Tinubu Approves Enhanced Tax Credit for Shell's $20bn Bonga Deepwater Project Investment

The Federal Government has approved an enhanced production-linked tax credit for Shell Plc's $20 billion Bonga Southwest Aparo deepwater project, in a move aimed at accelerating investment in Nigeria's upstream oil sector and increasing crude oil production.

According to a Bloomberg report, President Bola Tinubu approved the incentive, which grants Shell and its partners a tax rebate of $11.50 per barrel of crude produced more than double the standard production tax credit previously available for comparable deepwater projects.

The report, citing sources familiar with the development, said the incentive is expected to be extended to other international oil companies embarking on new deepwater developments and will remain in force until at least 2029.

The Bonga Southwest Aparoproject, one of Nigeria's largest planned offshore developments, is projected to attract about $20 billion in foreign direct investment and produce approximately 150,000 barrels of crude oil per day when fully operational, based on earlier estimates by the Nigerian National Petroleum Company Limited (NNPC).

Responding to the development, a Shell spokesperson told Bloomberg that the company continues to advance the project towards development and would communicate any material updates through its official channels.

The enhanced tax incentive forms part of a broader package of fiscal reforms introduced by the Tinubu administration since 2023 to revive Nigeria's oil and gas industry, which has faced years of declining investment, crude oil theft, pipeline vandalism and ageing infrastructure.

According to Bloomberg, an earlier executive order had capped production tax credits at 20 per cent of a licence holder's annual tax liability to offset operating costs—a threshold the Federal Government considered less competitive than those offered in other oil-producing jurisdictions.

The report also pointed to signs of recovery in Nigeria's petroleum sector, with crude oil production rising to an average of 1.56 million barrels per day in June, the highest monthly output recorded since April 2020, according to figures released by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

Meanwhile, Shell said it awarded contracts worth $518 million to indigenous companies in 2025, reinforcing its commitment to promoting local content in Nigeria's oil and gas industry.

The company disclosed that 123 Nigerian firms were engaged across its operations during the year.

Commenting on the figures published in Shell's 2025 Payments to Governments Report, the company's Vice President, Commercial, Rohan D'Souza, said the payments reflected Shell's continued support for indigenous service providers.

“The payments show a strong support for Nigerian service providers in our operations," D'Souza said.

He added that Shell views the development of Nigerian companies as a long-term strategic priority rather than merely a regulatory obligation.

"We see the development of Nigerian companies beyond compliance with laws. It is an integral part of a longstanding strategy to create a win-win relationship with indigenous companies and support them to create more value in the oil and gas industry within and outside the country," he said.

As part of efforts to strengthen indigenous participation, Shell Nigeria Exploration and Production Company Limited (SNEPCo) recently launched a $3 billion Contract Finance Facility in partnership with nine leading Nigerian banks.

The financing programme, available in both naira and US dollars, is designed to help indigenous contractors execute projects awarded under Shell's operations.

D'Souza further disclosed that Shell paid approximately $2.016 billion to the Nigerian Government in 2025 through production entitlements, royalties, taxes and statutory fees.

"When you consider the fact that Shell also paid some $2.016 billion through production entitlements, royalties, taxes, and statutory fees to the Nigerian Government in 2025 alone, you get an idea of the enduring partnership we have forged in the country since we set foot here more than 60 years ago," he said.