Business
Indigenous oil firms to the rescue as IOCs leave Nigeria in droves
Nigeria’s troubled oil and gas industry has been offered a lifeline with Domestic Oil Companies (DOCs) daily snapping up onshore oil blocks that are being abandoned by exiting International Oil Companies (IOCs), Business Hallmark can report.
Faced with several lingering challenges, especially the menace of insecurity, crude oil theft, entrenched hostilities in host communities and the rise in advocacy for the reduction in carbon emission, many international oil companies operating in the country have in the last 15 years, moved offshore, or outrightly left Nigeria for economic friendly oil producing nations like Angola, Guyana, Greenland, Costa Rica and Ghana.
The IOCs that have divested from their onshore oil blocks or in the process of doing so, include the five majors, namely Shell, Eni, ExxonMobil, Total and ConocoPhillips.
For instance, the IOC with the largest stake in the Nigerian oil and gas industry, Shell,
divested from four onshore oil blocks in 2010.
The successful sales of these oil assets by Shell triggered a wave of sales by other IOCs.
By the end of 2015, a total of 24 oil blocks had been sold to local oil firms, with the exception of one block sold to Chinese oil giant, Sinopec.
In 2022, Shell also announced that it received four offers for its entire onshore oil and gas portfolio worth US$3 billion it had earlier put up for sale.
According to Shell, it is selling its entire shareholding in the Shell Petroleum Development Company of Nigeria Limited to Renaissance, a consortium consisting of ND Western Limited, Aradel Holdings Plc, Petrolin Group, FIRST Exploration and Petroleum Development Company Limited and the Waltersmith Group.
According to reports, due diligence dialogue between representatives of Renaissance and NUPRC is expected to end by June ending.
In the same vein, Total and ConocoPhillips are divesting and selling onshore assets worth $27.5 billion to Nigerian frms.
Also, American oil giant, ExxonMobil, agreed to sell the entire share capital of its shallow water operations in Nigeria to Seplat Energy for an initial US$1.3billion, and added fees of up to another $1billion.
Other IOCs, including Chevron, have also put some of their oil blocks for sale.
From 2021till now, the worth of oil assets put on sale by the IOCs is over N20.8 trillion.
The trend, meanwhile, is expected to continue, as the top five IOCs and other big industry players like Nigeria Agip Oil Company and Equinor have began the process of divesting their investments in 26 oil blocks in Nigeria to indigenous firms.
“These blocks have an estimated total reserve of 8.211million barrels of oil, 2,699 million barrels of condensate, 44,110 billion cubic feet of associated gas and 46,604 billion cubic feet of non-associated gas. This is a significant contribution to the nation’s hydrocarbon resources.
“Additionally, these blocks contain P3 reserves estimated at 5,557 million barrels of oil, 1,221 million barrels of condensate, 14,296 billion cubic feet of associated gas and 13,518 billion cubic feet of non-Associated Gas
“It is worth noting that a substantial part of the P3 reserves is located in or near producing assets.
“This means that a competent successor could easily mature them to 2P reserves”, the Chief Executive, Nigeria Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, had revealed in early May.
According to the NUPRC boss, the average production from the blocks is 346,290 barrels per day.
“The average oil production from NAOC is 28,018 bpd; MPNU, 159,378 bpd; Equinor, 36,155 bpd; and SPDC, 122,739 bpd.
“But the technical production potential is much higher – standing at 643,054 barrels (NAOC -147,481 bpd, MPNU – 244,268 bpd, Equinor – 39,203 bpd, and SPDC -212,102 bpd).
“These blocks have the potential to significantly boost our national production, which would benefit all stakeholders”, Komolafe added.
Owing to the continued divestments and other factors, Nigeria’s oil production crashed from its highest peak of 2.469 millions barrels per day recorded on December 31, 2005, to 1.3 million barrels per day (excluding condensates) at the end of May 2024.
The development led to a huge revenue shortfall, resulting in governments at all levels unable to meet its financial obligations.
Meanwhile, there is hope for a positive turn of fate for Nigeria’s struggling oil industry as local oil firms are now snapping up onshore oil blocks dropped by the IOCs and continued to expand capacity.
Indigenous oil firms, it would be recalled, became players in the nation’s oil and gas sector in 2001 when they were given licenses to operate 24 marginal fields.
Another round of oil license bid took place in 2013, with 31 marginal fields licences sold to indigenous oil firms. However, the process was never concluded.
Meanwhile, another round with 57 marginal fields was announced in 2020. This time around, licenses were awarded to successful firms in June 2021 after about a year delay.
According to available data, domestic oil companies currently operate 36 2% of the nation’s existing Oil Mining Licenses (OMLs), followed by the National Oil Company (NOC), 32.7%, while OICs, which used to be the biggest player in the sector, are now left with 31.2% stake.
Before their divestments began in 2010, the five IOCs controlled over 45 per cent of Nigeria’s oil production assets, with the then Nigerian National Petroleum Corporation (NNPC), now Nigerian National Petroleum Corporation Limited (NNPCL) having 51 percent stake and domestic oil companies about 4 percent.
But domestic oil firms are now in the ascendancy. Encouraged by the Federal Government, domestic oil companies daily are taking oil over assets jettisoned by oil majors, and are gradually revving up oil production to the relief of the government and other local stakeholders.
On May 6, 2024, an indigenous oil firm, Natural Oilfield Services Ltd (NOSL), a subsidiary of Sterling Oil Exploration & Energy Production Company Ltd (SEEPCO), successful commenced oil production at Oil Mining Lease (OML) 13 in Akwa Ibom State.
The oil deal is a joint venture between NOSL and NNPC Exploration and Production Limited, the upstream subsidiary of Nigerian national oil company, NNPCL.
At the start of production on May 6, the company achieved 6,000 barrels of oil production. By May 27, 2024, the company had ramped up production to 40,000 barrels per day.
Speaking on the achievement, the company’s management said that it planned boosting its production in the coming years to generate more value for Nigeria’s economy.
“For Nigeria, the first oil from OML 13 holds some significance as it contributes to the country’s efforts to increase its oil production capacity, which is crucial for meeting domestic energy needs and driving economic growth”, NOSL stated.
Also, indigenous oil and gas firm, Oando Plc, recently achieved a production feat of 25,000 barrels per day, while it expects to to attain 50,000 barrels per day of oil by the end of the year with the closure of a landmark deal to acquire upstream assets of Italian oil giant, Eni, in Nigeria.
Speaking recently in Lagos, Oando’s Chief Operating Officer, Alex Irune, said that the firm intends scaling up to 100,000 barrels per day by 2029.
With the agreement, Oando will become one of Nigeria’s biggest domestic producers.
“We are working through the obligations under the Share Purchase Agreement and is on track to close the deal this quarter”, Oando’s COO added.
Another major indigenous player in the nation’s oil and gas sector, Seplat Energy Plc, is currently producing above 52,000 barrels of oil per day.
The oil fim announced in February 2022 that it had purchased ExxonMobil’s 40 percent stake in MPNU, expecting the transaction to be completed in the second half of the year.
Until last month when it was finally approved by federal authorities, the ExxonMobil/Seplat deal was stalled by the failure of NUPRC to approve it, citing ‘overriding national interest’.
While the dispute lasted, output from the controversial oil assets declined from 600,000 barrels per day to 120,000bpd, leaving a shortfall of 480,000bpd, which the Federal Government recently claimed amounted to $34 billion loss at a conservative $80 per barrels in the last two and a half years.
Meanwhile, with the approval of its bid to acquire ExxonMobil’s onshore business, Seplat will emerge as the biggest local player in the nation’s oil and gas industry, with the capacity to produce over 650,000 barrels of crude oil per day.
Other local oil companies at the forefront of raising Nigeria’s present oil production target include Addax Petroleum Nigeria Limited, Aiteo Oil, AMNI International Petroleum Development Company Ltd, Consolidated Oil Limited, Dubri Oil Company Ltd, Emerald Energy Resources Ltd, Lekoil Nigeria Ltd, Yinka Folawiyo Petroleum Company Ltd, and many others.
