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🇳🇬 Nigeria /Economy & Trade

Bonga: Ex-NLNG CEO, Energy Analyst Differ on FG’s $11.5/Barrel Tax Credit for Shell

From ThisDay · () English

Summarized and contextualized by DistantNews.

At a glance

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  • Nigeria's government has approved an enhanced $11.50 per barrel tax credit for Shell's Bonga South West Aparo deepwater project, aiming to unlock a $20 billion investment.
  • Former NLNG CEO Babs Omotowa defends the concession as a necessary catalyst, drawing parallels with the successful NLNG project's incentives.
  • Energy Analyst Kelvin Emmanuel criticizes the tax credit as overly generous and detrimental to government revenue, sparking debate within the industry.

Nigeria's federal government has approved a significant fiscal incentive for Shell Plc's Bonga South West Aparo deepwater project, offering an enhanced production-linked tax credit of $11.50 per barrel. This move is intended to unlock an estimated $20 billion investment in the long-delayed project, which has faced nearly two decades of setbacks.

The decision, approved by President Bola Tinubu, includes a tax incentive that experts suggest is more than double the standard rate provided under the Petroleum Industry Act (PIA). This has ignited a sharp disagreement between Babs Omotowa, a former Managing Director of Nigeria LNG (NLNG) and a non-executive director at the Nigerian National Petroleum Company (NNPC), and Energy Analyst Kelvin Emmanuel.

The Bonga South West field has sat stranded since 2010. This is nearly two decades of idle oil that has paid no dividends, created no jobs and funded no roads simply because it has never been allowed to flow.

— Babs OmotowaFormer NLNG MD Babs Omotowa explaining the need for the tax incentive.

Omotowa, a former Shell executive, staunchly defends the concession, characterizing it as a crucial catalyst for investment. He draws parallels with the NLNG project, arguing that generous initial incentives, though criticized at the time, ultimately led to billions of dollars in investment and substantial long-term returns for Nigeria. "Undeveloped projects generate no revenue, employment or economic value," Omotowa stated on LinkedIn, emphasizing that the Bonga South West field has been idle since 2010, yielding no benefits.

Conversely, Emmanuel views the tax incentive as an excessively generous package that disproportionately benefits operators at the expense of government revenues. He dismissed Omotowa's comparison with NLNG, asserting that the terms for the Bonga project represent an "unnecessary windfall" for the operators. The debate highlights a growing divide within Nigeria's oil and gas sector regarding the strategic use of fiscal incentives to stimulate upstream investment.

Undeveloped projects generate no revenue, employment or economic value.

— Babs OmotowaFormer NLNG MD Babs Omotowa arguing for the necessity of unlocking investment.
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Originally published by ThisDay. Summarized and contextualized by our editorial team with added local perspective. Read our editorial standards.

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