Shell Commits $5 Bn to Bonga North Deep-Water Project, Signaling Confidence in Nigeria’s Oil Sector

Major Milestone for Nigeria’s Offshore Production

Shell Commits to Bonga North Deep-Water Project

Shell Nigeria Exploration and Production Company (SNEPCo) has announced its final investment decision (FID) for the Bonga North deep-water project, marking a pivotal moment for Nigeria’s oil and gas industry. The investment is seen as a clear sign of Shell’s ongoing commitment to Nigeria’s offshore energy sector, despite the broader global push towards energy transition.

The Bonga North project is expected to harness more than 300 million barrels of oil equivalent in recoverable resources. Once operational, it is projected to produce up to 110,000 barrels of oil per day, with first oil targeted for later this decade. This project builds on the legacy of Nigeria’s first deep-water venture, the Bonga field, which commenced production in 2005.

Project Structure and Scope

The Bonga North development will be driven by the drilling of new subsea wells. These wells will be tied back to the existing Bonga Floating Production Storage and Offloading (FPSO) facility, which has been at the heart of Shell’s deep-water operations in Nigeria. Shell maintains a 55% operating stake in the Bonga FPSO, in partnership with ExxonMobil (20%), TotalEnergies (12.5%), and Nigerian Agip Exploration Limited (12.5%).

By using existing infrastructure, SNEPCo aims to reduce the project’s environmental footprint while maximizing operational efficiency. This approach is aligned with global industry standards for sustainable offshore production, reflecting a growing emphasis on responsible resource development.

Economic Impact and Local Content

The financial commitment for the Bonga North project is estimated to be around $5 billion. This investment is expected to have significant economic benefits for Nigeria, driving job creation, fostering local content development, and boosting revenue for the government.

Local content participation is a key aspect of the project’s strategy, with a focus on integrating Nigerian companies and workers into its supply chain. This aligns with Nigeria’s broader policy goals of increasing local participation in the oil and gas industry, ensuring that the economic benefits of resource development are felt across the country.

Broader Implications for Nigeria’s Oil Sector

The decision to proceed with Bonga North has broader implications for Nigeria’s energy landscape. The project will help sustain production levels from the Bonga field, which has been a critical component of Nigeria’s oil output for nearly two decades. At a time when international oil companies (IOCs) have been divesting from onshore oil assets, Shell’s renewed commitment to offshore production is seen as a stabilizing force for the country’s energy sector.

However, Nigeria’s oil and gas sector has faced significant challenges in recent years. Delays in passing the Petroleum Industry Act (PIA) stalled critical investment decisions, causing uncertainty for both local and international investors. The prolonged legislative bottleneck contributed to a dearth of fresh investment in the sector, with many international oil companies choosing to scale down their operations or exit the Nigerian market altogether. The passage of the PIA in 2021 was a welcome development, but its delayed implementation has had a lasting impact on investor confidence.

With Nigeria’s economy heavily dependent on oil revenue, projects like Bonga North are essential for ensuring the country’s fiscal stability. It also reinforces Nigeria’s role as a major oil supplier to global markets, particularly in light of shifting geopolitical energy demands.

Clementine Wallop, director  for Sub Saharan Africa at business intelligence consultancy, Horizon Engage, said about Shell Nigeria Exploration and Production Company final investment decision on the Bonga North deep-water project, “If the Tinubu government needed an endorsement of what it has been trying to do on energy, here it is”.

After a year of presidential directives, regulatory reforms and slated tax tweaks comes this substantial FID from Shell, countering the narrative that IECs are upping sticks or turning away from Nigeria, and underscoring the company’s long-term commitment to the country’s deepwater.

Operational and Technological Advancements

Bonga North will leverage state-of-the-art deep-water drilling technologies to ensure safe and efficient production. The use of existing FPSO infrastructure will allow for faster project execution and reduced environmental impact. This approach highlights the increasing emphasis on environmental stewardship in offshore oil and gas operations.

The use of subsea tiebacks — a method where new production wells are connected to an existing facility — is becoming an industry standard for optimizing costs and minimizing environmental disruption. Shell’s decision to follow this route reflects a commitment to sustainable development, even as demand for fossil fuels continues to evolve globally.

Looking Ahead

With the FID in place, the next phase for SNEPCo will involve engineering, procurement, and construction (EPC) activities. The successful execution of the Bonga North project is expected to strengthen Nigeria’s position as a top-tier oil producer and attract further investment in its deep-water resources.

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Beyond boosting oil production, Bonga North is also expected to contribute to Nigeria’s energy security. As the global energy transition continues, the role of oil and gas in Nigeria’s economy will remain crucial. Projects like Bonga North ensure that Nigeria maintains its competitive edge in the global oil market while creating economic opportunities for its citizens.

In sum, Shell’s decision to move forward with the Bonga North project reaffirms its commitment to Nigeria’s oil and gas sector. The project’s successful implementation could become a model for sustainable and profitable offshore energy production in West Africa.

 

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