Gbenga Komolafe, head of the Nigerian Upstream Petroleum Regulatory Commission. He added that new deepwater and frontier acreage PSCs would likely follow the same gas provisions.
As Africa’s largest oil producer, Nigeria wants to increase the role of gas in its energy mix. This shift is both economically beneficial and part of the move to cleaner energy. In July, Nigeria produced 1.31 million barrels equivalent of gas daily. They also produced 1.86 million barrels of crude and condensates daily. Nigeria’s proven gas reserves, estimated at 210.5 trillion cubic feet, are comparable to its oil reserves.
The Petroleum Industry Act (PIA), passed in 2021, recognises the distinct economics of oil and gas. It offers incentives like tax credits and investment allowances for gas-only projects.
Past infrastructure and regulatory gaps have slowed gas development. Large volumes of gas are still flared, with the flaring rate in July exceeding 7% of total production.
Although the government expects more deals and investments under the new framework, some analysts are cautious. ‘The real challenge will be in the details of cost recovery, including timing, scope, and administration,’ said Ayodele Oni, an energy lawyer in Lagos.
Mikolaj Judson, an analyst at Control Risk, agreed. He noted that for the incentives to work, the sector needs broader reforms. Without them, ‘investors will continue to face risks when developing gas projects,’ he said.
