Federal Government Approves $11.50 per Barrel Tax Credit to Unlock Shell’s $20 Billion Bonga Southwest Aparo Project
The Federal Government has approved a production-linked tax credit of $11.50 per barrel for Shell Plc to advance the $20 billion Bonga Southwest Aparo deepwater oil project, a move expected to drive significant foreign direct investment and boost local content in Nigeria’s oil sector.
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The Federal Government has approved an enhanced production-linked tax credit of $11.50 per barrel for Shell Plc and its partners to accelerate development of the $20 billion Bonga Southwest Aparo deepwater oil project, according to a statement reported by Vanguard News. The incentive is designed to de-risk the capital-intensive venture and unlock approximately $20 billion in foreign direct investment (FDI) into Nigeria’s upstream sector.
The Bonga Southwest Aparo project, long delayed due to fiscal uncertainties and capital constraints, is considered a strategic asset for Nigeria’s oil production growth. The tax credit, tied directly to output volumes, aims to improve project economics for Shell and its joint venture partners. According to This Day, the federal government’s intervention signals a renewed commitment to revitalizing deepwater exploration and attracting international oil companies back to Nigeria’s offshore basins.
As part of its local content strategy, Shell has awarded $518 million in contracts to Nigerian firms for the project, engaging 123 indigenous companies in engineering, procurement, and construction activities. This marks a significant step toward fulfilling Nigeria’s local content mandates under the Nigerian Oil and Gas Industry Content Development (NOGICD) Act. The engagement of domestic firms is expected to enhance technical capacity and create skilled jobs in the Nigerian energy sector.
The fiscal terms were negotiated under the framework of Nigeria’s Petroleum Industry Act (PIA), which allows for targeted incentives for marginal and deepwater fields. The $11.50 per barrel credit will be applied during the initial production phase, reducing Shell’s effective tax burden and improving internal rates of return. This move follows similar fiscal accommodations for other deepwater projects and underscores the government’s push to maintain Nigeria’s competitiveness in the global oil market.
Industry analysts from S&P Global have previously noted that Nigeria’s deepwater projects require stable and predictable fiscal regimes to attract investment. With oil prices remaining volatile, such targeted tax credits may become increasingly common as governments balance revenue needs with investor confidence. The success of the Bonga Southwest Aparo project could set a precedent for future deepwater developments in the Gulf of Guinea.