IOCs stage major comeback into onshore exploration

...as  stability returns to Nigeria’s oil and gas production

After a decade-long absence, International Oil Companies (IOCs) are once again staging a return to Nigeria’s volatile but highly lucrative oil and gas sector, Business Hallmark can report.

The oil and gas industry is experiencing a significant revival as a result of the improvement in security and the operating environment brought about by the recent reforms introduced by the administration of President Bola Tinubu.

Since assuming office on May 29, 2023, President Tinubu have been introducing major reforms in the nation’s oil and gas sector with the purpose of attracting investment, combating systemic challenges, and enhancing efficiency,

Some of the orders signed by the president included the Presidential Directive on Local Content Compliance Requirements 2024; Oil and Gas Companies (Tax Incentives, Exemption, Remission, etc.) Order, 2024 and Presidential Directive on Reduction of Petroleum Sector Contracting Costs and Timelines 2024, which is aimed at increasing the contract approval threshold of critical projects to $10 million.

Policy changes

The president last week followed up with his efforts to raise crude oil production and attract investment to the oil and gas sector with the issuing of a new Executive Order, which seeks to lower project costs, attract more investors, and enhance revenues from operations in the sector.

With the new order, 50% of incremental government gain resulting from cost savings will now be returned to investors, while available tax credits have been capped at 20 per cent of a company’s annual tax liability.

These policy changes have contributed to a significant uptick in new investments by the oil majors that started exiting the troubled oil-rich Niger-Delta region in 2012.

At the last count, no fewer than seven  international oil companies have made huge investments worth over $10 billion in the sector in the last one year, while other firms are in the process of finalizing their return to the nation’s downstream and upstream oil sectors.

Specifically, over $8 billion Final Investment Decisions (FIDs) has been committed to deep-water oil and gas projects, while the troubled shallow and onshore fields have attracted over $2 billion FIDs within the same period, thus marking a significant turnaround in the sector.

According to BH findings, a modest gain have been made in the nation’s land and shallow fields in the last twelve months, with indigenous oil firms beating the expectations of many industry watchers by driving up Nigeria’s natural gas and crude oil production.

According to several sources in the oil and gas industry, indigenous firms are responsible for about 70 percent of Nigeria’s  current crude oil output of about 1.8 million barrels per day, representing 1.26 million bpd.

Indigenous Quota Rises

Speaking during Heirs Energies Limited’s petroleum industry leadership dialogue held in Abuja in February 2025, the Chairman of Heirs Energies, operator of the oil mining lease (OML) 17, Tony Elumelu, said that indigenous energy companies are now responsible for more than 60 percent of Nigeria’s crude oil production.

According to Elumelu, a series of presidential executive orders have reshaped the operating environment, enabling indigenous firms to take the lead in crude production.

He added that the successful indigenization programme is driving growth and positioning local companies at the forefront of the industry.

Elumelu disclosed that in just four years, Heirs Energies has rapidly grown its production from 21,000 barrels per day to over 50,000 barrels per day.

What Elumelu, however, failed to mention is that the feat recorded by Heirs Energies, and other local operators, would have been largely impossible without the input of IOCs and major oil servicing companies, who work behind the scene as financial and technical partners.

BH reliably gathered that all indigenous oil firms operating in the country have one form of Financial and Technical Services Agreement (FTSA) or another with foreign partners, who help them to  achieve their target gas and crude oil production.

One of Nigeria’s foremost indigenous independent producers, Neconde, announced at the weekend that it achieved a feat of 50,000 barrels per day from its Oil Mining Licence 42.

According to Neconde, the implementation of the FTSA solution helped raise the company’s production from an average of 15,000 bpd in 2023 to 25, 000 bpd in 2024 and to 2025 year-to-date of 50,000 bpd, and the aspiration to exit the year at over 70,000bpd.

It would be recalled that oil major, Shell Nigeria, had shut down OML 42 (now owned by Neconde), which was producing 250,000 bpd at the height of host communities disturbances in 2006.

The oil field remained dormant until it was activated in 2022 by Neconde after the Federal Government sold it to the company.

An economist operating in the oil and gas sector, Dr. Titus Owoeye, told our correspondent that local oil firms had been able to build capacity through the FTSA model.

IOCs’ Role

“It is a well known fact to players in the industry that IOCs are scrambling to take up positions in the now recovering sector they hurriedly left behind because of environmental factors, hostilities from host communities and frequent vandalization of their equipment and assets.

“They do this by offering financial and technical support at a fee or in exchange for equity in firms they have interest in. In reality, they never left. They’ve always had a leg in the business with the agreement they signed with local consortium that bought the oil fields from them.

“This ingenious arrangement ensures indigenous firms have direct access to funds, international oilfield services like Shlumberger (SLB) and Haliburton, as well Original Equipment Manufacturers (OEMs).

“Apart from helping to ensure transparency and accountability in their operations and management, it has also helped local firms to achieve their  production targets”, Owoeye stated.

In the same vein, international oil companies are driving multiple exploration and production projects in the nation’s offshore and deep-water sector.

On May 15, 2025, Brazil’s national oil and gas company, Petrobras PBR, announced its intention to return to Nigeria’s oil industry, which it exited in 2002 owing to financial struggles stemming from domestic corruption scandals and a desire to streamline its global portfolios.

The re-entry of Petrobras into Nigeria is tied to its ambitious $111-billion five-year investment strategy, which aims to expand its footprint beyond Brazil and tap into high-potential deep-water plays..

Broader Co-operation

The return of Petrobras was also confirmed by Vice President Kashim Shettima, who attributed the firm’ renewed interest in Nigeria to the economic reforms introduced by the Tinubu-led administration.

“As the economic reforms of the administration of President take root, the company, which had previously wound down its operations in Nigeria at the Agbami Field, is now actively engaging with Nigerian authorities as part of broader efforts to revitalise bilateral cooperation ahead of the 2025 Nigeria–Brazil Strategic Dialogue Mechanism (SDM).

“We have not maximally capitalized on the fraternity between us and Brazil, but it is better late than never. The upcoming SDM presents an opportunity to execute sector-specific Memoranda of Understanding (MoUs) and unlock investment flows”, Shettima stated.

The Minister of Foreign Affairs,  Yusuf Tuggar, also confirmed Petrobras readiness to  acquire frontier acreage in Nigeria’s deep waters.

“Petrobras is not active in Nigeria, but they are very keen on coming back to Nigeria. They said they want frontier acreage in deep waters”, Tuggar declared.

While Petrobras is busy finalizing its planned return to Nigeria, major oil companies like Shell, Mobil, Total and Eni have expanded their operations in Nigeria with the signing of financial investment destinations.

In December 2024, Shell Nigeria Exploration and Production Company Limited (SNEPCo), announced a final investment decision (FID) worth $5 billion on Bonga North, a deep-water project off the coast of Nigeria.

The Bonga North project involves drilling, completing, and starting up 16 wells (8 production and 8 water injection wells), modifications to the existing Bonga Main FPSO and the installation of new subsea hardware tied back to the FPSO.

“This is another significant investment, which will help us to maintain stable liquids production from our advantaged Upstream portfolio,” Shell’s Integrated Gas and Upstream Director, Zoë Yujnovich had said back in December.

On May 28, 2025, SNEPCo also signed an agreement with TotalEnergies EP Nigeria Limited  to buy its 12.5% stake in the OML 118 Production Sharing Contract (OML 118 PSC), an offshore oil mining lease that includes the Bonga field, for $510 million.

Earlier in June 2024, TotalEnergies announced a $550 million FID on the Ubeta Field Development Project in North-West of Port Harcourt, Rivers State.

Once on stream, the facility will produce about 350MMScf/day of gas and 10,000 BBLS/day of associated liquids, tapping into the vast gas reserves and contributing towards securing gas supply to the Nigeria Liquiefied Natural Gas (NLNG).

Speaking during the event,  Senior Vice President Africa, Exploration and Production, TotalEnergies, Mike Sangster, said Ubeta was the latest in a series of projects developed by TotalEnergies in Nigeria alongside Ikike and Akpo West.

“I am pleased that we can launch this new gas project, which has been made possible by the Government’s recent incentives for non-associated gas developments.

“Ubeta fits perfectly with our strategy of developing low-cost and low emission projects, and will contribute to the Nigerian economy through higher NLNG exports”, Sangster said.

Like Shell and TotalEnergies, American oil giant, ExxonMobil, has also announced plans to invest $1.5 billion to revitalize production at the Usan deep-water offshore oil field in the Niger Delta.

The investment plan was announced on May 6, 2025 by ExxonMobil’s Managing Director in Nigeria, Shane Harris, at the end of a meeting with the Chief Executive Officer (CEO) of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe.

According to Harris, the investment would be allocated from the second quarter of 2025 to 2027 to revitalize production at the Usan deep-water oil field, located on offshore Block OML 138.

The oil giant said it expects to reach a final investment decision on project in Q3 2025. Project partners include Chevron, China National Offshore Oil Co. and TotalEnergies.

The ExxonMobil CEO also disclosed that the $1.5 billion investment in Usan is in addition to other financial commitments like the Owowo and Erha deep-water fields.

While Owowo deep-water field straddles OML 139 and OPL 223, Erha is located in OML 133, about 97 kilometers offshore in the Gulf of Guinea.

The ExxonMobil boss added that the Usan project reflects his firm’s confidence in Nigeria’s upstream potentials.

Speaking on the development, the Special Adviser on Energy to President Bola Tinubu, Olu Verheijen, attributed it to the significantly reduced time-to-market project execution timelines, production costs and enhanced fiscal competitiveness of projects brought about by the Tinubu’s administration.

Verheijen said that before the turnaround, the country was benchmarked against 13 other countries, where International Oil Companies (IOCs) actively invest, with Nigeria ranking ninth in investment attractiveness.

Industry experts, who spoke on the surge in investments agreed that the development underscores the oil majors pivot to Nigeria’s offshore after the initial divestment of their onshore assets.

“Though many Nigerians are not seeing it yet, the new administration is resetting the nation’s economy on the part of growth. At least I know of the revolution going on in the petroleum sector because I am a stakeholder.

“Good things don’t come easy. If it is sustained, I see us hitting 2 million barrels per day by the end of the year. That is more funds for government to spend.

“What the economy needs is a shock therapy to kick-start it. But I strongly believe Nigerians will soon start to feel the positive effects.

“And so far, the indices are blinking amber and green. Though I am in the oil and gas sector, as an economist, I know quite well that a growing economy does not necessarily translate to a good living to citizens. It normally takes time for the effects to show”, Owoeye argued