On Tuesday, Shell Nigeria Exploration and Production Company (SNEPCo) said it had taken final investment decision on an offshore gas scheme alongside local operator Sunlink Energies and Resources.
The sanction follows the December approval of Bonga North – a deep-water tie-back that will drill 16 wells, modify the Bonga Main floating production, storage and offloading vessel (FPSO) and add a new subsea kit.
The moves come seven months after Shell completed the sale of Shell Petroleum Development Company (SPDC) to Renaissance, a consortium of four local operators – ND Western, Aradel Energy, First E&P and Waltersmith – and the international group Petrolin. Shell said in March that exiting onshore oil production in the Niger Delta would simplify its Nigeria portfolio and concentrate future spending in deep water and integrated gas.
"The new final investment decision is a very good development," says Abdullahi Bukar, an industry veteran and director at Frontier Oil. "Shell themselves had said they are not leaving Nigeria – they are releasing some of their commitments to Nigerian independents that can use them."
Interest in deep water accelerates
SNEPCo agreed in May to acquire TotalEnergies’ 12.5% stake in the OML 118 production sharing contract, which includes Bonga. Nigeria’s deep-water pipeline had stalled for years as majors deferred multibillion-dollar schemes pending fiscal reform. Projects on ice have included Shell’s Bonga South West Aparo, Eni’s Zabazaba-Etan, Chevron’s Nsiko and ExxonMobil’s Bosi and Uge.
"I’m sure Shell would also like to get all the mess around OML 245 cleared so they can bring Zabazaba and other fields into production," says Bukar, a former board member of the Nigerian National Petroleum Company (NNPC).
"International oil companies don’t just work alone. Quite often, they work together. For example, Shell has a hand in Erha, although ExxonMobil is seen as the frontrunner. Ditto in Agbami."
Nigeria relied on maturing onshore fields for decades. Their decline, coupled with higher operating risks, has pushed international oil companies to divest to lower-cost local producers.
"Now we can put more attention into ensuring offshore reserves come in to support national needs," Bukar adds.
Gas for NLNG and Shell’s LNG growth plan
Shell says the HI gas project will deliver peak output of 350 million standard cubic feet a day to Nigeria LNG (NLNG), in which Shell holds 25.6%. First gas is due before the decade’s end.
"This upstream project will help Shell grow our leading integrated gas portfolio, while supporting Nigeria’s plans to become a more significant player in the global LNG market," says Peter Costello, Shell’s upstream president.
Additional feedgas dovetails with NLNG’s Train 7 expansion at Bonny Island and with Shell’s global aim to grow LNG volumes by an average 4%-5% a year to 2030.
Olu Verheijen, special adviser to President Bola Tinubu on energy, says the HI project will supply nearly one-third of the gas needed for Train 7, shoring up exports and boosting domestic LPG availability.
"It is the third major oil and gas FID in the last 18 months … bringing total upstream investment commitments to over $8bn since Tinubu assumed office in 2023," she says, citing Ubeta gas and Bonga North alongside HI.
Reform tailwinds
Officials say recent executive orders and fiscal tweaks have improved project economics and shortened approvals. NLNG in August signed long-term gas supply deals with six third-party suppliers to underpin existing trains and expansion.
The Oil and Gas Companies Order (tax incentives, exemption, remission, among others) aimed at the gas value chain has, according to KPMG, stirred investor interest with targeted credits for non-associated gas greenfields onshore and in shallow water achieving first gas by 1 January 2029.
Bukar argues policy should further step back from day-to-day business decisions. "Too much government interference in what independent companies should do" deterred investment, he says.
The presidency has asked its energy adviser to cut project cycle times to under six months from "the horrible" two to three years seen previously. "I hope this will be one of the biggest incentives," Bukar adds.
