FG offers Shell $11.50 per barrel tax credit to unlock $20bn Bonga Deepwater project

Udeme Akpan with Agency Report

The Federal Government has approved an enhanced production-linked tax credit of $11.50 per barrel for Shell Plc and its partners in a move aimed at unlocking the long-delayed Bonga Southwest Aparo deepwater oil project, a development expected to attract about $20 billion in foreign direct investment (FDI) into Nigeria.

The incentive, approved by President Bola Tinubu, is designed to pave the way for a Final Investment Decision (FID) on the offshore project, which has remained stalled for nearly two decades despite its strategic importance to Nigeria’s oil production ambitions.

According to a Bloomberg report, President Tinubu approved the gazetting of investment-linked fiscal incentives on January 22 to support the development of the Bonga Southwest Aparo field.

The publication, citing sources familiar with the negotiations, said Shell and its partners would receive a production-linked tax credit of $11.50 for every barrel of crude produced—more than double the standard incentive provided under the Petroleum Industry Act (PIA).

The approval removes one of the final obstacles that had delayed the project for almost 20 years.

The Nigerian National Petroleum Company Limited (NNPC Ltd.) described the approval as a landmark breakthrough, noting that it would result in the first Final Investment Decision on a Nigerian deepwater Production Sharing Contract (PSC) asset since 2008.

The prolonged absence of new deepwater investments has slowed Nigeria’s ability to compete with emerging offshore producers such as Angola, Brazil and Guyana.

Bloomberg also reported that the fiscal package resolves a dispute settlement agreement dating back to 2021, eliminating another major hurdle that had discouraged Shell and its partners from committing capital to the offshore development located about 120 kilometres off Nigeria’s coastline.

Once operational, the Bonga Southwest Aparo project is expected to produce approximately 150,000 barrels of crude oil per day and 140 million standard cubic feet of natural gas daily, while creating more than 5,000 direct and indirect jobs.

The negotiations leading to the enhanced tax incentive reportedly involved NNPC Ltd., the Nigeria Revenue Service (NRS), the President’s Special Adviser on Energy, Olu Verheijen, and Shell Chief Executive Officer Wael Sawan.

According to Bloomberg, Sawan’s recent visit to the Presidential Villa helped accelerate months of commercial and technical negotiations that culminated in the government’s approval.

Commenting on the development, NNPC Group Chief Executive Officer, Bayo Ojulari, described the approval as a major milestone after years of stalled progress.

“For nearly two decades, the Bonga Southwest project remained stalled,” Ojulari said, attributing the breakthrough to the Tinubu administration’s commitment to reviving investments in Nigeria’s upstream petroleum sector.

Industry analysts believe the approval represents a significant shift in Nigeria’s fiscal strategy toward attracting deepwater investments.

While the enhanced tax credit will reduce government revenue per barrel in the short term, it is expected to unlock billions of dollars in investment, boost crude oil production, create jobs and strengthen foreign exchange earnings.

The move could also encourage other international oil companies—including ExxonMobil, Chevron and TotalEnergies—to seek similar fiscal incentives for their own deepwater assets.

If extended across the sector, the policy may signal a broader transformation in Nigeria’s approach to competing for global upstream investment, especially as countries such as Guyana and Brazil continue to attract significant capital into offshore exploration and production.

For the Tinubu administration, the decision reflects a strategic trade-off: accepting lower immediate tax receipts in exchange for reviving large-scale projects capable of increasing production, attracting investment and strengthening Nigeria’s long-term position in the global oil industry.

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