Wedoany.com Report-Sept. 4, Nigeria has signed a production-sharing contract (PSC) with TotalEnergies (TTEF.PA), its first agreement under a new law aimed at increasing gas production, the oil regulator confirmed to Reuters on Wednesday. Officials said the deal will serve as a framework for future contracts.

A vertical gas flaring furnace is seen in Ughelli, Delta State, Nigeria September 16, 2020. Picture taken September 16, 2020

The Petroleum Industry Act (PIA), adopted in 2021, recognized the different financial dynamics of oil and gas exploration and created incentives such as tax credits and investment allowances for gas-focused projects. The new PSC, finalized on September 1, was agreed between TotalEnergies and its local partner and covers prospecting licenses awarded in 2023. The acreage spans about 2,000 square kilometers (772 square miles) in the Niger Delta Basin.

Gbenga Komolafe, head of the Nigerian Upstream Petroleum Regulatory Commission, explained: “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 added that all new deepwater and frontier acreage contracts will likely adopt similar gas terms, setting a model for dedicated gas development agreements.

Nigeria, Africa’s largest oil producer, has been working to expand the role of gas in its energy mix. Officials see gas as important both for domestic economic growth and as a transitional fuel toward cleaner energy. According to the regulator, Nigeria produced 1.31 million barrels of oil equivalent (BOE) of gas daily in July, compared with 1.86 million barrels of crude and condensates. With an estimated 210.5 trillion cubic feet of proven gas reserves, comparable to its crude oil reserves, the gas sector is regarded as a key growth area.

Despite the potential, infrastructure gaps and regulatory challenges have slowed development, and gas flaring remains an issue. In July, the flaring rate, although at a three-year low, was still above 7% of total output. Authorities believe the PIA framework can reduce flaring by encouraging more commercial use of gas.

Analysts remain cautious about implementation. Ayodele Oni, a Lagos-based energy lawyer and partner at Bloomfield Law Firm, noted: “The real challenge lies in the detail of cost recovery, particularly the timing, scope, and administrative process.”

Mikolaj Judson, analyst at Control Risk, highlighted that while the incentives are positive, broader reforms are necessary. “Investors will continue to face various risks in developing gas projects” if infrastructure shortfalls and regulatory issues are not fully addressed, he said in a note to Reuters.

The new PSC with TotalEnergies marks a significant milestone under the PIA, signaling Nigeria’s intent to strengthen its gas sector. Whether this framework will attract sustained investment and accelerate development depends on consistent implementation and solutions to long-standing structural challenges.