The Federal Government has approved a special production-linked tax credit for Shell Plc’s Bonga Southwest Aparo deepwater oil project in a move aimed at attracting billions of dollars in investment and boosting Nigeria’s crude oil production.
According to a Bloomberg report, President Bola Tinubu approved fiscal terms granting Shell and its partners a tax rebate of $11.50 per barrel of crude oil produced from the project, more than double the standard incentive currently available under Nigeria’s fiscal regime.
The report, citing sources familiar with the development, said the incentive is expected to accelerate the long-delayed project towards a Final Investment Decision (FID), while similar tax credits would also be extended to other international oil companies undertaking new deepwater developments in Nigeria.
“Nigeria granted Shell Plc a production-linked tax credit for a deepwater project, an incentive that will be offered to other oil majors as Africa’s biggest producer seeks to boost production,” the report stated.
The Bonga Southwest Aparo project, regarded as one of Nigeria’s largest undeveloped deepwater oil assets, is projected to attract about $20 billion in foreign direct investment and produce approximately 150,000 barrels of crude oil per day when operational, according to the Nigerian National Petroleum Company Limited (NNPC Ltd).
The latest fiscal incentive forms part of ongoing efforts by the Tinubu administration to revive Nigeria’s oil and gas sector, which has experienced years of declining investment due to crude oil theft, pipeline vandalism, insecurity, ageing infrastructure and regulatory uncertainties.
Responding to enquiries, a spokesperson for Shell confirmed that the company was continuing efforts to advance the project.
“Shell continues to progress the Bonga Southwest Aparo project toward development and will communicate material updates through official channels,” the spokesperson said.
Officials of NNPC Ltd and the Office of the President’s Special Adviser on Energy did not comment on the development, according to the report.
The approval is part of a broader reform agenda introduced since President Tinubu assumed office in May 2023 to improve Nigeria’s competitiveness and unlock stalled oil and gas investments.
Over the past three years, the Federal Government has introduced a series of executive orders and fiscal measures designed to attract fresh capital into the petroleum sector and improve the commercial viability of large-scale projects.
Industry stakeholders believe the enhanced tax credit could significantly improve investment prospects for deepwater developments, where production costs are substantially higher than those of onshore operations.
The report also noted signs of recovery in Nigeria’s oil production. Data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that crude oil output rose to an average of 1.56 million barrels per day in June, the highest monthly production level recorded since April 2020.
The increase has been attributed to improved security around oil facilities, renewed upstream investment and government-backed reforms aimed at restoring production capacity.
However, concerns remain among investors regarding the long-term stability of the incentives, as executive orders can be amended by future administrations or challenged in court.
To strengthen investor confidence, Shell reportedly requested that the Federal Government publish the tax-credit order in the Official Gazette, a step expected to enhance its legal standing and provide greater certainty for project financing.
According to Bloomberg, government officials have already commenced the process of gazetting the order.
Nigeria has struggled for years to attract new investments into its upstream petroleum industry, with several multinational oil companies delaying or suspending major projects despite the enactment of the Petroleum Industry Act (PIA) in 2021.
The Federal Government hopes that unlocking projects such as Bonga Southwest Aparo will increase crude oil production, generate jobs, attract billions of dollars in investment and boost government revenues.
