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The Federal Government has approved a special production-linked tax credit for Shell Plc’s Bonga Southwest Aparo deepwater oil project in a fresh move aimed at unlocking billions of dollars in investment and accelerating Nigeria’s crude oil production.
According to a Bloomberg report 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 available under Nigeria’s fiscal framework.
The report, citing people familiar with the matter who spoke on condition of anonymity because the information is not yet public, said the incentive is expected to help move the long-delayed Bonga Southwest Aparo project towards a Final Investment Decision.
The sources also disclosed that the same production-linked tax credit would be extended to other international oil companies developing new deepwater projects in Nigeria and would remain in force until at least 2029.
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 development marks another step in the Federal Government’s efforts to restore investor confidence in Nigeria’s oil and gas industry after years of declining investment caused by 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 it comes on stream, significantly boosting Nigeria’s oil production capacity.
Responding to enquiries, a spokesperson for Shell said the company was continuing work towards developing the project. The spokesperson said, “Shell continues to progress the Bonga Southwest Aparo project toward development and will communicate material updates through official channels.”
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, according to the report.
The latest incentive forms part of a broader package of reforms introduced by the Tinubu administration since assuming office in May 2023 to revive Nigeria’s struggling petroleum sector.
Over the past three years, the Federal Government has issued several executive orders designed to improve the country’s competitiveness, attract fresh investment, and unlock stalled oil and gas projects.
One of the earlier executive orders limited production tax credits to 20 per cent of a licence holder’s annual tax liability to offset operating costs, a level the government said compared favourably with global industry standards.
Stakeholders anticipate that the enhanced tax credit could improve the commercial viability of expensive deepwater developments, where production costs are significantly higher than those of onshore assets.
The report also noted that the government’s efforts to increase crude oil production are beginning to yield results.
Figures 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, representing the country’s highest monthly output since April 2020.
The increase reflects improved security around critical oil infrastructure, renewed investment in upstream operations and government reforms aimed at restoring production levels.
However, the report said concerns remain among investors over the durability of the fiscal incentives because executive orders can be challenged in court or amended 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 that would strengthen its legal standing and provide greater certainty for investors.
Internal government documents seen by Bloomberg indicated that officials have already begun the process of gazetting the order.
Nigeria has struggled for years to attract fresh investment into its upstream petroleum sector as multinational oil companies delayed or suspended major projects due to fiscal uncertainty, insecurity, and rising operating costs. Several deepwater developments have remained stalled despite the enactment of the Petroleum Industry Act in 2021.
The Tinubu administration has since prioritised reforms aimed at reversing the investment decline through executive orders, tax incentives and regulatory reforms.
The government hopes that unlocking projects such as Bonga Southwest Aparo will not only raise crude oil production but also generate billions of dollars in foreign investment, create jobs, and strengthen government revenues.
