Nigeria Approves Enhanced Tax Incentive for Shell to Unlock $20bn Deep water Oil Investment

The Federal Government has approved a special production-linked tax credit for Shell Plc’s Bonga Southwest Aparo deepwater oil project in a move aimed at unlocking an estimated $20 billion in fresh investment and increasing Nigeria’s crude oil production.

According to reports citing sources familiar with the development, President Bola Tinubu approved revised fiscal terms granting Shell and its partners a tax credit of $11.50 for every barrel of crude oil produced from the offshore project. The incentive is more than double the standard production-linked tax credit currently available under Nigeria’s petroleum fiscal regime.

The enhanced tax incentive is expected to pave the way for a long-awaited Final Investment Decision (FID) on the Bonga Southwest Aparo project, one of Nigeria’s largest undeveloped deepwater oil assets.

Sources indicated that the same incentive framework would also be extended to other international oil companies undertaking new deepwater developments in Nigeria, with the arrangement expected to remain in effect until at least 2029.

The Bonga Southwest Aparo project is projected to attract approximately $20 billion in foreign direct investment. According to the Nigerian National Petroleum Company Limited (NNPC Ltd.), the field is expected to produce around 150,000 barrels of crude oil per day once operational, providing a significant boost to Nigeria’s oil output and export earnings.

The approval forms part of broader efforts by the Federal Government to revive investor confidence in the country’s oil and gas sector after years of declining investment driven by oil theft, pipeline vandalism, ageing infrastructure, insecurity, and regulatory uncertainty.

Industry stakeholders believe the enhanced tax credit could improve the commercial viability of capital-intensive deepwater projects, where production costs are considerably higher than those of onshore operations. The incentive also aligns with the Tinubu administration’s wider programme of fiscal reforms designed to attract fresh investment and unlock stalled energy projects.

Shell, responding to enquiries on the development, said it continues to advance work on the Bonga Southwest Aparo project and will communicate any material updates through its official channels. Officials of NNPC Ltd. and the Office of the President’s Special Adviser on Energy had not publicly commented on the approval at the time the reports emerged.