Above image courtesy of African Energy Chamber
(Bloomberg) – Nigeria has set a lower threshold by which oil companies can recover their expenses as it seeks to boost government revenue amid lower crude oil prices threatening to widen the budget deficit in the West African nation.
An onshore rig in Nigeria. Image: TotalEnergies
Firms with production-sharing contracts with the government will now claim a maximum of 70% of their expenses, down from a previous 80% ceiling, Bashir Ojulari, group chief executive officer of the Nigerian National Petroleum Co. Ltd. said during a briefing in Abuja, the capital on Monday.
This will allow “continuous flow of production funds into the federation,” Ojulari said. “This stance enhances the federation stake while ensuring good return on investment to the contractor.”
The balance of 30% unrecoverable cost, also known as profit oil, will be shared between the companies and the government according to terms agreed in their specific pacts, the NNPC head said.
The new rule will impact oil majors like Shell, ExxonMobil, Chevron and TotalEnergies that have production-sharing contracts with the state-owned NNPC, for deepwater offshore fields including Agbami, Egina and Akpo. These deals account for roughly a third of output in Africa’s biggest producer.
The International Monetary Fund projects that Nigeria’s fiscal deficit could expand to 4.7% of gross domestic product this year from 4.1% in 2024, due to lower oil prices. Africa’s most-populous nation had drawn its 2025 spending plan based on an optimistic oil price of $75 per barrel and production of 2.06 million bpd
but prices and volume are currently trailing the set targets.
