Tinubu Issues New Executive Order to Slash Oil Production Costs, Reward Efficient Operators

In a fresh move to transform Nigeria’s oil and gas sector and attract more investment, President Bola Tinubu has signed a new Executive Order designed to lower project costs, reward operational efficiency, and enhance government revenues.

The order, titled “The Upstream Petroleum Operations Cost Efficiency Incentives Order (2025),” introduces performance-based tax incentives for companies that cut costs and meet industry benchmarks.

The new order forms part of a broader effort by Tinubu’s administration to reposition Nigeria’s energy sector for global competitiveness, following what officials described as significant investment gains and sector-wide reforms since he took office in May 2023.

Under the directive, investors will now receive 50 percent of incremental government revenue generated from verified cost savings. Meanwhile, the maximum tax credit a company can claim has been capped at 20 percent of its annual tax liability.

The Special Adviser to the President on Energy, Olu Verheijen, said the order strikes a balance between protecting state revenues and offering strong fiscal incentives to efficient upstream operators.

“This is not just about reducing costs. It’s about rewarding performance and positioning Nigeria as a competitive and resilient oil and gas investment destination,” Verheijen said while unveiling the order.

Nigeria’s Cost Burden

Nigeria has long struggled with some of the highest oil production costs in the world. Depending on the terrain, field, and security conditions, the cost to produce a barrel of oil in the country ranges between $25 and $48. That figure stands in stark contrast to Saudi Arabia and Iraq, where average costs hover around $3 to $10 per barrel.

Industry stakeholders often blame this disparity on Nigeria’s unstable policy environment, multiple regulatory agencies, frequent delays in contracting, and complex local content requirements. While the local content drive was meant to stimulate indigenous participation and capacity, companies have noted that it has made operations more expensive in the short term.

The new Executive Order seeks to overhaul this operating climate by introducing cost benchmarks that will be developed annually by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), based on operational terrain — onshore, shallow water, and deep offshore.

According to the order, companies that exceed cost-saving targets will earn tax credits tied directly to their production volumes and operating cost reductions.

“The aim is to progressively eliminate the cost premium in Nigeria’s upstream sector,” Tinubu said in the order, stressing that annual benchmarking studies by the NUPRC will anchor implementation and compliance.

Building on Previous Reforms

Since taking office, Tinubu has signed multiple directives to address inefficiencies in the sector. These include:

1. The Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order, 2024
2. A Presidential Directive on Local Content Compliance Requirements
3. A directive to increase the contract approval threshold to $10 million and reduce timelines.

Verheijen said the new order is a continuation of those reforms, adding that inter-agency coordination would be led from her office to ensure the policies translate into measurable outcomes.

“This is about creating jobs, securing our energy future, and making every barrel count,” Tinubu said.

The African Energy Chamber (AEC), through its Executive Chairman NJ Ayuk, welcomed the move, calling it a timely intervention that strengthens investor confidence and Nigeria’s position as a leading African oil producer.

“The executive order could not come at a better time,” Ayuk said, referencing Nigeria’s targets of hitting 2 million barrels per day (bpd) in oil production and 12 billion standard cubic feet per day (bscf/d) in gas output—up from the current 7.3 bscf/d.

Ayuk acknowledged that Nigeria has suffered years of declining upstream investment due to regulatory uncertainty and an unattractive business environment. But with the combined weight of the new order and the Petroleum Industry Act (PIA) signed in 2021, he said the country appears ready to turn that trend around.

The recent influx of over $8 billion in investments into deepwater oil and gas projects such as Bonga North (Shell) and Ubeta (TotalEnergies) is one of the early signs of renewed investor confidence. These projects stem from Final Investment Decisions (FIDs) secured under Tinubu’s administration and were highlighted by Verheijen at the 2025 Africa CEO Forum in Abidjan.

Analysts say if properly implemented, the Executive Order could drastically reduce Nigeria’s cost per barrel and unlock more production, but caution that its success hinges on effective oversight and streamlined agency coordination.

With ambitious targets and global investors watching closely, the pressure is now on the Tinubu administration to effectively implement the executive order.