Nigeria’s TotalEnergies Deal Signals Bold Shift Toward Gas Development
Nigeria has taken a major step toward reshaping its energy future with the signing of a new production-sharing contract (PSC) with French oil giant TotalEnergies. The agreement, finalized on September 1, 2025, marks the country’s first deal under the framework of the Petroleum Industry Act (PIA), the landmark legislation passed in 2021 to unlock investment in gas and align with the global shift toward cleaner energy.
The deal covers oil and gas prospecting licenses across roughly 2,000 square kilometers in the Niger Delta Basin. While Nigeria has long been known as Africa’s largest oil producer, the agreement underscores a deliberate policy shift: to prioritize natural gas as both an economic driver and a bridge fuel in the country’s transition toward a more sustainable energy mix.
Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, described the contract as a model for future arrangements. According to him, all upcoming deepwater and frontier acreage deals are expected to adopt similar gas-friendly terms. “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,” Komolafe said.
Nigeria’s estimated 210.5 trillion cubic feet of proven gas reserves place it among the top holders of natural gas globally. By comparison, its gas reserves are almost on par with its crude oil deposits, but gas development has historically lagged due to regulatory bottlenecks, underinvestment, and infrastructure shortfalls. Despite this, the government hopes that fresh incentives—such as tax credits and investment allowances specifically designed for gas projects—will encourage multinational and local operators to commit long-term capital.
Daily production figures highlight both the challenge and the opportunity: in July, Nigeria produced about 1.86 million barrels of crude and condensates compared to 1.31 million barrels of oil equivalent in gas. Yet, despite this output, a significant volume of gas is still flared. The country’s July gas flaring rate stood at more than 7 percent of total production—its lowest in three years but still an indicator of wasted resources and environmental costs.
Energy analysts, while acknowledging the importance of the TotalEnergies contract, warn that the road ahead is far from straightforward. Ayodele Oni, a Lagos-based energy lawyer and partner at Bloomfield Law Firm, noted that “the real challenge lies in the detail of cost recovery, particularly the timing, scope, and administrative process.” These are critical elements for companies that must weigh long-term profitability before committing billions of dollars in infrastructure.
Mikolaj Judson, analyst at Control Risks, echoed these concerns. In his view, the incentives offered under the PIA are only part of the equation. Without wider reforms—such as upgrades to pipelines, processing facilities, and a stronger regulatory framework—investors may still hesitate. “Otherwise, investors will continue to face various risks in developing gas projects,” he cautioned in a note.
Still, optimism is building within government circles that this landmark contract will pave the way for more deals. By using the TotalEnergies arrangement as a template, regulators hope to accelerate projects that reduce gas flaring, boost domestic power generation, and position Nigeria as a leading supplier of liquefied natural gas (LNG) in international markets.
As Nigeria balances its dual identity as a major oil exporter and an emerging gas powerhouse, the TotalEnergies agreement could prove to be a turning point. If successfully implemented, it may not only reshape the country’s energy sector but also signal to global investors that Nigeria is ready to compete as a serious player in the gas economy.
