Nigeria’s oil sector requires change to stem investor flight – global experts

• Investor flight poses serious problem
• Côte d’Ivoire, Namibia, Congo, Angola attracting investments
• Deleterious regulatory environment, safety issues, vandalism chasing away investors

Ben Eguzozie

Experts knowledgeable in the global oil industry dynamics are advising Nigeria on the strategic and pragmatic measures it needs to adopt in order to stem the current divestment syndrome in its dimming oil industry.

In particular, the global energy experts say Nigeria’s oil sector requires urgent policy change to curtail the current divestment by the international oil companies (IOCs). More than two-thirds of the country’s revenue comes from oil. Investor flight poses a serious problem to the African top oil producer, the experts observed.

NJ Ayuk, the executive chairman at the African Energy Chamber (AEC), lamented that “Nigeria, a previous bright spot on big oil and gas investors’ radar screens, has dimmed substantially as investor attention is increasingly drawn to new and emerging developments in Namibia, Côte d’Ivoire, Angola, and the Republic of Congo”.

Côte d’Ivoire, Namibia, Republic of Congo, and Angola are the new investor havens — drawing investors’ attention away from Nigeria. For example, Shell, with the largest footprint in Nigeria, is pursuing deepwater blocks in Côte d’Ivoire for exploration. Italian energy giant Eni has just added offshore Block CI-205 to its vast Murene Baleine discovery of 2021, which has shot Cote d’Ivoire’s production to 30,000 barrels per day (bpd), a number that is expected to rise an astonishing 556 percent to 200,000 bpd by 2027. TotalEnergies is also looking to invest $600 million in exploration and production in the Republic of Congo’s Moho Nord deep offshore field this year. The French major made recent Namibian discoveries in the Venus area, for which it is seeking approval to move ahead by the close of 2025. Venus is expected to produce up to 180,000 bpd of oil. TotalEnergies also plans to invest $6 billion in energy in Angola, which has become a major investment site; portraying “a country with a more stable policy framework,” said Patrick Pouyanne, chairman and chief executive officer of TotalEnergies.

The energy experts point at a variety of deleterious forces such as an uninviting regulatory environment, lack of transparency, safety issues, vandalism, and theft as the reasons that have rattled the big foreign players, including TotalEnergies and Shell. The two major international energy giants are exiting or shifting their priorities in Nigeria.

“For a country whose economy is dependent on fossil fuels, this divestment by majors, totaling around £17 billion since 2006, is catastrophic. Nigeria’s 37 trillion barrels of reserves can do the country no good underground,” Ayuk said.

France’s TotalEnergies, which has been in Nigeria since 1962, is seeking to sell its share of Shell Petroleum Development Company of Nigeria, Limited (SPDC), although it will continue to have 18 percent of its investments in Nigeria. 

TotalEnergies CEO Patrick Pouyanne says his company hasn’t explored oil in Nigeria for 12 years, explaining, “There is always a new legislature in Nigeria about a new petroleum law. When you have such permanent debates, it’s difficult for investors looking for long-term structure to know what direction to go.”

By far, investors want predictable environments and simple, trustworthy systems of regulation. A shortage of these factors seems to have trumped the fact that Nigeria yet contains large reserves that could be tapped. This much, TotalEnergies’ recent stance highlights Nigeria’s unpredictable regulation.

At the time being, five global oil companies are still working in Nigeria, but three of them — Shell, Eni, and ExxonMobil — are selling off in-country assets valued at £1.8 billion, £4 billion, and £11.9 billion, respectively. Both Shell and Eni have stated an intent to continue operating in Nigeria’s offshore sector, whereas ExxonMobil has conveyed a commitment to a Nigerian continued investment.

However, Nigerian companies, Seplat, Aiteo, and Eroton have moved quickly to buy divested assets. So has the Nigerian government, which has been named top bidder for 57 oilfields and granted licences to 130 firms for development.

Ayuk says he is pleased to see indigenous companies seizing the opportunities created by divestments. Nigeria is projected to require $25 billion of investment per year to keep its production at 2 million bpd — a level that will sustain the nation’s economy. 2014 manifested the peak of investment in Nigerian oil at $22.1 billion.

“I urge (the indigenous companies) to take serious measures to control emissions and limit flaring, as large international firms have. In doing so, they will be taking care of their own families, neighbours, friends, and fellow citizens, while building top-notch reputations,” the African Energy Chamber executive chairman, said.