Shell and NNPC Sign Terms for US$21 Billion Bonga Project
NIGERIA · ENERGY
Key Facts
—The signature: NNPC and its OML 118 partners signed an addendum to their production sharing contract, plus an addendum to their dispute settlement agreement, on Monday 24 August in Abuja.
—The money: The project could attract US$15 billion to US$21 billion in investment over its life, according to NNPC.
—The output: Peak production is put at about 175,000 barrels of oil a day and 140 million standard cubic feet of gas a day.
—Who is involved: The contractor parties are Shell Nigeria Exploration and Production Company, Esso Exploration and Production Nigeria (Deepwater) and Nigerian Agip Exploration.
—Where it stands: Early engineering work is complete, a preferred builder for the production vessel has been picked, and the project can move into detailed design.
—Still missing: No final investment decision date, no first-oil date and no equity split were disclosed.
Nigeria has signed the fiscal terms for Bonga South West Aparo, a deepwater development that could draw between US$15 billion and US$21 billion over its life. The agreement clears one of the last commercial obstacles before a final investment decision.
What was actually signed
NNPC and the OML 118 contractor parties signed two documents on Monday 24 August at the NNPC Towers in Abuja. The first is an addendum to their production sharing contract, which is simply the agreement that sets how the state and its partners split the oil and the costs.
The second is an addendum to the dispute settlement agreement that governs disagreements over the block. Together they put into force fiscal and commercial terms approved by the federal government under President Bola Tinubu’s deep offshore incentives order issued earlier this year.
The announcement came in a statement from Andy Odeh, NNPC’s chief corporate communications officer, and was carried by Leadership and other Nigerian outlets. NNPC had already announced the presidential approval of the fiscal package in March.
The contractor parties are Shell Nigeria Exploration and Production Company, known as SNEPCo, Esso Exploration and Production Nigeria (Deepwater) and Nigerian Agip Exploration. SNEPCo, Shell’s deepwater arm, operates the block.
The partners also confirmed that the project’s early engineering phase is finished and that a preferred contractor has been chosen to build the floating production vessel. That allows Bonga South West Aparo to move into detailed design, subject to partner and governance approvals.
Why Bonga South West Aparo matters
The field is expected to be one of Nigeria’s largest deepwater developments, with peak output of roughly 175,000 barrels of oil a day. It would also produce about 140 million standard cubic feet of gas daily.
For a country whose crude production has repeatedly fallen short of its own targets, a single project of that size is unusually consequential. Deepwater barrels are also harder to steal than onshore pipeline volumes, which have bled for years.
NNPC’s group chief executive, Bashir Bayo Ojulari, said the agreement showed that Nigeria now offers a competitive fiscal framework. He framed it as evidence that government reforms are converting policy into investment.
Nigeria has set a target of raising crude output substantially in the coming years, and deepwater is where the remaining large volumes sit. Onshore and shallow-water fields are mature, and many have been sold by the majors to local operators.
The numbers that were not explained
The investment figure is a range rather than a commitment, and NNPC did not explain what separates the low case from the high one. Nor did it break the total down by phase or by partner.
No equity split among NNPC, Shell, Esso and Agip was published. The nature of the dispute that the settlement agreement addresses was not described either.
Most importantly, there is still no date. The statement does not say when a final investment decision is expected, when engineering design will conclude, or when first oil might flow.
A long wait, and why it happened
Bonga South West Aparo has been discussed for well over a decade without reaching a decision. Fiscal uncertainty was the recurring obstacle, as majors weighed Nigerian terms against opportunities in Guyana, Brazil and Namibia.
The Petroleum Industry Act of 2021 was meant to settle that question, but deepwater terms needed a further round of negotiation. This addendum appears to be the result of it.
The comparison that matters is competitive. Every barrel Nigeria fails to sanction is capital that can move to another Atlantic basin, and several of those basins have moved faster.
Guyana went from first discovery to production in five years, a pace Nigerian projects have not matched. Namibia’s Orange Basin is now attracting the same exploration budgets that once came to the Niger Delta.
What a dispute settlement addendum signals
The second document signed is easy to overlook, and it may be the more revealing one. A dispute settlement agreement governs how disagreements between the state and its partners are resolved.
Amending it alongside the fiscal terms suggests both sides wanted the arbitration route clarified before committing billions. That is a normal precaution in Nigerian deepwater, where past disagreements have run for years.
NNPC did not describe what the underlying dispute concerned. Without that detail it is impossible to judge whether a long-running obstacle has been cleared or merely deferred.
For international partners, the credibility of these terms is the whole question. Nigeria has changed fiscal rules mid-project before, and memories in the sector are long.
A firm date would change the calculation for service companies, which need lead time to build vessels and subsea equipment. Until then, the addendum is a necessary step rather than a sufficient one.
What to watch
The next verifiable milestone is the award of detailed engineering contracts, which would show the partners spending real money. After that comes the investment decision itself.
Watch also for confirmation from Shell, ExxonMobil or Eni. So far the announcement has come from the Nigerian state company alone, without matching statements from the partners.
Frequently Asked Questions
What is Bonga South West Aparo?
It is a deepwater oil and gas development on Nigeria’s OML 118 block, expected to be one of the country’s largest. Peak output is put at about 175,000 barrels of oil and 140 million standard cubic feet of gas a day.
How much investment could the project attract?
NNPC says the project could draw between US$15 billion and US$21 billion over its life. The company did not break that range down by phase or partner.
Which companies are involved?
The contractor parties are Shell Nigeria Exploration and Production Company, Esso Exploration and Production Nigeria (Deepwater) and Nigerian Agip Exploration. NNPC is the state counterparty.
Has a final investment decision been taken?
No. The signing advances the project towards a decision, and early engineering work is complete, but no decision date has been announced.
Connected Coverage
The state oil company’s finances are under scrutiny after a 35% fall in first-half profit, while private refining expands through the Dangote listing. The wider contest for African energy is mapped in Africa: The New Scramble, with more on our Western Africa desk.
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