ABUJA, Nigeria (VOICE OF NAIJA)- 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 billions of dollars in investment and boost Nigeria’s crude oil production.
According to a Bloomberg report published on Tuesday, 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, more than double the standard incentive currently provided under Nigeria’s fiscal framework.
The report, citing sources familiar with the matter who spoke on condition of anonymity because the information has not yet been made public, said the incentive is expected to move the long-delayed Bonga Southwest Aparo project closer to a Final Investment Decision.
The sources also disclosed that the production-linked tax credit would be extended to other international oil companies undertaking new deepwater projects in Nigeria and would remain in place until at least 2029.
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The report read, “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, according to people familiar with the matter.
“Terms approved by President Bola Tinubu to push the Bonga Southwest Aparo project toward a final investment decision give Shell and its partners a rebate of $11.50 per barrel of crude produced, said the people who asked not to be identified because the information is not public. That’s more than double the standard amount.”
The latest development marks another effort by the Federal Government to rebuild investor confidence in Nigeria’s oil and gas sector after years of declining investment driven by crude oil theft, pipeline vandalism, insecurity, ageing infrastructure and regulatory uncertainty.
The Bonga Southwest Aparo project is one of Nigeria’s largest undeveloped deepwater oil fields and is projected to attract about $20bn in foreign direct investment.
According to the Nigerian National Petroleum Company Limited, the project is expected to produce about 150,000 barrels of crude oil per day when operations commence, significantly increasing Nigeria’s oil production capacity.
Responding to enquiries, a spokesperson for Shell said the company remains committed to advancing the project.
“Shell continues to progress the Bonga Southwest Aparo project toward development and will communicate material updates through official channels,” the spokesperson said.
According to the report, officials of the Nigerian National Petroleum Company Limited and the Office of the President’s Special Adviser on Energy did not respond to requests for comment on the development.
The tax incentive forms part of a broader package of reforms introduced by the Tinubu administration since taking office in May 2023 to revive Nigeria’s struggling petroleum industry.
Over the past three years, the Federal Government has issued several executive orders aimed at improving Nigeria’s competitiveness, attracting fresh investment and unlocking stalled oil and gas projects.
One of the earlier executive orders capped production tax credits at 20 per cent of a licence holder’s annual tax liability to offset operating costs, a threshold the government said compares favourably with global industry standards.
Industry stakeholders believe the enhanced tax credit could improve the commercial viability of costly deepwater projects, where production expenses are significantly higher than those of onshore operations.
The report also noted that the government’s efforts to increase crude oil production are beginning to produce positive results.
Data released on Sunday by the Nigerian Upstream Petroleum Regulatory Commission showed that Nigeria’s crude oil production rose to an average of 1.56 million barrels per day in June, marking the country’s highest monthly output since April 2020.
The increase has been attributed to improved security around critical oil infrastructure, renewed upstream investment and government reforms aimed at restoring production levels.
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However, the report noted that some investors remain concerned about the long-term certainty of the fiscal incentives because executive orders can be challenged in court or revised by future administrations.
To address those concerns, Shell reportedly requested that the Federal Government publish the tax-credit order in the Official Gazette, a move expected to strengthen its legal backing and provide greater certainty for investors.
According to Bloomberg, internal government documents show that the process of gazetting the order has already commenced.
Nigeria has struggled for years to attract fresh investment into its upstream petroleum sector, with several multinational oil companies delaying or suspending major projects because of fiscal uncertainty, insecurity and rising operating costs.
Many deepwater developments have remained stalled despite the passage of the Petroleum Industry Act in 2021.
Since assuming office, the Tinubu administration has prioritised reforms aimed at reversing the investment downturn through executive orders, tax incentives and regulatory measures.
The government expects that unlocking projects such as Bonga Southwest Aparo will increase crude oil production, attract billions of dollars in foreign investment, create jobs and strengthen government revenue.