Oil Major Exodus Poses Threat to Nigeria’s Oil Industry Expansion
Big Oil’s Exodus from Nigeria’s Onshore: Local Firms Step In for Onshore Resurgence
Nigeria faces a significant shift in its oil and gas landscape as international oil companies continue to divest from the onshore Niger Delta due to security concerns and illegal activities. The exit of Big Oil has prompted local firms to step in, offering potential revitalization for Nigeria’s onshore oil sector.
Challenges Leading to Big Oil’s Exit:
- Security Concerns: Persistent security challenges, including oil theft and illegal tapping of pipelines in the onshore Niger Delta, have led to repeated force majeure declarations on exports from major terminals.
- Exodus of Big Oil: The leaner and more cost-conscious oil industry, shaped by price crashes, has seen international oil companies divesting from onshore assets in Nigeria. Chevron, Eni, Equinor, and Shell are among the major players exiting or expressing interest in selling onshore assets.
- Preference for Secure Projects: Big Oil’s shift away from the onshore region is driven by a preference for more secure and cost-effective exploration and production areas, with Nigeria’s onshore unable to compete with these alternatives.
Recent Divestments:
- ExxonMobil: Plans to sell its shallow water business in Nigeria to Seplat for $1.3 billion, pending regulatory approval.
- Eni: Signed a deal with Nigeria’s Oando PLC to sell Nigerian Agip Oil Company Ltd (NAOC Ltd), focusing on onshore oil and gas exploration and production.
- Equinor: Announced the sale of its Nigerian business, including a 53.85% ownership in oil and gas lease OML 128, to local firm Chappal Energies.
- Shell: Announced its exit from Nigeria’s onshore oil and gas industry while maintaining investments in deepwater and Integrated Gas businesses.
Local Firms’ Opportunity:
- Revitalizing Onshore Sector: Regulatory, security and environmental challenges have slowed investments in Nigeria’s oil and gas industry. Local firms are now seen as potential catalysts for the revitalization of the onshore oil sector.
- Negotiating with Local Communities: Local firms may have an advantage in negotiating with local communities, potentially easing challenges associated with doing business in Nigeria’s onshore sector.
- Expansion Opportunities: With limited capital for offshore assets, local companies view acquiring onshore assets as an opportunity to expand their operations and contribute to the country’s energy sector.
Government’s Role:
- Attracting Investments: The administration of President Bola Tinubu aims to attract investments, especially in the absence of major international players in onshore operations.
- Relying on Local Players: Nigeria will likely rely on local oil firms and consortiums to drive growth in the onshore sector, addressing years of underinvestment and illegal activities.
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Outlook:
The shift in Nigeria’s oil and gas landscape, marked by the exit of Big Oil and the entry of local firms, reflects a changing dynamic in the industry. As the government seeks investments and local players step up to revitalize the onshore sector, the success of these efforts will shape Nigeria’s position in the OPEC+ agreement and its oil production goals in the coming years.
