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Tax Alert
This alert contains:
Upstream Petroleum Operations (Cost Efficiency Incentives) Order 2025
Background
On April 30, 2025, The President of Nigeria signed into law the Upstream Petroleum Operations (Cost Efficiency Incentives) Order, 2025. This order aims to reduce operating costs in the upstream oil and gas sector while enhancing global competitiveness and efficiency.
The Order introduces a Cost Efficiency Incentive (CEI) framework, which offers a performance-based tax incentive for eligible upstream operators who reduce their Unit Operating Costs (UOC) below annual targets.
It also seeks to maximise economic returns from petroleum operations by reducing operational costs, project delays and contracting inefficiencies.
Key highlights
- Scope and eligibility: The Order applies to lessees, licensees, and contractors engaged in upstream petroleum operations. Eligibility for incentives is contingent on achieving or exceeding annual cost reduction targets set by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
- Tax credit incentives: Eligible companies can claim a tax credit equal to 50% of cost savings, multiplied by the applicable income tax rate. The CEI credit is capped at 20% of tax liability and must be used within 3 years of issuance.
- Validity period: The incentive programme is valid for 10 years from 30 April 2025 to 31 May 2035, unless extended by the President. Any unused tax credits after 31 May 2035, become void.
Read the tax alert for the full report.
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