Africa’s oil producing countries are increasing their focus on marginal sectors as they seek new avenues to strengthen energy security, expand domestic supplies and stimulate economic growth. This strategy is also gaining momentum in Nigeria, where indigenous company Energy Transfer HS recently acquired a 48% interest in the Kugbo Western Marginal gas field. This investment confirms the increasing commercial viability of small-scale, undeveloped hydrocarbon assets.
The deal was signed Dec. 8 with Prime Horizon Energy as technology partner and commits $120 million over two years to drilling, capacity expansion and infrastructure upgrades. These efforts support Nigeria’s broader policy objective of increasing the availability of affordable natural gas for power generation, industry and households, which is key to meeting the country’s growing energy needs.
Across Africa, marginal sectors are increasingly being seen as strategic opportunities. These deposits are typically small or previously uneconomic, but can be brought to production more quickly with lower costs and fewer technical barriers than frontier megaprojects. By integrating these into national energy strategies, governments can supplement production from the large energy sector, stabilize domestic supplies and generate new sources of income.
Encourage investment in marginal areas
To attract capital to these assets, several African states are introducing targeted fiscal and regulatory reforms. In Nigeria, marginal oil fields have accounted for more than 2% of the country’s crude oil supply since their introduction in 2003. The Petroleum Industry Act modernized the sector by clarifying licensing conditions, streamlining royalties, and increasing transparency. All of these are essential to investor confidence. The annual bidding round now includes heritage and undeveloped land, creating opportunities for both indigenous and international players.
The Upstream Petroleum Business Cost Efficiency Incentive Order 2025 introduced additional incentives. This provides a tax credit of up to 20% of annual tax payments to businesses that achieve verified cost savings. This policy directly improves the economics of small and technically challenging sectors by reducing operational expenditures.
Angola is following a similar trajectory. The U.S. Oil, Gas and Biofuels Agency included five marginal fields in the 2025 bidding round, prioritizing promising fields near existing infrastructure to reduce capital expenditures. Angola also maintains favorable fiscal conditions, including reduced oil production taxes and oil income taxes on marginal operations, to attract diverse investors and encourage exploration of overlooked reservoirs.
Strengthening indigenous production and infrastructure
Policies targeting marginal areas are helping to shift ownership and operational capacity to domestic companies. Historically, small discoveries have not been developed for decades under the IOC’s portfolio. By opening these assets to local operators, governments are facilitating skills transfer, building local content and increasing Indigenous participation in upstream activities.
Development of marginal zones is also driving new infrastructure. In June 2025, Nigeria’s Green Energy International completed the Otakipo land terminal in Rivers State and lifted its first crude oil cargo shortly thereafter. With a throughput capacity of up to 250,000 barrels per day from third-party producers, the terminal is poised to release stranded volumes from more than 40 marginal zones, providing a much-needed alternative to costly evacuation routes and enhancing overall supply resiliency.
As global energy markets tighten, African oil and gas producers stand to benefit by expanding marginal field development across borders. Sharing infrastructure, coordinating licensing and technology partnerships across Africa could help maximize investment efficiency while strengthening regional energy integration. By prioritizing marginal sectors, African countries can strengthen domestic production, support industrial growth and advance energy security, laying the foundations for a more resilient and sustainable energy future.
