FG Approves $11.5 Per Barrel Tax Credit for Shell’s Bonga Project to Unlock $20bn Investment

The Federal Government has approved a special production-linked tax credit for Shell Plc’s Bonga Southwest Aparo deepwater oil project, a move expected to unlock about $20bn in investment and support efforts to increase Nigeria’s crude oil production.

According to a Bloomberg report, 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 production incentive available under Nigeria’s existing fiscal framework.

The incentive is expected to move the long-delayed Bonga Southwest Aparo project closer to a Final Investment Decision (FID), a critical milestone that would allow full-scale project development to commence.

The Bonga Southwest Aparo project is regarded as one of Nigeria’s largest undeveloped deepwater oil assets and is projected to attract approximately $20bn in foreign direct investment.

According to the Nigerian National Petroleum Company Limited (NNPC), the project could produce about 150,000 barrels of crude oil per day when operational, providing a significant boost to Nigeria’s oil output and export earnings.

The approval comes as the Federal Government intensifies efforts to attract fresh upstream investments following years of declining capital inflows caused by regulatory uncertainty, crude oil theft, pipeline vandalism, insecurity, and aging infrastructure.

Bloomberg reported that the tax credit would not be limited to Shell alone. Sources familiar with the development disclosed that the incentive would also be made available to other international oil companies developing new deepwater projects in Nigeria.

The tax credit is expected to remain in force until at least 2029.

The report stated that the approved fiscal terms provide Shell and its partners with a rebate of $11.50 per barrel of crude oil produced from the project, significantly enhancing the economics of deepwater developments, which typically require substantial capital expenditure and longer payback periods.

Responding to enquiries, Shell said it remains committed to advancing the project.

“Shell continues to progress the Bonga Southwest Aparo project toward development and will communicate material updates through official channels,” a company spokesperson said.

Officials of the NNPC and the Office of the Special Adviser to the President on Energy were yet to publicly comment on the development.

The approval forms part of a wider package of reforms introduced by the Tinubu administration since 2023 to revive investment in Nigeria’s oil and gas sector.

The government has implemented several executive orders aimed at improving the competitiveness of Nigeria’s petroleum industry, accelerating project approvals, and attracting capital into the upstream segment.

Fiscal incentives are necessary to improve the commercial viability of deepwater projects, where development and production costs are significantly higher than those of onshore operations.

Data released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) showed that crude oil production rose to an average of 1.56 million barrels per day in June 2026, representing the country’s highest monthly output since April 2020.

The increase has been attributed to improved security around oil infrastructure, renewed upstream investments, and ongoing regulatory reforms designed to restore production capacity.

Beyond increasing crude oil production, the project is expected to support foreign exchange earnings, create jobs, stimulate local content participation, and boost government revenues.