Powering Forward: Nigerian Petroleum Industry as IOCs Back Pedal

The merger and acquisition activities in Nigeria’s petroleum sector are driven by energy transition and strategic alliances for operational efficiencies. The divestment by major international oil companies (IOCs) presents opportunities for indigenous players in the industry to take center stage.

Felix Douglas reports that IOCs are shifting focus from shallow water to deep water, raising concerns about the industry’s future sustainability.

At the 24th edition of the Petroleum Policy Roundtable (PPR) organized by the Centre for Petroleum Information (CPI), Engr. Afolabi Oladele, Chairman of the CPI Board of Governors, highlighted that 2024 marks a significant year with IOCs selling their interests in joint venture-operated land, swamp, and shallow water leases to Nigerian independent producing companies.

Recent transactions include:

• ExxonMobil sold shallow water leases to Seplat, a company listed on exchanges in both Nigeria and the UK.
• TotalEnergies sold gas supply assets related to LNG to Chappal.
• Eni sold its interests in Shell-operated joint venture leases to Oando.

Oladele emphasized that this shift has far-reaching implications for Nigeria, as indigenous companies now hold significant oil reserves. The critical question is whether these companies can effectively manage the nation’s oil reserves and navigate the energy transition amid climate action challenges.

Leveraging Mergers and Acquisitions in Nigeria’s Upstream Oil and Gas

Pedro Omontuemhen, Partner at PWC, discussed global trends in mergers and acquisitions (M&A) in the upstream oil and gas sector. He noted that security of supply chains, strategic alliances for operational efficiencies, and corporate governance are key drivers of M&A. The divestment by IOCs is driven by their corporate headquarters’ strategic decisions rather than local companies. This creates opportunities for indigenous players to take advantage of the situation.

Omontuemhen highlighted challenges such as offshore oil and gas activities, security concerns, regulatory uncertainty, decayed infrastructure, and funding constraints. He stressed the importance of removing regulatory bottlenecks to ease business operations in the industry.

Managing Inherited Assets: Rising to the Challenge

Roger Brown, CEO of Seplat Energy PLC, delivered a keynote address emphasizing prudent management of inherited oil and gas assets. He shared Seplat Energy’s success in increasing production across its portfolio and generating strong cash flows. Brown called for strong collaboration between operators and host communities to ensure the future success of acquired assets.

Squeezing Out the Last Barrel

Austin Avuru, Chairman and CEO of AA Holdings and former CEO of Seplat, spoke about the opportunities for independent companies as IOCs divest. He praised Seplat’s success in managing assets and generating significant returns. Avuru highlighted the importance of efficiency, low-cost operations, and leveraging technology to maximize production from acquired assets.

Avuru pointed out that while IOCs are moving to deep offshore operations, independent operators must be prepared to take over and maximize production from existing fields. He stressed the need for efficient management of resources, particularly in areas such as water handling, gas monetization, and heavy oil development.

Overall, the divestment by IOCs presents a pivotal moment for Nigeria’s petroleum industry, offering significant opportunities for indigenous companies to step up and lead the sector into a new era of energy transition and sustainability.

Source: The Nation