By Prime Bulletin — October 2025
Nigeria’s oil industry — long a backbone of federal revenue but also a source of chronic underperformance and controversy — appears to be staging a comeback. Over the past year the country has reported a notable rise in crude output, a jump in drilling activity and a string of new deals and investment commitments. Abuja’s push to modernize rules, open assets to competitive bids and de-risk gas projects is attracting majors and independents alike. But structural hurdles — from proposed legal rewrites to lingering infrastructure and security concerns — mean the gains remain fragile.
This article explains what’s changed, what’s driving recent production growth, where the investment is coming from, and the risks that could blunt Nigeria’s ambitions.
The facts on the ground: production, rigs and deals
In recent months Nigeria’s daily crude output has climbed from levels below 1.6 million barrels per day (bpd) earlier in the year to roughly 1.7–1.83 million bpd, according to officials and reporting based on government data — a sharp improvement driven by new investment, restoration of damaged infrastructure and improved pipeline availability.
Activity in the upstream is following suit: the number of active drilling rigs rose from around 31 in January to about 50 by July 2025, and other regulatory updates list even larger counts in the autumn as new projects reach sanction. The regulator and industry sources say field development plan approvals and final investment decisions (FIDs) since 2023 could add several hundred thousand barrels to output in coming years.
Major deal flow lends credibility to that picture. In September 2025 Nigeria signed a production-sharing contract (PSC) with TotalEnergies and a local partner for two deepwater blocks awarded in the 2024 licensing round — one of the most visible examples of new deepwater interest. Separately, ExxonMobil has signalled substantial investments and project revitalisation (including a multi-hundred-million to $1.5 billion scale programme in existing deepwater assets) consistent with the surge in capital commitments.
What changed: the policy and commercial levers
Several reforms and policy moves explain why companies are returning.
1. Licensing rounds and competitive bids. After a series of open licensing exercises (notably the 2024 and 2025 rounds), Abuja awarded acreage across shallow, deepwater and marginal fields. These rounds were explicitly aimed at unlocking fallow assets and inviting technical partners that can commit capital, creating immediate workstreams for drilling and seismic programs. Regulators say licensing outcomes have led to meaningful FIDs.
2. The Petroleum Industry Act (PIA) framework and incentives. The 2021 PIA created fiscal and contractual structures intended to provide predictability — from tax credits to cost recovery mechanisms — that make long-lead projects more bankable. Operators say the combination of clearer fiscal terms and greater regulatory engagement has reduced some of the political risk premium that haunted the market for years.
3. Targeted gas incentives and midstream funds. Nigeria is also moving to prioritize gas development — both to monetize large gas resources and to support domestic power and industrialization. New vehicles such as the Midstream and Downstream Gas Infrastructure Fund were promoted to de-risk gas pipelines and processing projects for private investors. These mechanisms have helped attract gas-focused funding and PSCs that include gas development clauses.
4. Operational fixes: tackling theft and restoring pipeline availability. A sustained security and enforcement effort — combining military operations against illegal refining, local enforcement and community engagement — has helped reduce crude losses from theft and sabotage from the very high levels of recent years. Industry reports and regulator updates show daily loss metrics have fallen sharply in 2025, improving available production and export capacity.
Large international oil companies and regional independents are returning for several reasons:
- Attractive asset economics in mature and deepwater Nigerian fields where breakevens remain competitive versus other basins.
- Regulatory clarity from PIA-era rules and licensing rounds that provide contractual transparency.
- Opportunity to acquire matured assets divested by majors elsewhere, with local partners offering operating continuity and local content advantages.
- Strategic positioning: while global capital is being reallocated into lower-carbon ventures, producing oil and gas assets that can deliver near-term cashflow remain valuable to companies balancing portfolios.
Notable recent commitments
- TotalEnergies: PSCs for two offshore blocks (operator, 80% stake) to pursue exploration and gas development.
- ExxonMobil: announced plans for a major investment cycle in deepwater assets, signalling confidence in Nigeria’s operating environment.
The roadblocks: legal uncertainty, infrastructure gaps and politics
Despite the positive momentum, several material risks could derail ambitions.
PIA amendments and a tug-of-war over contract control. In late 2025 the federal government signalled plans to amend the Petroleum Industry Act to shift some powers and clarify who controls existing oil contracts — notably proposals to move certain contract management responsibilities away from the national oil company toward the independent regulator (NUPRC). While proponents argue this will plug revenue leakages and enhance transparency, critics warn that rushed or unclear amendments could unsettle investors who prize legal certainty. Public debate and commentary by industry stakeholders suggest this issue is a key watch-point.
Infrastructure and gas-offtake bottlenecks. Even when fields are developed, a lack of midstream pipelines, gas processing capacity, and reliable domestic and export offtake agreements can limit the pace at which production becomes monetised. The state’s new midstream funds and private projects aim to close gaps, but these are long-cycle investments.
Security and local grievances. Progress in reducing theft and illegal refining has been measurable, but the Niger Delta remains a politically sensitive environment. Military action can reduce theft in the short term; long-term stability requires jobs, community investment and credible revenue sharing. Recent operations and clampdowns (including destruction of illegal refineries) indicate authorities are serious, but the region’s political dynamics remain a variable.
Global demand and price risk. OPEC+ decisions and global demand trends continue to influence investors’ calculus. Modest changes in crude prices can alter project economics, especially for marginal deepwater developments that face high upfront costs. Recent OPEC+ moves to adjust supply show the market remains fluid.
Outlook: realistic targets and policy priorities
Officials and some industry forecasts talk about the possibility of pushing toward 2.0–2.5 million bpd over the next 12–24 months if current projects proceed and infrastructure/shipping constraints are managed. That is technically feasible given the assets and exploratory upside, but depends on timely FIDs, continued reduction in theft, and steady legal/regulatory continuity.
To convert momentum into durable growth, policymakers should prioritize:
- Legal certainty: manage PIA amendments with extensive stakeholder consultation to avoid investor shock.
- Rapid midstream build-out: accelerate pipelines and gas processing to ensure produced hydrocarbons can be monetized domestically and for export.
- Community-first approaches: tie security gains to economic opportunities for Niger Delta communities to make reductions in theft sustainable.
- Transparent revenue management: ensure divestments and asset transfers translate into clear fiscal receipts for the federation and subnational governments.
Nigeria’s recent production rebound is real and rooted in an engineered combination of policy reform, fresh licensing and renewed investor interest. The country is no longer simply hoping for a turnaround — it is actively building the fiscal, contractual and operational scaffolding to support higher output. Yet the outcome is not guaranteed: legal tweaks, infrastructure shortfalls and political friction could stall progress. If Abuja keeps policy predictable, prioritizes midstream investment and consolidates security gains with community development, Nigeria may be closer than it has been in years to turning its hydrocarbon riches into measurable, long-term value for its economy.
