FG Approves Production Tax Credit To Unlock $20bn Bonga Deepwater Investment

By kingsley Ani

President Bola Ahmed Tinubu has approved a fiscal incentive package designed to unlock the Final Investment Decision (FID) on the Bonga Southwest Aparo deepwater project.

The approval includes an enhanced Production Tax Credit (PTC) aimed at improving the commercial viability of the project and resolving structural issues that had stalled investment for nearly two decades.

According to a statement issued by Andy Odeh, Chief Corporate Communications Officer of Nigerian National Petroleum Company Limited (NNPCL), the project is expected to attract about $20 billion in foreign direct investment into Nigeria’s upstream oil sector.

“The project is estimated to attract about $20 billion in Foreign Direct Investment and position Nigeria for a new era of deepwater production,” Odeh said.

The approval followed negotiations involving NNPCL as concessionaire, the Nigeria Revenue Service (NRS), the Office of the Special Adviser to the President on Energy led by Olu Verheijen, and Shell Plc led by Chief Executive Officer Wael Sawan.

Engr. Bashir Bayo Ojulari, Group Chief Executive Officer of NNPCL, said that the approval represents a breakthrough after years of delays.

“For nearly two decades, the Bonga Southwest project remained stalled. Today we have broken that logjam,” Ojulari said.

DECISION HIGHLIGHT

The federal government has approved a PTC framework to enable the FID on the $20 billion Bonga Southwest Aparo deepwater oil project.

DECISION MEMO

Nigeria’s approval of fiscal incentives for the Bonga Southwest Aparo project reflects a renewed attempt to revive capital investment in the country’s deepwater oil sector.

Deepwater developments represent some of the most capital-intensive projects within the global oil industry. The technical complexity of offshore drilling and subsea infrastructure requires large-scale financial commitments and stable fiscal regimes capable of supporting long-term investment horizons.

For several years, Nigeria struggled to attract new deepwater investment despite possessing substantial offshore reserves.

Uncertainty surrounding fiscal terms, disputes over production sharing contracts and broader regulatory transitions discouraged international oil companies from committing capital to new projects.

The Bonga Southwest Aparo development illustrates the consequences of those uncertainties.

Despite its strategic significance, the project remained stalled for nearly two decades as investors assessed the fiscal environment and commercial viability of the asset.

Odeh indicated that the newly approved fiscal package is intended to remove some of the structural constraints that previously prevented the project from progressing to FID.

Odeh said the fiscal structure includes an enhanced PTC and the resolution of a dispute settlement agreement dating back to 2021.

These adjustments aim to create a more competitive investment environment while preserving government revenue interests.

Ojulari framed the decision as evidence that policy alignment between government institutions and industry stakeholders can unlock previously stalled projects.

Ojulari noted that the breakthrough resulted from sustained negotiations involving NNPCL and its international partners.

The project’s scale underscores its economic significance.

Upon completion, the Bonga Southwest Aparo development is expected to produce approximately 150,000 barrels of crude oil per day and around 140 million standard cubic feet of natural gas daily.

The project is also projected to create more than 5,000 direct and indirect jobs during its development and operational phases.

Perhaps more significantly, the project would represent the first Final Investment Decision on a Nigerian deepwater Production Sharing Contract asset since 2008.

That long gap reflects the broader slowdown in upstream capital investment that affected Nigeria’s oil industry during the past decade.

The approval therefore carries symbolic as well as economic significance.

It signals the government’s intention to reposition Nigeria as a competitive deepwater investment destination at a time when global oil companies increasingly allocate capital to jurisdictions offering stable fiscal terms and predictable regulatory frameworks.

Yet the long-term success of the project will depend on whether Nigeria can sustain policy stability beyond the initial fiscal incentives.

Deepwater developments operate on multi-decade timelines. Investors evaluating such projects typically prioritise long-term fiscal certainty over short-term policy adjustments.

Consequently, the Bonga Southwest Aparo project may ultimately serve as a test case for whether Nigeria’s post–Petroleum Industry Act investment framework can consistently attract large-scale upstream capital.

DATA BOX

Estimated project investment: $20 billion
Projected crude oil production: 150,000 barrels per day
Projected gas output: 140 million standard cubic feet per day
Estimated employment impact: Over 5,000 jobs
First deepwater Final Investment Decision in Nigeria since: 2008

WHO WINS / WHO LOSES

Winners

Nigeria’s upstream petroleum sector may benefit from renewed international investor confidence if the project proceeds successfully.

International oil companies participating in the project may gain access to a major offshore production asset with long-term output potential.

Local contractors and service providers may benefit from employment opportunities and procurement contracts associated with project development.

Potential Losers

Critics of fiscal concessions may argue that enhanced tax incentives could reduce the government’s immediate share of resource revenues.

Competing oil-producing countries may face stronger competition for upstream capital if Nigeria successfully revitalises its deepwater investment environment.

POLICY SIGNALS

The decision signals the federal government’s willingness to adjust fiscal frameworks in order to revive stalled investments in the oil and gas sector.

It also indicates an effort to align Nigeria’s regulatory environment with international investment expectations following the implementation of the Petroleum Industry Act.

More broadly, the approval reflects a policy strategy centred on partnership between government institutions and international energy companies.

INVESTOR SIGNAL

For global energy investors, the approval suggests improving alignment between Nigeria’s fiscal policy and the commercial requirements of large-scale offshore projects.

The decision may encourage renewed evaluation of Nigeria’s deepwater assets by companies seeking long-term exploration and production opportunities.

If implemented successfully, the project could signal a reopening of Nigeria’s upstream investment cycle.

RISK RADAR

Despite the fiscal incentives, several structural risks remain.

Deepwater projects require long development timelines and substantial capital commitments, making them sensitive to volatility in global oil prices.

Policy consistency will also be critical. Future changes to fiscal frameworks could undermine investor confidence if regulatory conditions become unpredictable.

Operational risks persist within Nigeria’s upstream sector, including infrastructure constraints, security concerns and regulatory delays.

Finally, long-term demand uncertainty associated with the global energy transition may influence investment decisions surrounding large-scale fossil fuel developments.