Nigeria’s tax claims may delay the development of Shell’s Bonga Southwest deepwater oil field

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Royal Dutch Shell said Nigeria’s claims that the company owed billions in taxes could delay the development of Bonga Southwest deepwater oil field, a major oil field off the coast of the West African nation.

The West African country ordered several major foreign oil and gas companies to pay nearly $20 billion in taxes it says are owed to local states.

On the sidelines of the International Petroleum Week conference, Andy Brown, The Head of Shell’s upstream told Reuters that the company would likely dispute the charges. He said “it is something that has gone through the courts in Nigeria which relates to an original clause within the original PSCs (production sharing contracts). We  will have to take it seriously but we think it has no merits”.

Brown revealed that 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. He said “we’ll need to resolve that before we ever FID the Bonga Southwest project”.

Brown noted that 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. He added that “Bonga Shouthwest’s FID may slip into next year”.

Brown said Shell planned to move swiftly to develop the Whale discovery in the Gulf of Mexico, which it announced in January 2018. Shell holds a 60 percent stake in the field and Chevron has the remaining 40 percent.  He said the field had the potential to be developed into a new production hub for Shell in the Gulf of Mexico.

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