Mega deals in Permian Basin show how much Nigeria is losing

Nigeria is losing
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Recent mega merger and acquisition deals in the Permian Basin, West of Texas is pitting oil majors one against the other in a race to take position in the world’s most prolific oil fields as Nigeria continues to dilly-dally about reforming its petroleum sector laws.

In the week ending April 20, Chevron made public its decision to takeover Anadarko Petroleum for $33 billion, a deal seen as a watershed moment for the Permian Basin and the U.S. shale industry as a whole, Oilprice.com had reported. The deal is believed to be the beginning of a massive round of consolidation in the shale industry.

Already, the Permian has rapidly shifted in favour of the largest oil companies, with ExxonMobil, BP and Chevron betting their futures on West Texas and New Mexico. Exxon expects to produce 1 million barrels per day (mb/d) from the Permian by 2024, while Chevron had announced plans to produce 900,000 bpd by the same date.

While ExxonMobil might not have immediate plans to depart from Nigeria, it recently joined the league of multinational oil companies selling some of their Nigerian oil assets. ExxonMobil was weighing the possibility of selling its stakes in Oil Mining Leases (OML) 66, 68, 70 and 104 with a total production capacity of 120,000 barrels per day as at 2017, which might provide an opportunity for indigenous companies who have purchased assets worth billions from firms such as Eni, Shell, Chevron and Total in the past five years.

However, oil majors are scrambling for positions in the Permian. The acquisition of Anadarko grows Chevron’s position in the Permian, while also adding offshore and liquefied natural gas projects to the oil major’s portfolio.

Chevron’s total production will jump almost to parity with Shell and ExxonMobil, rising to 3.6 million barrels per day after incorporating Anadarko.

“We have always considered Anadarko as having the best positioned acreage in the sweetest spot of the Permian Delaware basin,” said Per Magnus Nysveen, head of research at consultant Rystad Energy. “Combining these shale assets with Chevron’s strong legacy position in the same area, we will now see Chevron emerging as the clear leader among all Permian players, both in terms of production growth and as a cost leader.”

In fact, while Chevron’s prior goal was to produce 900,000 bpd in the Permian within five years, it may now be able to achieve 1.6 mb/d after taking over Anadarko, according to Rystad, pushing it far ahead of Exxon.

Nigeria’s President Muhammadu Burhari in 2018 declined assent to the Petroleum Industry Governance Bill designed to reform and lure investors in, who have not seen clarity in the sector.

The 8th Senate on April 17 passed the PIGB.  “Following the adoption of the recommendations of the Technical Committee on ‘Declined Assents to Bills by Mr. President’, the @NGRSenate has once again passed the Petroleum Industry Governance Bill,” The Senate president said on its Twitter handle.

Whether the President Buhari would assent to the Bill and let in the much needed foreign direct investment into the sector will be known in the coming days.

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