Key takeaways:
- Nigeria has granted Shell a production-linked tax credit of $11.50 per barrel for the Bonga Southwest Aparo project
- The incentive will extend to other oil majors developing new deepwater projects till at least 2029
- The $20 billion project is expected to produce 150,000 barrels per day
Nigeria has granted Shell Plc a production-linked tax credit for its Bonga Southwest Aparo deepwater project, an incentive the government plans to extend to other oil majors as it works to boost the country’s crude output.
President Bola Tinubu approved terms giving Shell and its partners a rebate of $11.50 per barrel of crude produced, more than double the standard rate, according to people familiar with the matter who asked not to be identified because the information is not yet public.
The people said the incentive will be offered to other producers developing new deepwater projects and will remain in place until at least 2029.
Bonga Southwest Aparo is expected to attract $20 billion in foreign direct investment and produce 150,000 barrels of crude per day once complete, the Nigerian National Petroleum Company (NNPC) Limited said in March. A Shell spokesperson told Bloomberg the company continues to progress the project toward development and will share material updates through official channels.
Part of a wider push to revive Nigeria’s oil sector
The tax credit adds to a series of incentives Tinubu has introduced through executive orders since taking office in 2023, aimed at reviving a sector weighed down by crude theft, pipeline vandalism, aging infrastructure and years of declining investment.
A previous order capped such tax credits at 20% of a licensee’s annual tax liability to help offset operating costs, which the government said remained high relative to global benchmarks.
Those efforts are beginning to show results. Nigeria’s crude output rose to a daily average of 1.56 million barrels in June, the highest monthly figure since April 2020, according to the Nigerian Upstream Petroleum Regulatory Commission. The increase reflects a broader recovery in Nigeria’s oil sector after years of underinvestment drove output well below the country’s OPEC production quota.
Investors remain wary of policy reversal risk
Despite the incentives, Tinubu’s executive orders remain vulnerable to legal challenge or reversal by future administrations, a risk that has weighed on investor confidence in Nigeria’s oil sector.
Shell has requested that Nigeria formally publish the tax-credit order to give the incentive greater legal standing and reduce the risk of it being altered or withdrawn.
The push to attract deepwater investment comes as global oil majors have increasingly diverted capital toward other regions offering more predictable fiscal terms.
Nigeria’s ability to lock in large-scale projects like Bonga Southwest Aparo is seen as a test of whether its recent reforms can durably shift that trend, particularly as the incentive framework’s stability beyond the current administration remains uncertain.
