- Analysts predict improved forex earnings, reserves
- Jobs to be created
Onome Amuge
Nigeria’s oil and gas industry is undergoing a monumental shift as indigenous companies capitalise on the departure of multinational firms, seizing the opportunity to consolidate their position as leading players in the sector.
This trend has opened up a window of opportunity for local Nigerian operators to cement their presence in the industry, boosting homegrown involvement, and challenging the long-standing dominance of multinationals, in what has been considered a new dawn for the sector as it increasingly tilts towards a more local-centric model of operation.
In a landmark year for the Nigerian oil and gas sector, 2024 witnessed an unprecedented series of acquisitions of international oil companies by domestic firms.
At the forefront of this development, Renaissance Africa Energy Company, a consortium of five energy firms —ND Western, Aradel Holdings, Petrolin Group, First E&P, and WalterSmith Group, secured a $2.8 billion acquisition of Shell Petroleum Development Company’s (SPDC) 45 percent stake in four oil mining licenses, thrusting the consortium into the ranks of major industry players in the shift towards indigenous dominance in the Nigerian energy sector.
Adding to the ongoing reshuffling of Nigeria’s oil and gas industry, Seplat Energy secured a $800 million acquisition of ExxonMobil’s Nigerian assets in 2024, after nearly three years of intense negotiations.
The high-profile deal, ranking among the most significant divestments by an international oil company from the Nigerian market, represented another pivotal moment in the country’s ongoing transformation, with indigenous firms increasingly occupying centre stage in the oil and gas sector.
Oando PLC, a leading Nigerian energy company, also made a notable splash in the oil and gas industry with its acquisition of Eni’s subsidiary, Nigerian Agip Oil Company (NAOC), in a transaction worth $783 million, further strengthening the presence of homegrown companies in Nigeria’s oil and gas industry.
Following a period of declining crude oil production, Nigeria is embracing a renewed sense of optimism in its oil and gas industry.
With indigenous companies stepping into the spotlight, the country’s projected target of 2.06 million barrels per day (including condensates) crude oil production by 2025 seems well within reach, according to Heineken Lokpobiri, the minister of state for Petroleum Resources (Oil), as laid out in the Appropriation Bill.
Nigeria’s ambitious drive to expand its oil production has been set in motion, with December 2024’s figures demonstrating a promising 6.3 percent year-on-year increase in crude oil production, excluding condensate. Given December’s 1.507 million barrels per day (bpd), the country surpassed the 2023 benchmark of 1.418 million bpd, paving the way for Nigeria’s aspiration of reaching a 2 million bpd output by 2025, as part of a grander goal of becoming a $1 trillion economy under President Bola Tinubu’s leadership.
The government’s expansionary strategy is set to gain momentum with the anticipated acquisition of foreign oil companies by Nigerian players, further strengthening the local industry’s competitive edge and paving the way for Nigeria to establish itself as a formidable force in the global oil and gas landscape.
According to industry players, the advantage of cultural and community familiarity possessed by local companies in Nigeria’s oil and gas sector cannot be understated, as it allows them to address the complex and sensitive relationship between operator and community with an agility and adaptability that larger international companies are often unable to match.
The Renaissance consortium, in a statement, affirmed its dedication to usher a new era in Nigeria’s energy landscape by leveraging cutting-edge technology, sustainable practices, and the wealth of local expertise available in the country.
By prioritising innovation, sustainable practices, and the harnessing of local expertise, the consortium envisions a future where Nigeria’s energy sector is not only self-sufficient but also a catalyst for industrialisation, economic growth, job creation, and reduced dependence on imported energy products.
As industry experts assess the ramifications of Renaissance’s acquisition of Shell’s onshore assets, they unanimously view the transaction as a pivotal turning point, indicative of a strong commitment to local content development and the empowerment of indigenous firms.
While the trend of divestment by international oil companies continues in Nigeria, the transfer of these assets to a consortium led by domestic upstream giants is considered a new era in the Nigerian energy sector, ushering the possibility of an industry-wide transformation that prioritises local expertise, boosts local content, and promotes sustainable development.
Notably, Shell’s recent divestment of its onshore assets to Renaissance Africa Energy Company, has been widely seen as an indicator that Nigeria is now capitalising on its massive energy potential.
This high-profile transaction aligns with the ongoing call by key government officials, such as Minister of State for Petroleum Resources (Oil) Heineken Lokpobiri, and Presidential Advisor for Energy Olu Verheijen, who, during the 2024 African Energy Week (AEW): Invest in African Energies conference, urged for an increase in both investment and domestic participation across Nigeria’s oil sector.
Lokpobiri and Verheijen also dwelled on the crucial role of the Shell-Renaissance deal in unlocking Nigeria’s energy potential, highlighting its alignment with the country’s vision to drive exploration and production activities, while simultaneously consolidating Renaissance’s presence in the market.
With the government targeting a $10 billion investment pipeline in the oil and gas sector, the $1.3 billion transaction is believed to add significantly to the country’s efforts to boost its production capacity and provide a tangible economic boost to local firms operating in the sector.
The consortium’s extensive operations, including producing approximately 100,000 barrels of oil per day in the Niger Delta region and operating two modular refineries, further underscore its capacity to pave the way for a more sustainable and prosperous future in Nigeria’s energy sector.
In yet another positive highlight for Nigeria’s oil industry growth, Seplat Energy Plc, described the successful acquisition of ExxonMobil’s onshore assets as a transformative move, asserting that the transaction was expected to double its crude oil production to approximately 120,000 barrels per day.
“This will provide the company with a significant opportunity to further drive its growth and profitability, whilst contributing significantly to the Nigerian economy. These assets are of proven quality, located in one of the world’s leading hydrocarbon basins,” the company stated.
With a keen focus on the human resources implications of the ExxonMobil acquisition, Seplat Energy Plc announced that approximately 1,000 employees and 500 contractors from ExxonMobil’s operations would be transferred to the Seplat Group.
This, according to analysts, demonstrates Seplat’s commitment to talent acquisition and retention, signaling a critical strategy in maximising the benefits of the acquisition for the company, its stakeholders, and the broader Nigerian oil and gas industry.
As local companies deepen their footprint in Nigeria’s oil and gas exploration sector, analysts predict a range of far-reaching economic benefits to materialize from the ancillary services and industries that will inevitably arise to cater to these companies’ needs.
“In response to the expanding operations of indigenous firms, construction engineers, health and safety organisations, training and consulting firms, lawyers, and many other related sectors will inevitably step up their services, creating a fertile ground for enhanced skills development and job opportunities across the nation,” they said.
Ugodre Obi-Chukwu, founder/ceo, Nairametrics, hinted that more jobs will be created in the emerging oil and gas industry in Nigeria which will warrant that some Nigerians outside the shores of the country to come back fill the skill gaps needed to drive the industry.
Obi-Chukwu predicted that ‘Japada’ might happen as immigration policy tightens and more assets acquired by Nigerian companies. Citing the cases of Seplat and Oando, he said, “They will need very good intellectuals to operate these emerging multinationals.”
Luqman Agboola, an energy and infrastructure expert at Sofidam Capital noted that the profitability of indigenous companies’ expanding asset base would bring economic benefits to the federal government, with half of its revenue coming from the petrochemical sector.
According to Agboola, if these homegrown firms can successfully scale up their operations and maximise the profitability of these acquired assets, a surge in government revenues is expected, providing a much-needed boost to the country’s economy.
Agboola also hinted that the nation’s foreign exchange revenue will improve with increased export of crude from local oil firms which will positively boost the foreign reserves.
