Shell in Talks With Nigeria for a Potential $20B Offshore Investment

Shell plc SHEL, the British oil and gas major, has shown interest in developing the Bonga South West deepwater oilfield located in the Niger Delta. SHEL and its joint venture partners are currently evaluating ways to develop the oilfield, offshore Nigeria. The company’s CEO, Wael Sawan, has stated that he intends to reach a final investment decision (FID) on Bonga South West in 2027, a move that would involve an investment of up to $20 billion.

Offshore Project Cost Estimated at $20 Billion

If the Bonga South West deepwater oilfield reaches the FID stage, Shell and its joint venture partners would need to spend approximately $20 billion on the project, with 50% allocated to capital expenditures and the remaining to operating costs and other expenses. The company has shown keen interest in participating in Nigeria's exploration license round. It has also invested significantly in other energy projects across the country, including $5 billion in Bonga North and $2 billion in the HI gas project, which provides feedstock to Nigeria LNG, thereby contributing to energy security in the region.

These developments highlight Shell’s continued interest in Nigeria’s offshore reserves despite withdrawing from its onshore operations in the Niger Delta. In the previous year, Shell purchased an additional stake in the Bonga oilfield from TotalEnergies, raising its stake in the field to 65%. The other partners in the Bonga oilfield include subsidiaries of Exxon Mobil and Eni, along with the state-owned Nigerian National Petroleum.

Nigerian Government Offers Incentives to Attract Investments

After meeting with Shell’s CEO, Nigerian president Bola Tinubu mentioned that he has agreed to provide "investment-linked" incentives to the company for the development of the deepwater oilfield. He has also stated that he expects the company to target an FID on the Bonga South West oilfield development within the first term of his administration. This indicates that government support for this capital-heavy project will depend on the timely progress of the development. Per Reuters, the incentives offered by the Nigerian government are part of a broader push to attract new investments and boost oil production in the country.

Bonga South West’s Production Potential

The Bonga South West deepwater oilfield is estimated to hold nearly 820 million barrels of oil resources. At peak levels, the field could produce up to 220,000 barrels of oil per day. The Bonga South West oilfield is a significant offshore resource for the country that could boost production and support economic growth. Shell has mentioned that it will continue to take a disciplined approach toward upstream investments. The current oil and gas price environment is not favorable for new exploration activities. However, Shell highlighted that it will invest in the right opportunities, implying that it will continue to develop projects that are economically viable and capable of delivering high returns.

SHEL’s Zacks Rank and Key Picks

SHEL currently carries a Zacks Rank #3 (Hold).

Some top-ranked stocks from the energysector are Oceaneering International OII, Subsea7 S.A. SUBCY and W&T Offshore WTI. While Oceaneering and Subsea7 currently sport a Zacks Rank #1 (Strong Buy), W&T Offshore carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Oceaneering International delivers integrated technology solutions across all stages of the offshore oilfield lifecycle. The company is a leading provider of offshore equipment and technology solutions to the energy industry. OII’s proven ability to deliver innovative, integrated solutions supports ongoing client retention and new business opportunities, ensuring steady revenue growth.

Subsea7 helps build underwater oil and gas fields. It is a leading player in the global offshore energy industry, providing engineering, construction and related services at offshore oil and gas fields. The long-term outlook for energy demand remains positive, and Subsea7’s focus on cost-efficient deepwater projects strengthens the position of its subsea business.

W&T Offshore benefits from its prolific Gulf of America assets, which offer low decline rates, strong permeability and significant untapped reserves. The company’s recent acquisition of six shallow-water fields in the Gulf of America boosts its production prospects in the future, which is expected to enhance its revenues. 

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This article originally published on Zacks Investment Research (zacks.com).

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