Nigeria NNPC, TotalEnergies approve $2.2bn deepwater oil project to lift offshore production

The Nigerian National Petroleum Company Limited (NNPC Ltd) and TotalEnergies approved a $2.2 billion deepwater oil development project in Nigeria on Tuesday to increase offshore crude production. According to TotalEnergies, the project aims to add new wells and subsea infrastructure to an existing offshore block, reducing development costs and accelerating the timeline to first oil.

The development involves drilling new wells and installing subsea infrastructure tied back to existing offshore facilities, which is intended to reduce unit development costs and accelerate the timeline to first oil compared with greenfield projects, the company said.

The $2.2 billion deepwater project, jointly approved by NNPC Ltd and TotalEnergies on Tuesday, is expected to add several tens of thousands of barrels per day to Nigeria’s offshore oil output once fully operational, according to TotalEnergies’ 2023–2024 factbook.

TotalEnergies serves as the operator of the offshore block under a production sharing contract (PSC) with NNPC Ltd and other international partners. NNPC Ltd participates on behalf of the Federal Government of Nigeria, reflecting its transition under the Petroleum Industry Act (PIA) from a statutory corporation to a commercially oriented entity. Nigerian authorities have cited the PIA and related regulations as providing regulatory certainty that has helped unlock large upstream investments, including multi-billion-dollar deepwater projects such as this one.

The project targets deepwater reservoirs located at water depths typically exceeding 1,000 meters, consistent with other Nigerian offshore hubs operated by TotalEnergies. The incremental reserves are classified as low-cost by TotalEnergies, aligning with the company’s strategy to prioritize deepwater developments with competitive breakeven prices. Nigerian regulators have emphasized that deepwater projects are essential to offsetting declines from aging onshore and shallow-water assets and stabilizing national oil output around or above 1.5 to 1.7 million barrels per day.

Following the final investment decision (FID), the project will enter a multi-year development phase involving detailed engineering, drilling, subsea installation, and integration with existing offshore infrastructure. TotalEnergies’ medium-term planning documents place the start-up of new Nigerian deepwater phases within its 2020s project pipeline, synchronized with its global production profile. Nigerian regulators have noted that streamlined approval processes under the PIA are designed to shorten the cycle from project sanction to first oil for offshore developments.

NNPC Ltd leadership has publicly linked deepwater investments like this $2.2 billion project to broader goals of boosting crude exports, increasing government revenue, and improving foreign exchange earnings. Authorities have also highlighted the role of such projects in enhancing energy security by stabilizing domestic supply and supporting export commitments. The Nigerian government aims to attract about $20 billion in upstream oil and gas foreign direct investment by 2024–2025, with deepwater projects playing a central role in this strategy.

The investment is expected to generate significant government take through profit oil, taxes, and royalties under the PSC framework, supporting federal and sub-national budgets. It is also anticipated to create contract opportunities for Nigerian service companies in engineering, fabrication, logistics, and marine services, in line with local content requirements. NNPC officials have emphasized the importance of strengthening metering and measurement systems for large offshore projects, noting that about $880 million—roughly 40% of an estimated $2.2 billion—was lost to crude oil metering errors in 2022.

Within TotalEnergies’ broader portfolio, the Nigerian deepwater development is part of a selective upstream growth strategy focused on high-margin projects that maintain production and fund the company’s energy transition efforts. Nigeria is listed among TotalEnergies’ core upstream countries, where deepwater oil and associated gas projects constitute a significant share of African production. The company prioritizes operational efficiency and emissions performance in its deepwater hubs, aiming to keep carbon intensity below industry averages.

For NNPC Ltd, participation in large offshore projects with international oil companies is a key avenue for accessing technology, gaining project management experience, and generating cash flow as it evolves into a fully commercial enterprise. Both NNPC Ltd and TotalEnergies have framed the new deepwater phase as leveraging existing infrastructure and partnerships to reduce risk and unit costs compared with standalone greenfield developments, while supporting Nigeria’s offshore production growth ambitions.

The project’s approval follows the implementation of Nigeria’s new petroleum legislation, which officials say has restored investor confidence in the upstream sector. Execution will involve phased drilling campaigns, allowing initial production to ramp up while additional wells are completed and brought online. Nigerian regulators have indicated that the revised fiscal and regulatory framework for deepwater projects aims to improve project economics while maintaining government take, thereby sustaining Nigeria’s competitiveness against other African deepwater plays where investment has accelerated in recent years.