TotalEnergies sues Nigeria over $554m petroleum profit tax demand

French energy major TotalEnergies EP Nigeria Limited has launched a fresh legal challenge against Nigeria‘s tax authorities and the Nigerian National Petroleum Company (NNPC) over a disputed N75.2bn ($554.1m) petroleum profits tax assessment, arguing that the demand breaches the 2008 Modified Carry Agreement for one of the country’s offshore oil projects.

Court filings before the Lagos Tax Appeal Tribunal show that TotalEnergies is contesting additional petroleum profits tax (PPT) assessments issued by the Nigeria Revenue Service (NRS), which it describes as “defective and inconsistent with the provisions of the Petroleum Profits Tax Act”.

The disputed assessments, totalling $554,086,909.02, were issued on 13 April for the 2019-2024 accounting years. They came on top of earlier tax assessments totalling about $324.5m, which had already been served on TotalEnergies for the same period.

2008 agreement with NNPC

TotalEnergies argues that the additional assessments disregard the terms of a Modified Carry Agreement signed with NNPC on 24 November 2008, under which the French company agreed to finance the Nigerian state’s share of the development costs for the Ofon Phase II offshore project. NNPC has been named as the second respondent in the case.

The Ofon Phase II project in the Oil Mining Lease (OML) 102 field commenced in February 2012 to increase Nigeria’s crude oil output by up to 90,000 barrels per day.

The Modified Carry Agreement was designed to ease the government’s funding burden under the parties’ 1991 joint venture by allowing TotalEnergies to carry NNPC’s 60% share of project costs, including cash-call obligations.

In return, TotalEnergies is entitled to an agreed volume of crude oil and gas. Under a subsequent escrow agreement dated 19 October 2010, NNPC markets that allocation on TotalEnergies’ behalf and remits the proceeds to an escrow account.

According to the court filings, the escrow bank is responsible for settling the petroleum profits tax due on TotalEnergies’ behalf from those proceeds.

TotalEnergies’ case

TotalEnergies contends that the new tax assessments effectively ignore the contractual framework established by the Modified Carry Agreement and seek to impose liabilities that have already been accounted for under the escrow arrangement. It also contends that the additional demand, particularly for the 2019 accounting year, is statute-barred, as it falls seven years after the period ended.

TotalEnergies argues that Nigeria’s Petroleum Profit Tax Act “prescribes a six-year limit within which the NRS may issue an additional assessment in respect of an accounting period”.

The dispute arises against the backdrop of an ongoing legal battle between TotalEnergies and NNPC over the company’s entitlements under the same Modified Carry Agreement. In that separate case, TotalEnergies is seeking to offset its petroleum profits tax liabilities against what it says are excess tax payments previously made to the Nigerian government via the escrow bank.

The company says it overpaid $239.2m in petroleum profits tax between 2019 and 2022, while also challenging a $372.2m Company Income Tax assessment for the 2021-2024 accounting years, stating that its actual liability is $292.1m.

In the fresh suit, TotalEnergies argues that the NRS should set off its Company Income Tax liabilities for the 2021-2024 accounting years against the $239.2m in alleged excess petroleum profits tax payments. TotalEnergies is also asking the tribunal to set aside $237.7m in cumulative interest and penalties imposed on the disputed Company Income Tax assessments for the 2021-2024 accounting periods.

Last year, Nigeria embarked on its most ambitious tax reform in decades as President Bola Tinubu‘s administration sought to broaden the tax base and lift government revenues. The government says the reforms are already yielding results, with tax collections rising by 49% in the first half of 2026 compared with the same period a year earlier. (The Africa Report)