“Big oil companies leaving Nigeria puts the growth of their oil industry at risk”

For years, Nigeria has been trying to stop the decline in its oil production. This has affected government revenues and prevented them from fully benefiting from high oil prices in 2022. Nigeria has also experienced a departure of major oil companies from the troubled Niger Delta region, where oil theft and pipeline tapping have caused frequent oil spills. These spills have led to disruptions in exports from major oil terminals like Forcados and Bonny Light.

In the leaner and meaner oil industry, after two price crashes in the five years to 2020, Nigeria’s onshore – with all its security problems – has dropped out of Big Oil’s core areas of future development as it can’t compete with cheaper and more secure exploration and production areas in their portfolios.

Last year and early this year, more international oil companies divested or expressed interest in selling their onshore assets in Nigeria. The trend from the last few years has become more apparent—Big Oil prefers to spend cash on more lucrative and secure projects than on the Niger Delta onshore region plagued by illegal activity for years.

U.S. supermajor ExxonMobil intends to sell its shallow water business in Nigeria to Seplat, the biggest Nigerian energy company by market value. The deal is still bogged down at the Nigerian regulator, although the chief executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, told Reuters in October that the commission was “very optimistic” the $1.3-billion sale would move forward. Related: Emissions Pressure Turns Oil Drillers into Grid Drainers

A month earlier, Italy’s Eni signed a deal with Nigeria’s energy company Oando PLC to sell Nigerian Agip Oil Company Ltd (NAOC Ltd), the wholly Eni-owned subsidiary focusing on onshore oil and gas exploration and production in Nigeria, as well as power generation. Eni continues to operate in the country, focusing on operated offshore activities. Participations in operated-by-others assets, both onshore and offshore, and Nigeria LNG remain in the Eni portfolio, too.

In line with its plan through 2026, Eni’s global Upstream business “will supplement the core organically led growth with inorganic high-grading activity, adding resources with incremental value while divesting resources that can offer greater value and opportunities to new owners,” the Italian major said.

Then in November, Norway’s Equinor announced the sale of its Nigerian business to local firm Chappal Energies. Equinor’s assets include a 53.85% ownership in oil and gas lease OML 128, including the unitized 20.21% stake in the Agbami oil field, operated by Chevron.

Like Eni, Equinor said that the transaction realizes value and “is in line with Equinor’s strategy to optimize its international oil and gas portfolio and focus on core areas.”

The latest divestment announcement came from Shell, which said earlier this month that it would exit Nigeria’s onshore oil and gas industry but would remain a major investor in the country’s energy sector through its deepwater and Integrated Gas businesses.

Shell has struggled with its onshore business in Nigeria for years, and has had its fair share of troubles there, including several lawsuits over oil spills from local communities.

As a result of regulatory, security, and environmental issues, investments in Nigeria’s oil and gas industry have slowed over the past few years, leading to a drop in oil production, which has made Africa’s top oil producer the biggest laggard in the OPEC+ agreement. Nigeria hasn’t pumped to its quota under the deal and had its ceiling reduced once before OPEC+ handed it a 1.5 million barrels per day (bpd) quota for 2024 at the meeting in November 2023. That meeting was postponed by a few days due to disagreements over quotas with Nigeria and Angola, which had the latter announce it was quitting OPEC.

Nigeria, however, is still part of the cartel and the OPEC+ agreement and even hopes to boost its oil production this year and in the following years.

The administration of the new president, Bola Tinubu, who took office in May of 2023, has been looking to attract investments. In the absence of the deep pockets of Big Oil for onshore operations, Nigeria will have to rely on local oil firms and consortiums of smaller companies to revitalize its onshore oil sector after years of underinvestment and still ongoing oil theft and vandalism on petroleum facilities.

If companies are now leaving the less capital-intensive onshore operations to focus on offshore operations, it sends a perfect picture of the risk involved in doing business in Nigeria,” Seyi Awojulugbe, a senior analyst at Lagos-based security consultancy SBM Intelligence, told Reuters.

Local firms could have an easier time negotiating with local communities, which could make their doing business in Nigeria’s onshore oil sector easier, Noelle Okwedy, an energy analyst at intelligence firm Stears based in Lagos, told the Financial Times last month.

“For local companies who don’t have the billions of dollars in capital to invest in offshore assets, buying these assets is a chance for them to expand,” Okwedy noted.

By Tsvetana Paraskova for Oilprice.com

 

“Guyana is going to have the highest oil reserve per person in the world in 2024. It’s like a blessing and a curse!”

Since commencing oil production in 2019, Guyana’s fortunes have changed dramatically. With a population of just 800,000, this small South American nation is on track to become one of the world’s leading oil producers per capita in 2024, potentially surpassing major oil-producing nations like Saudi Arabia and Qatar shortly.

This newfound wealth has already transformed Guyana’s economic landscape and sparked vital discussions about the potential benefits and challenges of such an unprecedented oil boom.

In 2016, data shows that Guyana struck oil off its coast, with estimated reserves of 11 billion barrels. This discovery marked a turning point for the nation, whose GDP of 62.3% in 2022 is projected to triple by 2027, fueled by an estimated production of 4,000 barrels per day.

With its potential per-capita oil reserves rivalling even Saudi Arabia, Guyana could see its GDP soar to $10 billion by 2030.

This rapid growth, including an impressive 38% in 2023 and a projected 21% in 2024, has led some to liken Guyana to “South America’s Dubai,” due to its oil-driven economic boom and ambitious.

While Guyana’s oil boom holds immense promise, it also raises concerns and challenges that other oil-rich nations have faced.

History serves as a cautionary tale, with countries like Venezuela, Angola, and the Congo experiencing the downside of sudden resource wealth. Social conflicts, political instability, and the erosion of democratic institutions are common pitfalls for nations heavily reliant on oil revenue.

The construction of Silica City, an ambitious project in Guyana by President Irfaan Ali, symbolises the nation’s aspirations for grand infrastructure development. Large-scale projects, while showcasing growth potential, also run the risk of inefficiency and waste.

Guyana must strike a balance between realising its ambitious visions and ensuring that development projects contribute to the well-being of its citizens.

President Irfaan Ali said in an interview with Americas Quarterly, “There is no resource curse; the resource is a blessing. It’s a management curse, and we are doing everything to avoid that.”

“We are not building an energy nation; we are building a diversified economy that is focusing on many areas of growth,” Ali said.

Silica City is envisioned as a hub catering to technology professionals and other industries facing challenges finding space in the thriving capital, Georgetown.

Financed by resources derived from the oil industry, the city is set to channel investments into critical areas such as tourism, food production, industrial development, manufacturing, and biodiversity services, which will be “major growth areas of the future,” Ali said.

source: businessday.ng