The Federal Government has approved a special production-linked tax credit for Shell Plc’s Bonga Southwest Aparo deepwater oil project in a bid to unlock fresh investment and boost 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 for every barrel of crude oil produced from the project. The incentive is more than double the standard production-linked tax credit currently available under Nigeria’s fiscal regime.
The report, citing sources familiar with the development, said the enhanced incentive is expected to pave the way for a Final Investment Decision on the long-delayed Bonga Southwest Aparo project, which is projected to attract about $20 billion in foreign investment.
The sources added that the tax credit would also be extended to other international oil companies investing in new deepwater developments in Nigeria and would remain in effect until at least 2029.
The Bonga Southwest Aparo project is one of Nigeria’s largest undeveloped offshore oil fields. According to the Nigerian National Petroleum Company Limited (NNPCL), the project is expected to produce about 150,000 barrels of crude oil per day when operations begin.
Responding to enquiries, a Shell spokesperson said the company was continuing efforts to advance the project and would provide updates through official channels when necessary.
The approval forms part of the Tinubu administration’s broader strategy to revive Nigeria’s oil and gas sector through fiscal reforms, tax incentives and executive orders aimed at attracting new investments after years of declining upstream activity.
Industry stakeholders believe the enhanced tax credit will improve the commercial viability of costly deepwater projects, where production expenses are significantly higher than onshore operations.
The move comes as Nigeria records a gradual recovery in crude oil output. Data released by the Nigerian Upstream Petroleum Regulatory Commission showed the country’s average crude production rose to 1.56 million barrels per day in June, its highest monthly output since April 2020.
Despite the renewed optimism, concerns remain over the long-term certainty of the incentive because it was introduced through an executive order, which could be amended or challenged by future administrations.
To address those concerns, Bloomberg reported that Shell requested the Federal Government to publish the tax credit order in the Official Gazette to strengthen its legal standing. Government officials have reportedly commenced the gazetting process.
The Federal Government expects the incentive to unlock stalled deepwater projects, attract billions of dollars in foreign investment, increase oil production, create jobs and boost government revenue.
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