The Federal Government has approved a new production-based tax incentive for Shell’s Bonga Southwest Aparo deepwater oil project as part of efforts to attract fresh investment into Nigeria’s oil and gas sector.
Under the new fiscal arrangement approved by President Bola Tinubu, Shell and its partners will receive a tax credit of $11.50 for every barrel of crude oil produced from the project. The incentive is expected to improve the project’s commercial viability and pave the way for a long-awaited Final Investment Decision (FID).
The tax credit is reportedly more generous than the existing incentive available under Nigeria’s current fiscal framework. It is also expected to be extended to other international oil companies developing new deepwater projects, with the programme remaining in place until at least 2029.
The Bonga Southwest Aparo project, one of Nigeria’s largest undeveloped offshore oil assets, is estimated to attract about $20 billion in investment. According to projections by the Nigerian National Petroleum Company Limited (NNPCL), the field could produce around 150,000 barrels of crude oil per day, providing a significant boost to the country’s oil output.
The latest move forms part of the Tinubu administration’s broader strategy to revive investment in the petroleum industry after years of declining capital inflows caused by insecurity, crude oil theft, pipeline vandalism, ageing infrastructure and policy uncertainty.
Reacting to the development, Shell said it remains committed to advancing the Bonga Southwest Aparo project and will provide updates through its official communication channels as progress continues.
Government officials have yet to publicly comment on the new fiscal package.
Industry stakeholders believe the enhanced tax incentive could make high-cost deepwater projects more attractive to investors, helping Nigeria compete for global upstream capital.
The development comes as Nigeria records stronger crude oil production. Data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed the country produced an average of 1.56 million barrels per day in June, its highest monthly production level since April 2020.
Despite the optimism, some investors have expressed concerns 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 strengthen investor confidence, the Federal Government is reportedly taking steps to publish the tax incentive in the Official Gazette, a move expected to provide greater legal backing for the policy.
