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(Bloomberg) — Nigeria announced sweeping tax incentives to attract as much as $50 billion of investment in deepwater-oil and gas projects and revive capital-intensive projects that have stalled for decades.
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President Bola Tinubu on Aug. 6 signed an executive order granting tax credits of as much as $11.50 per barrel of crude for new deepwater developments, starting with Shell Plc’s Bonga Southwest Aparo project, confirming earlier Bloomberg reporting. It also provides a credit of as much as $8 per barrel of oil equivalent for non-associated gas projects.
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The incentives will remain in place until Dec. 31, 2029, the presidency said in a statement Tuesday.
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Tinubu has made reviving Nigeria’s oil and gas industry a key priority since taking office in May 2023, seeking to reverse years of declining investment and production in a sector hobbled by crude theft, pipeline vandalism and aging infrastructure.
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Demand for new energy sources has grown since the US-Iran war closed the Strait of Hormuz, through which 20% of the world’s oil and liquefied natural gas normally flows.
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The executive order reflects Nigeria’s commitment to building an investment environment defined by clear rules, strong institutions and enduring partnerships, Tinubu said.
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A significant part of the order is the so-called profit oil reset. It allows new projects within certain mature fields to start from a more favorable 70:30 contractor-government profit split, “thereby materially improving project economics and investment returns,” said Emmanuel Ifeanyi, senior associate on energy at Andersen in Nigeria.
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“That said, the ultimate verdict on the order will depend on whether it generates genuinely incremental investment and new production, rather than simply granting additional benefits to projects that would have proceeded regardless,” he said.
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Africa’s largest oil producer’s most significant deepwater projects like Shell’s Bonga Southwest and Exxon Mobil Corp.’s Owowo field, have been stranded for decades as the firms weighed the risks of regulatory uncertainties on such huge commitments. The Bonga Southwest project is expected to attract $20 billion in foreign direct investment and produce 150,000 barrels a day upon completion, Nigeria’s state oil company said in March.
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“The incentives makes deep-offshore blocks that were not being developed now bankable,” said Julius Rone, chief executive officer of UTM Offshore Ltd., a company that’s nearing the development of a $3 billion floating LNG plant in Nigeria.
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The company remains on course to reach a final investment decision before year end to “seize this opportunity and achieve more with the project,” Rone said.
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(Adds President Tinubu’s X post and updates throughout)
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