The growing row between Shell and the Nigerian Government over financing has taken a turn for the worse.

The Nigerian Government has now scrapped an oil bonus scheme that rewarded Shell in a further escalation of the confrontation between the two sides.

Shell has received a letter from the Nigerian Government notifying the oil company that it intended to cancel a memorandum of understanding between them. The MOU, which was signed in 2000, created an incentive regime awarding Shell a premium of $2.50 per barrel of oil discovered. In its place, the Nigerian Government said that Shell would be subject to the “regular Petroleum Profits Tax Act regime”.

The scrapping of the incentives regime occurs in the middle of a confrontation between Shell and its host over a massive funding shortfall affecting Shell Petroleum Development Company of Nigiera (SPDC), the joint venture between the Nigerian state oil company, NNPC, and the Dutch multinational. Shell argues that government funding of the joint venture was “significantly short of existing requirements.”

Don’t you just hate it when old friends fall out…