Shell Gets More Tax Relief on $20 Billion Nigerian Oil Project

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(Bloomberg) — Nigeria granted Shell Plc a production-linked tax credit for a deepwater project, an incentive that will be offered to other oil majors as Africa’s biggest producer seeks to boost production, according to people familiar with the matter.

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Terms approved by President Bola Tinubu to push the Bonga Southwest Aparo project toward a final investment decision give Shell and its partners a rebate of $11.50 per barrel of crude produced, said the people who asked not to be identified because the information is not public. That’s more than double the standard amount.

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The incentive will be offered to other producers for new deepwater projects and will remain in place until at least 2029, the people said. Bonga Southwest is expected to attract $20 billion in foreign direct investment and produce 150,000 barrels a day upon completion, the state oil company said in March. 

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A spokesperson for Shell said the company continues to progress the project toward development and will communicate material updates through official channels. The Nigerian National Petroleum Co. and the president’s energy adviser didn’t respond to requests for comment.

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The measure adds to a raft of incentives Nigeria initiated through executive orders since Tinubu took power in 2023, setting out to revive a sector hobbled by rampant theft, vandalism, aging infrastructure and waning investment. A previous order capped such tax credits at 20% of a licensee’s annual tax liability to offset operating costs, which the government said was high compared with the global average.

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The efforts to boost oil production are showing results.

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Output rose to a daily average rate of 1.56 million barrels a day in June, the highest for any month since April 2020, the Nigerian Upstream Petroleum Regulatory Commission said on Monday.

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Still, Tinubu’s executive orders can be voided by courts or amended by future presidents, raising concerns for investors. Shell requested that Nigeria publish the tax-credit order in an official government gazette to make it binding, which officials are now in the process of executing, according to internal memos seen by Bloomberg.

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—With assistance from Mitchell Ferman.

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