Nigeria’s Bonga Oil Field Development Suffers Set Back Over Tax Disputes With Govt

Yemisi Izuora 

 

The hope of early actualisation of Nigeria’s prolific Bonga oil field would face major set back as oil major Shell kicks against Nigeria’s claims that it was owed billions in taxes.

Nigeria ordered several major foreign oil and gas companies to pay nearly $20 billion in taxes it says are owed to local states, industry and government sources told Reuters.

Shell, the largest investor in Nigeria would likely dispute the charges, Shell’s head of upstream Andy Brown told Reuters on the sidelines of the International Petroleum Week conference.

“It is something that has gone through the courts in Nigeria which relates to an original clause within the original PSCs (production sharing contracts),” he said in an interview.

“We will have to take it seriously but we think it has no merits,” said Brown, who steps down from his role this year.

The outstanding tax issue will delay the final investment decision (FID) on developing Shell’s Bonga Southwest deepwater oil field, one of Nigeria’s largest with production expected to reach 180,000 barrels per day, Brown said.

“We’ll need to resolve that before we ever FID the Bonga Southwest project,” he said.

Shell has made progress with the government on some basic terms for operating the field but a decision on its development was now unlikely to be made in 2019. “Bonga Shouthwest’s FID may slip into next year.” Brown said.

In the Gulf of Mexico, Brown said Shell planned to move swiftly to develop the Whale discovery, which it announced in January 2018. Shell holds a 60 percent stake in the field and Chevron the remaining 40 per cent.

“We’re going to crack on with the development of this project,” he said, without giving a specific timeline for the development except to say it would be “fast”.

He said the field had the potential to be developed into a new production hub for Shell in the Gulf of Mexico.

Shell and many of its peers have been cutting costs sharply for developing large offshore fields to compete with cheaper sources of oil such, as U.S. shale.

Bonga is the first deepwater project for the Shell Nigeria Exploration and Production Company (SNEPCO) and for Nigeria.

The discovery well is located in oil prospecting license (OPL) 212, which was awarded during Nigeria’s first round of deepwater frontier acreage awards in 1993.

Add Comment