Royal Dutch Shell says Nigeria’s claims that it was owed billions in taxes could delay the development of a major oil field off the coast of the West African nation.
Recall that the federal government had ordered several major foreign oil and gas companies to pay nearly $20 billion in taxes it says are owed to local states, industry and government sources told Reuters.
Shell, the largest investor in the West African nation, would likely dispute the charges, Shell’s head of upstream Andy Brown told Reuters on the sidelines of the International Petroleum Week conference.
“It is something that has gone through the courts in Nigeria which relates to an original clause within the original PSCs (production sharing contracts),” he said in an interview.
“We will have to take it seriously but we think it has no merits,” said Brown, who steps down from his role this year.
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, Brown said.
“We’ll need to resolve that before we FID the Bonga Southwest project,” he said.
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. “Bonga Shouthwest’s FID may slip into next year.” Brown said.
In the Gulf of Mexico, Brown said Shell planned to move swiftly to develop the Whale discovery, which it announced in January 2018. Shell holds a 60 percent stake in the field and Chevron the remaining 40 percent.
“We’re going to crack on with the development of this project,” he said, without giving a specific timeline for the development except to say it would be “fast”.
He said the field had the potential to be developed into a new production hub for Shell in the Gulf of Mexico.
Shell and many of its peers have been cutting costs sharply for developing large offshore fields to compete with cheaper sources of oil such, as U.S. shale.