Nigeria Strikes Landmark Gas Deal with TotalEnergies Under New Oil Law

Nigeria has signed its first production-sharing contract (PSC) with French energy giant TotalEnergies, in a landmark deal that reflects the country’s new focus on natural gas development.

The agreement, sealed on September 1 with TotalEnergies and its local partner, covers oil and gas prospecting licences across roughly 2,000 square kilometres in the Niger Delta Basin. It is the first PSC executed under the Petroleum Industry Act (PIA) of 2021, which introduced reforms to separate oil and gas economics and offered incentives such as tax credits and investment allowances for gas-focused projects.

Gbenga Komolafe, chief executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), described the contract as a turning point. “This new PSC with TotalEnergies represents a policy shift, in line with the PIA, which aims to unlock Nigeria’s gas potential and support the transition to a gas-powered economy,” he said.

According to Komolafe, similar gas-focused terms are expected to apply to all upcoming deepwater and frontier contracts, making the TotalEnergies deal a blueprint for future agreements.

Nigeria, Africa’s largest oil producer, is seeking to increase gas use in its domestic energy mix, both as a growth driver and as a transition fuel toward cleaner energy. In July, daily gas production stood at 1.31 million barrels of oil equivalent (BOE), compared to 1.86 million barrels of crude and condensates. With an estimated 210.5 trillion cubic feet of proven gas reserves, almost on par with its crude reserves, the country sees vast potential in expanding the gas sector.

Despite this, progress has long been hampered by weak infrastructure and regulatory shortcomings, while gas flaring remains persistent. Even at a three-year low in July, flaring still exceeded 7% of total production.

Industry experts welcomed the new framework but warned that investment confidence will depend on implementation. Ayodele Oni, an energy lawyer at Bloomfield Law Firm, pointed to uncertainties around cost recovery. “The real challenge lies in the detail of cost recovery, particularly the timing, scope, and administrative process,” he said.

Mikolaj Judson, an analyst at Control Risks, echoed this caution, stressing that without broader reforms to address infrastructure bottlenecks and governance gaps, investors will remain wary. “Otherwise, investors will continue to face various risks in developing gas projects,” he noted.