Nigeria on voicemail as investors answer Angola’s call with $50bn

Nigeria’s grip on Africa’s oil production throne is waning as neighbouring Angola surges in popularity with international oil companies.

Investment in Angola’s oil sector increased by 96 percent between 2022 and 2023, with investments of almost $50 billion recorded over the last five years, according to data sourced from Angola’s National Oil, Gas and Biofuels Agency (ANPG).

Over the next five years, investments of around $71 billion are planned, which does not include investment in incremental production, said Jerónimo, chairman of the board of directors at ANPG, said in the state company’s investor note.

Read also: Why TotalEnergies picked Angola over Nigeria for $6bn project

Since 2017, Angola has been undertaking aggressive industry reforms to ensure a transparent and competitive oil and gas market.

The country introduced a six-year licensing round in 2019 which guarantees yearly investment opportunities in exploration for foreign players.

The most recent of these – a 12-block tender covering blocks in the Lower Congo and Kwanza Basins – featured 53 bids, underscoring the scale of interest in Angola’s oil and gas.

José Barroso, Angola’s secretary of state for oil and gas, explained that the country’s national regulator and concessionaire, ANPG, will continue to aggressively promote the industry, pushing bid rounds in line with national production targets.

Barroso stated that Angola offers regulatory flexibility with regard to oil and gas agreements.

“In addition to production-sharing agreements under the six-year licensing round, the country introduced a risk-reducing alternative in 2020, enabling the awarding of risk service contracts when the public bid process is unlikely to succeed,” Barroso said in an interview monitored by BusinessDay.

He added, “A permanent offer program initiated in 2021 also enables the ANPG to negotiate new contracts with operators without offering a bid round. Additional reforms include a Tax Benefits Code enacted in 2022, creating incentives for oil companies”.

According to Barroso, the government is open to discussing terms and finding a balanced agreement that provides the right returns for investors.

He added that the government is open to licence renewal, thereby ensuring a strong and long-term relationship between oil companies and the state.

“With oil accounting for over 30 percent of GDP, 70 percent of government revenue and 90 percent of exports, the plan ensures oil and gas production remains a top priority for the next ten years,” Barroso said.

With vast oil reserves estimated at 37.1 billion barrels, Nigeria is punching below its weight.

Oil is the lifeblood of Africa’s biggest economy. It provides roughly half of government revenues and nearly all of its foreign exchange receipts as well as a big part of its presence on the global stage.

But it has also been underutilised as a resource for Nigeria’s 200 million people in the 64 years of its discovery due to bureaucratic bottlenecks, contracting delays, and low local participation since Royal Dutch Shell first tapped a well in the swamps of the Niger Delta.

“Nigeria loves to open topics without closing them. You love to debate. 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,” Patrick Pouyanne, chief executive officer of TotalEnergies said.

Pouyanne, who spoke with panellists at the Africa CEO Forum in Kigali, Rwanda, said the inconsistency in policy making decisions led to the diversion of the project from Nigeria to Angola, a country with a more stable policy framework.

“We have countries that have perfectly integrated policies like Angola. So, we went to Angola and announced a very large $6 billion project at the beginning of the week because their framework is stable. So we know where we go,” Pouyanne said.

Security concerns in the Niger Delta, the heart of Nigeria’s oil industry, have long been a deterrent for investors, according to experts surveyed by BusinessDay.

Early this month, the Nigerian government began processes for the 2024 oil bid round but perennial concerns around a forced merger of bidders, allegations of favouritism and high signature bonuses could mar the process.

12 oil blocks and five deep offshore assets from last year’s bid exercise are on the line.

BusinessDay’s findings showed out of the over 60 companies that got approvals in the last marginal bid round, only about five have started production.

“Nigeria can’t afford to be complacent,” says Folabi Ogunrinola, an energy analyst based in Lagos. “Angola has made a very compelling case to investors, and Nigeria needs to address the challenges that have made it a less attractive option in recent years.”