Expert urges fiscal review of Bonga deepwater project despite technical success
A renowned petroleum economist, Wunmi Iledare, has called for a comprehensive assessment of the fiscal performance of Nigeria’s flagship Bonga deepwater oil project, arguing that its celebrated engineering achievements should be complemented by an evaluation of the economic value delivered to the nation.
In a presentation on the Bonga project, Prof. Iledare acknowledged that the field’s technical and operational accomplishments remain significant milestones in Nigeria’s offshore petroleum industry. However, he maintained that measuring the project’s success solely on production and engineering records presents an incomplete picture.
According to him, a balanced assessment should also examine the project’s cost structure, the allocation of profit oil and the overall economic benefits accruing to Nigeria under the fiscal regime that governed the development.
“Bonga’s technical and operational achievements are unquestionably commendable and deserve recognition,” he said. “However, from a petroleum economics perspective, it would also be useful to review the project’s cost structure and Profit Oil allocation to assess its equity and overall public value.”
The professor noted that for much of its operational life, the Bonga field was developed under a Production Sharing Contract (PSC) that featured a 100 per cent Cost Recovery Limit (CRL) and a zero royalty regime. He explained that while these fiscal incentives were introduced to attract the substantial investments required for frontier deepwater exploration and production, they also shaped the timing and distribution of revenues between investors and the Nigerian government.
He stressed that such fiscal provisions should be evaluated within the broader context of their long-term impact on national revenue generation.
According to Prof. Iledare, although the absence of royalty payments and the full recovery of costs before profit sharing delayed government earnings in the early years of production, these provisions should not automatically be interpreted as evidence that Nigeria received an unfair share of the project’s benefits.
Instead, he argued that government revenues under the arrangement depended largely on profit oil and taxes after the recovery of project costs.
He therefore cautioned against simplistic conclusions regarding the fairness of the fiscal framework, saying a more rigorous economic assessment is required before drawing policy lessons from the Bonga experience.
The petroleum economist outlined several critical indicators that should guide any comprehensive evaluation of the project.
These include determining whether investor returns were commensurate with the level of financial and technical risks that existed when the Final Investment Decision (FID) was taken, evaluating the government’s total share of revenues throughout the project’s life cycle, analysing the timing of government earnings between the early and later production years, and measuring the overall economic rent captured by Nigeria.
According to him, only such a holistic review can establish whether Bonga should be regarded not only as one of Nigeria’s greatest engineering accomplishments but also as a successful fiscal model.
Prof. Iledare emphasised that the objective is not to diminish the project’s achievements but to broaden the conversation beyond production volumes and technological excellence.
He argued that petroleum projects should ultimately be assessed by the value they generate for citizens through an equitable distribution of resource wealth alongside operational efficiency.
Using a local proverb to illustrate his point, he remarked that “whatever you call your calabash determines what you use it for,” suggesting that the criteria used to evaluate major petroleum investments ultimately shape public perceptions of their success.
Industry analysts say the observations come at a time when Nigeria is implementing sweeping reforms under the Petroleum Industry Act (PIA), with renewed emphasis on designing fiscal frameworks that remain competitive for investors while ensuring the country secures an equitable share of revenues from its hydrocarbon resources.
The Bonga field, Nigeria’s first deepwater oil development, has long been regarded as a landmark project that opened the country’s offshore frontier and demonstrated the commercial viability of deepwater exploration. Beyond its production achievements, experts note that its fiscal architecture continues to provide valuable lessons for future deepwater developments as Nigeria seeks to attract fresh investment into the sector.
Prof. Iledare concluded that future assessments of major petroleum projects should integrate engineering performance with fiscal outcomes, ensuring that discussions of success reflect not only technological milestones but also the broader economic value created for the Nigerian people. Such an approach, he said, would provide policymakers with a stronger basis for evaluating the effectiveness of Nigeria’s petroleum fiscal regimes and guiding future reforms.
