The Federal Government has approved a production-linked tax credit of $11.50 per barrel for Shell Plc’s Bonga Southwest Aparo deepwater oil project in a move aimed at accelerating investment in Nigeria’s offshore oil sector.
Gatekeepers News reports that according to a Bloomberg report published on Monday, President Bola Tinubu approved the enhanced incentive to help the long-delayed project reach a final investment decision. The approval follows the gazetting of investment-linked incentives for the project on January 22.
Citing sources familiar with the matter, Bloomberg reported that the incentive grants 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 industry framework.
“The sign-off clears one of the last hurdles for a project that has been in limbo for close to two decades,” the publication said.
The Nigerian National Petroleum Company (NNPC) Limited described the approval as the first final investment decision on a Nigerian deepwater production-sharing contract asset since 2008, marking a significant milestone for the country’s offshore oil industry.
Bloomberg also reported that the fiscal package resolves a dispute-settlement agreement dating back to 2021, removing another key obstacle that had delayed investment in the field, located about 120 kilometres off Nigeria’s coast.
According to NNPC, the Bonga Southwest Aparo project is expected to attract about $20 billion in foreign direct investment. Once operational, it is projected to produce around 150,000 barrels of crude oil per day and approximately 140 million cubic feet of gas daily, while creating more than 5,000 direct and indirect jobs.
The report said negotiations leading to the enhanced tax credit involved NNPC, the Nigeria Revenue Service (NRS), Presidential Special Adviser on Energy Olu Verheijen, and Shell Chief Executive Officer Wael Sawan.
Bloomberg added that Sawan’s recent courtesy visit to the Presidential Villa helped speed up months of technical and commercial negotiations surrounding the project.
Commenting on the development, NNPC Group Chief Executive Officer Bayo Ojulari described the approval as a major breakthrough after years of delays.
“For nearly two decades, the Bonga Southwest project remained stalled,” he said.
Ojulari attributed the progress to the Tinubu administration’s reforms and NNPC’s sustained efforts to unlock investment in the project.
Bloomberg noted that extending the $11.50 per barrel tax rebate beyond the Bonga Southwest Aparo project could reshape Nigeria’s approach to attracting deepwater investments. The publication said major international oil companies, including ExxonMobil, Chevron and TotalEnergies, may seek similar incentives for their own offshore projects.
According to the report, the development highlights the government’s balancing act of forgoing some short-term revenue in exchange for attracting long-term investment and boosting oil production.
