By Uche Amunike
The Federal Government has approved an enhanced Shell Nigeria deepwater tax credit of $11.50 per barrel for Shell Plc and its partners in a move aimed at reviving the long-delayed Bonga Southwest Aparo deepwater oil project. The incentive is expected to unlock about $20 billion in foreign direct investment (FDI) and strengthen Nigeria’s position as a preferred destination for upstream oil and gas investment.
Approved by President Bola Tinubu, the fiscal incentive is expected to pave the way for a Final Investment Decision (FID) on the offshore development, which has remained stalled for nearly two decades despite its strategic importance to Nigeria’s oil production goals.
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. Sources familiar with the negotiations said the Shell Nigeria Deepwater Tax Credit would provide Shell and its partners with $11.50 for every barrel of crude oil produced, more than double the standard production-linked incentive under the Petroleum Industry Act (PIA).
The approval removes one of the final hurdles that had delayed the multi-billion-dollar project for almost 20 years.
The Nigerian National Petroleum Company Limited (NNPC Ltd.) described the decision as a landmark breakthrough, saying it would lead to the first Final Investment Decision on a Nigerian deepwater Production Sharing Contract (PSC) asset since 2008.
The absence of major deepwater investments in recent years has slowed Nigeria’s ability to compete with offshore producers such as Angola, Brazil and Guyana. Bloomberg also reported that the new fiscal package resolves a dispute settlement agreement dating back to 2021, removing another obstacle that had discouraged Shell and its partners from committing funds to the project, located about 120 kilometres off Nigeria’s coastline.
Once operational, the Bonga Southwest Aparo project is expected to produce about 150,000 barrels of crude oil daily and 140 million standard cubic feet of natural gas each day. It is also projected to create more than 5,000 direct and indirect jobs, boosting economic activity and increasing foreign exchange earnings.
Negotiations leading to the enhanced Shell Nigeria deepwater tax credit reportedly involved NNPC Ltd., the Nigeria Revenue Service (NRS), the Office of the President’s Special Adviser on Energy, Olu Verheijen, and Shell Chief Executive Officer, Wael Sawan.
Bloomberg said Sawan’s recent visit to the Presidential Villa helped accelerate months of commercial and technical discussions that culminated in the government’s approval.
Reacting to the development, NNPC Group Chief Executive Officer, Bayo Ojulari, described the approval as a major milestone after years of stalled progress. He noted that the Tinubu administration’s commitment to restoring investor confidence had finally unlocked one of Nigeria’s most significant offshore oil projects.
Industry analysts believe the Shell Nigeria deepwater tax credit signals a shift in Nigeria’s fiscal strategy toward attracting large-scale offshore investments. Although the incentive could reduce government revenue per barrel in the short term, experts say it is likely to generate greater long-term benefits through increased oil production, fresh investment, job creation and stronger foreign exchange inflows.
The decision could also encourage other international oil companies, including ExxonMobil, Chevron and TotalEnergies, to pursue similar investments in Nigeria’s deepwater sector. For the Tinubu administration, the policy represents a strategic effort to revive major energy projects, strengthen the economy and improve Nigeria’s competitiveness in the global oil industry.
