Nigeria Offers Shell $11.50 Tax Credit to Unlock $20 Billion Deepwater Project

Africa · Western

Key Facts

—The incentive. Nigeria gazetted an $11.50-per-barrel production-linked tax credit for Shell and its partners on early 2026.

—The project. Bonga Southwest–Aparo holds roughly 820 million barrels of reserves and could produce 150,000 barrels per day at peak.

—The investment. Shell CEO Wael Sawan confirmed the project could attract around $20 billion in foreign direct investment if it reaches a final decision.

—The context. Nigeria has unlocked over $8 billion in deepwater final investment decisions in less than a year under its reformed fiscal regime.

—The signal. Other majors including ExxonMobil, Chevron and TotalEnergies are watching the package as a template for their own deepwater assets.

Nigeria has approved an unprecedented Bonga Southwest tax credit of $11.50 per barrel for Shell and its partners, a fiscal gamble designed to unlock roughly $20 billion in stalled deepwater investment and reverse years of capital flight to rival producers.

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A fiscal lever to end two decades of delay

President Bola Tinubu approved the gazetting of the investment-linked fiscal incentives on early 2026, clearing one of the last obstacles that had kept the Bonga Southwest–Aparo field on the drawing board for nearly twenty years. The credit is more than double the standard incentive available under Nigeria’s Petroleum Industry Act, a deliberate overpayment designed to settle a 2021 dispute and give Shell’s board the certainty it needs to sanction the project.

Shell CEO Wael Sawan told investors that the incremental incentives had given the company “line of sight” to a final investment decision, describing a field with roughly 820 million barrels of reserves and a potential peak output of 150,000 barrels per day. The project sits about 120 kilometres offshore and has long been considered one of Nigeria’s most strategic undeveloped deepwater assets.

The arithmetic of buying back capital

Abuja is effectively accepting a lower government take per barrel in the short term in exchange for a project large enough to boost national output, create jobs and generate foreign-exchange earnings over decades. Presidential energy adviser Olu Verheijen framed the move as part of a wider reform programme that has already helped unlock over $8 billion in deepwater oil and gas final investment decisions in less than a year.

Verheijen also said Nigeria is now positioned to tap into roughly $90 billion in global deepwater financing, and that capturing just 20 percent of that pool would be enough to bring five major deepwater projects on stream, unlocking 1.3 billion barrels of oil equivalent. The Bonga Southwest tax credit is the sharpest test yet of whether that arithmetic works in practice.

Why the great-power contest matters offshore

Nigeria’s deepwater push arrives at a moment when the global scramble for energy and critical minerals is reshaping investment flows across the continent, a dynamic we track in our pillar series Africa: The New Scramble. Western oil majors remain the dominant players in Nigeria’s offshore sector, but the government is acutely aware that capital is mobile and that competitors such as Guyana and Brazil have been far more successful at attracting deepwater dollars in recent years.

The tax-credit package can be read as a hedge: it draws Western oil capital back into the country while preserving Abuja’s ability to court Chinese-linked finance for infrastructure and trade where useful. For a nation that is Africa’s most populous, one of its largest economies and a key OPEC member, losing the next wave of offshore investment would mean ceding both revenue and geopolitical relevance.

A template for Exxon, Chevron and TotalEnergies

The Bonga Southwest tax credit is not a one-off favour to Shell; it is a policy signal aimed at every major operator with deepwater acreage in Nigerian waters. Reuters reported in May 2025 that ExxonMobil was poised to invest $1.5 billion into enhancing its own deepwater ventures, a move that industry analysts read as a direct response to the improving fiscal environment.

Chevron and TotalEnergies are also watching closely, and the government has made clear that similar incentives could be available for projects that meet the scale and timing criteria. The strategy is to convert Nigeria’s vast hydrocarbon reserves into leverage, revenue and jobs before the global energy transition permanently shifts the economics of long-cycle offshore projects.

What the Bonga Southwest tax credit means for frontier investors

For an internationally-minded reader tracking money and power across the Global South, the Nigerian move is a case study in how resource-rich states are rewriting upstream economics to stay competitive. The Tinubu administration is betting that targeted fiscal concessions will generate a multiplier effect: one large final investment decision begets another, and the resulting production helps stabilise the naira and the current account.

The risk is equally clear: if oil prices weaken or project costs overrun, the government will have traded away near-term revenue for a payoff that may arrive later than promised. For now, Shell’s public commitment and the parallel Bonga North decision in December 2024—expected to deliver 110,000 barrels per day at peak—suggest that the bet is finding takers.

Frequently Asked Questions

What is the Bonga Southwest–Aparo project?

Bonga Southwest–Aparo is a deepwater offshore oil field located roughly 120 kilometres off Nigeria’s coast. It holds an estimated 820 million barrels of reserves and could produce up to 150,000 barrels per day at peak, making it one of the country’s most strategically important undeveloped assets.

How does the $11.50 tax credit change the project’s economics?

The production-linked credit more than doubles the standard incentive available under Nigeria’s Petroleum Industry Act, directly improving the project’s internal rate of return for Shell and its partners. It also resolves a 2021 dispute settlement agreement that had been a major hurdle, giving the consortium the fiscal certainty required to move toward a final investment decision.

Will other oil majors receive similar incentives in Nigeria?

The government has signalled that the Bonga Southwest package is a template, not an exception. ExxonMobil has already announced a $1.5 billion deepwater investment plan, and Chevron and TotalEnergies are expected to seek comparable terms for their own offshore assets as Nigeria tries to reclaim its position in the global deepwater capital race.