Nigeria has granted Shell Plc an $11.50 per barrel production-linked tax credit for the Bonga Southwest Aparo deepwater oil project, in a move aimed at pushing the long-delayed project toward a final investment decision.
President Bola Tinubu had, on January 22, approved the gazetting of investment-linked incentives to support the proposed Bonga Southwest deep-offshore oil project being developed by Shell and its partners.
According to a Bloomberg report, the incentive approved by the President gives Shell and its partners a rebate of $11.50 for every barrel of crude produced, more than double the standard production tax credit available under Nigeria’s petroleum fiscal framework.
The approval is said to have cleared one of the final hurdles for the project, which has remained stalled for close to two decades.
The Nigerian National Petroleum Company Limited said the approval signals the first final investment decision on a Nigerian deepwater production-sharing contract asset since 2008, a long gap that has affected Nigeria’s ability to compete with deepwater oil producers such as Angola, Brazil and Guyana.
The fiscal package also reportedly resolves a dispute-settlement arrangement dating back to 2021, removing another obstacle that had delayed Shell and its partners from committing capital to the field.
The Bonga Southwest Aparo field is located about 120 kilometres off Nigeria’s coast and is expected to make a major contribution to the country’s production base.
NNPC said the project could attract about $20 billion in foreign direct investment, produce roughly 150,000 barrels of oil per day, deliver about 140 million cubic feet of gas daily, and support more than 5,000 direct and indirect jobs once operational.
The negotiations that led to the enhanced tax credit reportedly involved NNPC as concessionaire, the Nigeria Revenue Service, Presidential Energy Adviser Olu Verheijen, and Shell’s Chief Executive Officer, Wael Sawan.
The report said Sawan’s visit to the Presidential Villa helped accelerate months of technical and commercial negotiations around the project.
NNPC Group Chief Executive Officer, Bayo Ojulari, described the approval as a breakthrough after years of inactivity.
“For nearly two decades, the Bonga Southwest project remained stalled,” Ojulari said.
He credited the Tinubu administration’s policy push and NNPC’s advocacy for unlocking the deal.
The development is also expected to raise wider questions about whether similar enhanced fiscal incentives could be extended to other deepwater oil operators in Nigeria.
The standard production tax credit under the Petroleum Industry Act is reportedly less than half of the $11.50 per barrel approved for Bonga Southwest Aparo, meaning other major operators such as ExxonMobil, Chevron and TotalEnergies may seek comparable terms for their stalled or prospective offshore projects.
The approval reflects the trade-off facing the Tinubu administration: accepting lower near-term tax revenue per barrel in exchange for unlocking major oil investments that have been delayed for years.
The Bonga Southwest Aparo project is now expected to become a key test of Nigeria’s ability to attract deepwater capital, boost crude oil production, expand gas output and revive investor confidence in the country’s upstream petroleum sector.
