Tinubu Approves Enhanced Tax Incentive to Unlock $20bn Shell Deepwater Oil Project

Tinubu Approves Enhanced Tax Incentive to Unlock $20bn Shell Deepwater Oil Project

The federal government has approved an enhanced production-linked tax incentive for Shell Plc's long-delayed Bonga Southwest Aparo deepwater oil project, granting the energy giant and its partners a tax credit of $11.50 per barrel of crude produced in a move aimed at unlocking an estimated $20 billion investment.

The incentive, approved by President Bola Tinubu, is expected to pave the way for the project's long-awaited final investment decision (FID), ending nearly two decades of delays that have stalled one of Nigeria's most significant offshore developments.

According to a Bloomberg report, the approval grants Shell and its partners a rebate of $11.50 for every barrel of crude produced—more than double the standard production tax credit available under Nigeria's petroleum fiscal regime.

Tinubu had, on January 22, approved the gazetting of investment-linked fiscal incentives to support the Bonga Southwest Aparo deepwater development, a move designed to improve the project's commercial viability.

Bloomberg, citing sources familiar with the negotiations, said the presidential approval removes one of the final obstacles that had kept the project in limbo for almost 20 years.

The Nigerian National Petroleum Company (NNPC) Limited described the development as a landmark for Nigeria's oil and gas sector, noting that it represents the first final investment decision on a deepwater production-sharing contract asset since 2008.

The state oil company said the prolonged absence of new deepwater investments had weakened Nigeria's competitiveness against major offshore producers such as Angola, Brazil and Guyana.

The report also said the fiscal package resolves a dispute-settlement agreement dating back to 2021, eliminating another major hurdle that had prevented Shell and its partners from committing capital to the offshore field, located about 120 kilometres off Nigeria's coastline.

Once operational, the Bonga Southwest Aparo project is projected to produce about 150,000 barrels of crude oil per day and approximately 140 million standard cubic feet of gas daily. NNPC estimates the development will attract around $20 billion in foreign direct investment while creating more than 5,000 direct and indirect jobs.

Bloomberg reported that negotiations leading to the enhanced tax credit involved officials from NNPC, the Nigeria Revenue Service (NRS), the presidency, and Shell. Participants included Olu Verheijen, the president's special adviser on energy, Shell Chief Executive Officer Wael Sawan, and senior government officials.

The report added that Sawan's recent visit to the Presidential Villa helped accelerate months of technical and commercial negotiations.

NNPC Group Chief Executive Officer Bayo Ojulari described the approval as a breakthrough after years of inactivity.

"For nearly two decades, the Bonga Southwest project remained stalled," Ojulari said, attributing the breakthrough to the Tinubu administration's policy support and sustained engagement by NNPC.

Analysts, however, note that the generous incentive could reshape Nigeria's deepwater investment framework. With the approved rebate significantly exceeding the standard production tax credit under the Petroleum Industry Act, other international oil companies—including ExxonMobil, Chevron and TotalEnergies—may seek similar fiscal terms for their own offshore projects.

The development highlights the federal government's strategy of offering stronger fiscal incentives to revive large-scale upstream investments, even at the cost of lower short-term revenue, in the hope of boosting long-term production, foreign investment and economic growth.