The Federal Government has introduced a new fiscal incentive for Shell Plc’s Bonga Southwest Aparo deepwater oil project, a move expected to unlock about $20 billion in investment and accelerate the development of one of Nigeria’s largest offshore oil fields.
According to a Bloomberg report, President Bola Tinubu approved a production-based tax credit that will grant Shell and its partners a rebate of $11.50 for every barrel of crude oil produced from the project.
Sources familiar with the arrangement said the incentive is more than twice the standard production tax credit currently available under Nigeria’s oil and gas fiscal framework and is intended to help move the project towards a Final Investment Decision (FID).
The report indicated that the incentive would also be extended to other international oil companies undertaking new deepwater projects in Nigeria and would remain in place until at least 2029.
The measure is part of broader efforts by the Federal Government to revive investor confidence in the petroleum industry and attract fresh capital into a sector that has suffered years of underinvestment.
Nigeria’s oil industry has faced challenges ranging from crude oil theft and pipeline vandalism to regulatory uncertainty and rising operational costs, prompting several multinational companies to delay or suspend major investment decisions.
The Bonga Southwest Aparo field, regarded as one of the country's most significant undeveloped offshore assets, is expected to attract around $20 billion in foreign investment and increase crude oil production by approximately 150,000 barrels per day when fully operational.
Industry observers believe the enhanced tax incentive could improve the economics of deepwater exploration and production, where project costs are substantially higher than those associated with onshore operations.
A spokesperson for Shell confirmed that work on the project is progressing but declined to comment on the reported fiscal terms.
“Shell continues to advance the Bonga Southwest Aparo project towards development and will provide updates through its official communication channels,” the company said.
Officials of the Nigerian National Petroleum Company Limited (NNPCL) and the Office of the President’s Special Adviser on Energy did not publicly comment on the reported approval.
Since taking office in 2023, the Tinubu administration has rolled out a series of policy reforms aimed at making Nigeria a more competitive destination for oil and gas investment.
These reforms include executive orders designed to improve the business environment, reduce regulatory bottlenecks and encourage the development of stalled projects across the upstream sector.
An earlier policy framework limited production tax credits to 20 per cent of a licence holder’s annual tax obligations, but industry stakeholders have continued to advocate stronger incentives for capital-intensive offshore projects.
The latest development comes as Nigeria records improvements in crude oil production. Data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that average crude oil output rose to 1.56 million barrels per day in June, representing the country's highest monthly production level in more than five years.
The increase has been linked to improved security around oil infrastructure, renewed investment activity and government efforts to restore production capacity.
However, some investors remain cautious about the long-term certainty of incentives introduced through executive orders, which could be amended or challenged in the future.
To address such concerns, Shell has reportedly requested that the tax credit directive be published in the Federal Government’s Official Gazette, a step expected to provide stronger legal backing and greater confidence for investors.
Government officials have reportedly commenced the process of gazetting the order.
The Federal Government hopes that fast-tracking projects such as Bonga Southwest Aparo will boost crude oil output, increase foreign direct investment inflows, generate employment and strengthen public revenues as Nigeria seeks to maximise the benefits of its hydrocarbon resources.
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