Shell moves forward with $5 billion deepwater oil & gas project offshore Nigeria

Shell Nigeria Exploration and Production Company Limited (SNEPCo), a subsidiary of the UK-headquartered Shell, has made a final investment decision (FID) for a deepwater oil and gas project off the coast of Nigeria, which will be developed as a subsea tie-back to an existing floating production, storage, and offloading (FPSO) unit.

Shell’s investment in the Bonga North project is expected to generate an internal rate of return (IRR) over the hurdle rate for the firm’s Upstream business, which continues to look for ways to boost performance through near-field opportunities like Bonga North, leveraging technical expertise, strong partnerships, and a model built on simplification and replication.

With water depths exceeding 1,000 meters, the latest project in Nigeria will be tied back to the Shell-operated FPSO Bonga in OML 118, where production began in 2005. The FPSO, which can produce 225,000 barrels of oil per day, reached a production milestone in 2023 thanks to its one-billionth barrel of crude oil. Based on African Energy Council’s data, the FID unleashes an estimated $5 billion development project.

According to Shell, the Bonga North project encompasses the drilling, completion, and start-up of 16 wells, of which half are production ones and the remaining half water injection wells, modifications to the existing FPSO Bonga Main, and the installation of new subsea hardware tied back to the unit for which Akselos provided a structural digital twin in 2020.

Shell believes Bonga North will help ensure its Integrated Gas and Upstream business continues to drive cash generation into the next decade. The operator expects the project to sustain oil and gas production at the Bonga facility because of its estimated recoverable resource volume of over 300 million barrels of oil equivalent (boe). The Bonga North project’s peak production is forecast to be 110,000 barrels of oil per day, with the first oil anticipated by the decade-end.

SNEPCo (55%) operates the Bonga field in partnership with Esso Exploration and Production Nigeria (20%), Nigerian Agip Exploration (12.5%), and TotalEnergies Exploration and Production Nigeria (12.5%), on behalf of the Nigerian National Petroleum Company Limited (NNPC).

Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director, commented: “This is another significant investment, which will help us to maintain stable liquids production from our advantaged Upstream portfolio.”

This comes after Shell made arrangements in January 2024 to divest its interest in the Shell Petroleum Development Company of Nigeria Limited (SPDC) joint venture (JV), with a net book value of around $2.8 billion, aiming to turn all its attention to deepwater and integrated gas businesses in the African country.

Shell is also actively pursuing more oil and gas outside Africa, as illustrated by its recent decision to develop another multi-well project in the U.S. Gulf of Mexico (GoM).

The firm also joined forces with Equinor to combine their UK offshore assets to create a joint venture company, which the duo describes as the largest independent oil and gas player in the UK sector of the North Sea.