The Federal Government has approved a special production-linked tax credit of $11.50 per barrel for Shell Plc and its partners to accelerate the long-delayed Bonga Southwest Aparo deepwater oil project, in a move aimed at unlocking about $20 billion in investment and boosting Nigeria’s crude oil output.
According to Bloomberg, President Bola Tinubu approved the enhanced fiscal incentive to help push the project towards a long-awaited Final Investment Decision (FID), ending nearly two decades of uncertainty over one of Nigeria’s largest undeveloped offshore oil assets.
Bloomberg, citing people familiar with the matter who requested anonymity because the information has not been made public, reported that the new incentive grants Shell and its partners a rebate of $11.50 for every barrel of crude oil produced, more than double the standard production-linked tax credit currently available under Nigeria’s fiscal framework.
The report said the approval removes one of the final obstacles preventing the multibillion-dollar project from proceeding to full development.
The same tax credit framework is expected to be extended to other international oil companies developing new deepwater projects in Nigeria and will remain in force until at least 2029, according to the report.
The Bonga Southwest Aparo project, operated by Shell Nigeria Exploration and Production Company (SNEPCo), is regarded as one of Nigeria’s most significant deepwater developments. Once operational, it is expected to produce about 150,000 barrels of crude oil per day and substantially increase Nigeria’s oil production capacity. The project is also projected to yield approximately 350 million barrels of crude oil over its lifespan while attracting around $20 billion in foreign direct investment.
A Shell spokesperson told Bloomberg that the company continues to make progress towards developing the project and would announce material developments through its official communication channels.
The incentive underscores the Tinubu administration’s strategy of using targeted fiscal reforms to revive investment in Nigeria’s oil and gas sector after years of declining capital inflows. International oil companies have repeatedly cited regulatory uncertainty, delayed approvals and less competitive fiscal terms as major reasons for postponing investments in Nigeria’s deepwater fields.
The government has in recent months introduced several executive orders and investment-linked incentives designed to improve the competitiveness of Nigeria’s petroleum industry, particularly in deep offshore operations where production costs are significantly higher than onshore assets.
Industry analysts say bringing the Bonga Southwest Aparo project to fruition could help reverse Nigeria’s declining crude oil production, strengthen foreign exchange earnings, generate thousands of jobs and reinforce investor confidence in the country’s upstream petroleum sector.
The Bonga field, located about 120 kilometres off the Niger Delta coast, was Nigeria’s first deepwater oil development when production began in 2005. The proposed Bonga Southwest Aparo expansion has remained on the drawing board for years despite its vast reserves, largely because of disagreements over fiscal terms and investment economics.
With the enhanced tax incentive now in place, industry observers believe Nigeria has significantly improved the commercial viability of the project and strengthened its position in competing for scarce global upstream investment capital.
