- Locals reaping benefits of IOCs’ divestment
Nigeria’s indigenous players have so far added 165,000 barrels per day (bpd) to Nigeria’s oil output since their acquisition of onshore production assets from the international oil companies (IOCs), The Nation investigation has revealed.
Their contribution to national oil output has further been buoyed by the various divestments of oil assets from multinational oil companies (IOCs), amongst them Mobil Oil Producing, Shell Petroleum Development Company that have been taken over by indigenous oil producers and firms, which onshore production assets have been ceded to indigenous oil and gas companies.
Some of these assets already consummated under this regime were transactions that had remained unfinished for over two years after initial announcement. They include the $1.3 billion ExxonMobil divestment to Seplat; TotalEnergies divestment to Chappal for $860 million, Equinor Nigeria Energy Company Limited divestment to Project Odinmin Investments Limited, which was valued at over $700 million, Oando PLC acquisition of shares of Nigerian Agip Oil Company (NAOC) at $783 million, and the $2.4 billion acquisition of Shell Petroleum Development Company onshore asset by Renaissance Africa Energy Company Limited, a local oil and gas consortium. Renaissance is a consortium formed by ND Western, Aradel Energy, First Exploration & Production, Waltersmith and Petrolin.
The effect of this development is already taking a positive toll on the government’s desire to increasing crude oil production and by extension, boosting the country’s revenue. Stakeholders agreed that the divestments are very pivotal in ensuring that the 2.1 million barrels per day (mbpd) target for the current year is attained.
For instance, production figures sourced from available data on the website of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), estimates that in the first half of this year, Seplat is expected to contribute 55,000 bpd to the national output.
Other indigenous operators that have taken over assets of IOCs and now expected to boost national production output include Oando with an expected contribution of 35,000 bpd; Arade, l14,825 bpd; First E & P, 51, 298 and Waltersmith, 2,496 bpd.
But NUPRC’s projection may be modest given the ambitious targets set for themselves by some of these firms. Seplat, following its successful asset take over, now aims to double its crude oil production capacity within six months. The firm’s Chief Financial Officer, Eleanor Adaralegbe, gave this projection in an interview with the Financial Times earlier in the year. He hinted that from about 50,000 barrels per day (bpd) output it will over the next six months, increase its output to about 120,000bpd.
Seplat, with an with an asset base of 11 onshore oil blocks, 48 oil and gas fields, three export terminals and five gas processing facilities, now controls about 16 per cent of Nigeria’s present production capacity, according to the submission of its Chief Executive, Roger Brown.
Oando, on its part, recorded an average production was 23,911 boe/day, compared to 23,258 boe/day in 2023. In 2024, it ramped up its production, consisting of 7,864 bbls/day of crude oil, 246 bbl/day of NGLs and 15,801 boe/day of natural gas. The firm affirmed that its production increase was a result of additional volumes from acquisition of 20 per cent additional stake in the NAOC JV in Q4 offset by the impact of shut in wells for repairs from sabotage activities.
Besides, stakeholders insist that the entry of local producers has aided the ability of the country in meeting its production quota to the Organisation of Petroleum Exporting Countries (OPEC), including that of domestic demands.
Yet, for indigenous oil producers, the stakes can only grow bigger. Oando, in a statement at its announcement of its 2024 financial year result, may have set its clear goals to achieve higher production output in the current year.
“In 2025, our priority shall be to leverage technology to improve productivity across our operations. We will intensify efforts to boost production through the dual approach of rig-less and workover initiatives while executing an aggressive drilling programme across three rig lines. Simultaneously, in collaboration with other stakeholders, we are proactively tackling above-ground security challenges by implementing a revamped security framework that integrates advanced surveillance technology and intelligence-driven initiatives to curb the perennial, unnecessary, and unjustifiable theft of oil to ensure the long-term integrity of our vast network,” the management said.
The Chief Executive Officer, Centre for the Promotion of Private Enterprise (CPPE), Dr. Muda Yusuf, agreed that the impact of the indigenous producers has been phenomenal and hence, they need to be encouraged by government to do more.
He argued that the divestment by the multinationals to deepwater operations leaving the onshore operations to indigenous players is a good development for the industry.
“I think the success we have recorded in the divested onshore operations to indigenous players is not only an indication of the local players’ competence, but a clear manifestation of their ability to better manage the local environment that the multinational. Government should further encourage them in their operations because in the long run it will be a blessing for the country economically and technologically; they will also generate employment both directly and indirectly as ancillary services providers will equally spring up,” Dr. Yusuf said.
Citing the production data of both Seplat and Oando, Yusuf, an economist, said it is a clear indication that the country’s production capacity is bright. “If in the short period of their taking over of the onshore assets from the former owners both firms have been able to record this feat, modest as it may appear, it is no mean achievement; it is an indication of hope for the production output and a boost that the 2.1 mbpd production output target may afterall not be an illusion. But government needs to encourage them and provide that enabling environment for them to do more,” he argued.
At the jus ended Nigerian International Energy Summit (NIES 2024) in Abuja, the Chairman of the Petroleum Technology Association of Nigeria (PETAN), Wole Ogunsanya, assured that crude oil production by indigenous producers under the umbrella of Independent Petroleum Producers Group (IPPG) will grow by one million barrels per day (bpd) and their gas output by one trillion cubic feet (TCF) per day within the next five to 10 years.
Ogunsanya, who is also the Chief Executive Officer of Geoplex Driileq, based his submissions on the rebounding activities of indigenous players in the sector especially on arising from the vast opportunities now being provided by the Nigerian Content Act, which mandated that local operators, service companies and contractors be prioritised during divestment of assets or award of contracts.
The PETAN boss agreed that with proven capacity and the growth in the number of assets now in the hands of indigenous firms, their production would rise significantly in the next five to 10 years. he added that his association, in view of the trend, now plans to invest about $450 million to grow the capacity of its members in preparation for future jobs and projects.
“In the next five to 10 years, we see the IPPG growing production by a million barrels. We see their gas production increase by a billion cubic feet. That will represent 15 per cent of the gas that we produced last year,” he said.
He explained that the country is witnessing growth in domestic refining capacity and by extension, a rising demand for crude. For instance, the country is presently grappling with meeting the huge crude oil demand of the 650,000 bpd capacity of the Dangore Refinery; the 450,000 bpd capacity by the Nigerian National Petroleum Company Limited (NNPC). This demand will further be compounded when BUA’s 350,000 bpd capacity refinery come on stream.
“We need 1.2 million barrels for local refining. And after that, the government is still going to make money. The OPEC puts about 1.6. So if you add that, you’re in the region of 2.7 or 2.8 million barrels.
“If we do it right for this country, and most of those productions will be owned by Nigerians, either through NNPC, where there are 55 per cent, the 45 per cent is owned by indigenous Exploration and Production (E&P) companies. So, imagine the implication of that on our GDP. Imagine the ability to have all the products that we need in Nigeria,” Ogunsanya said.
The Special Adviser on energy to President Bola Tinubu, Olu Verheijen, affirms the President’s commitment to unlocking Nigeria’s abundant energy resources through strategic policy and regulatory frameworks.
She maintained that the recent divestments by international oil companies (IOCs) represent a strategic shift towards deepwater projects, rather than a complete exit from Nigeria.
“This move allows a new generation of ambitious local companies to invest in onshore fields and drive production growth. The improved regulatory environment created by these reforms has also helped clear a backlog of pending regulatory approvals for divestments of onshore and shallow water operations by IOCs. Some observers erroneously misread these divestments as an exit by the IOCs from Nigeria, but this is not the case. Instead, it is a strategic shift towards larger scale deepwater projects, freeing up the onshore fields for investment by a new generation of ambitious local companies who are enthusiastic to grow production,” she had said at previous engagements.
