The Federal Government has approved a special production-linked tax incentive for Shell Plc’s Bonga Southwest Aparo deepwater oil project, a move expected to unlock about $20 billion in fresh investment and boost Nigeria’s crude oil production.
According to a Bloomberg report, President Bola Tinubu approved a fiscal package that grants Shell and its partners a tax credit of $11.50 for every barrel of crude oil produced from the project—more than double the standard incentive currently available under Nigeria’s fiscal framework.
The report, which cited sources familiar with the development, said the incentive is designed to accelerate the long-delayed project toward a Final Investment Decision (FID).
The same tax credit is also expected to be extended to other international oil companies developing new deepwater projects in Nigeria and will remain in effect until at least 2029.
The Bonga Southwest Aparo project is one of Nigeria’s largest undeveloped offshore oil fields and is projected to attract about $20 billion in foreign direct investment.
According to the Nigerian National Petroleum Company Limited (NNPCL), the project is expected to produce around 150,000 barrels of crude oil per day once operational, significantly increasing Nigeria’s oil output.
A spokesperson for Shell confirmed that work on the project is progressing but declined to comment on the tax incentive.
“Shell continues to progress the Bonga Southwest Aparo project toward development and will communicate material updates through official channels,” the company said.
The latest approval forms part of the Tinubu administration’s broader efforts to revive Nigeria’s oil and gas sector after years of declining investment caused by insecurity, pipeline vandalism, oil theft and regulatory uncertainty.
Industry stakeholders believe the enhanced tax incentive could improve the commercial viability of costly deepwater projects, making Nigeria more attractive to international investors.
Recent data from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) also showed that Nigeria’s crude oil production rose to 1.56 million barrels per day in June, the country’s highest monthly output since April 2020.
Despite the positive development, some investors remain cautious over the long-term stability of the incentives, as executive orders can be amended or challenged by future administrations.
According to Bloomberg, Shell has requested that the Federal Government publish the tax-credit order in the Official Gazette to strengthen its legal backing and provide greater certainty for investors.
The government hopes the new incentive will unlock stalled oil projects, increase crude production, attract billions of dollars in investment, create jobs and boost national revenue.
Source: Bloomberg.
