Oil firms ignore Nigeria, pump fresh dollars into Libya

Nigeria is struggling to attract investment into its energy sector, while Libya, a country that recently emerged from a decade of conflict, is getting serious attention from some of the biggest international oil companies to assist in the gradual revival of its energy space.

France’s TotalEnergies SE and Italy’s Eni SpA are making plans to invest $2 billion into Libya’s Waha oil project, which will boost its production by about 100,000 barrels a day.

The fresh investment is also expected to raise output at Libya’s Mabruk field and help build 500 megawatts of solar power to feed the local grid.

“I want to contribute to Libya’s comeback,” Patrick Pouyanne, TotalEnergies’ CEO, said at this week Libya’s Energy & Economic Summit 2021, the country’s first prominent energy forum in over 10 years.

Pouyanne said, “Some may see more boldness than wisdom in TotalEnergies’ decision to partner with Libya. I don’t. Where they see risks, I see the opportunities.”

Libya holds Africa’s biggest oil reserves estimated at 43 billion barrels and 1 trillion cubic meters of natural gas, but has been mired in fighting for much of the period since 2011, when leader Moammar Qaddafi was toppled in an uprising.

Warring sides struck a truce in mid-2020, leading to more stability and enabling crude output to rise from barely anything to around 1.2 million barrels a day, a tenfold increase from a 121,000bpd average in the third quarter of 2020.

Unlike Libya, Nigeria is punching below its weight in terms of attracting the right kind of investments in its energy sector as foreign investment now accounts for just a fraction of Africa’s biggest economy, with policy uncertainties and security issues also weighing on the mind of overseas investors.

“Nigeria may drop further in status as Africa’s biggest producer if the government does not urgently address the situation,” Abiodun Adesanya, the CEO of Lagos-based oil consultancy Degeconek, told S&P Global Platts, noting, “Already the country has fallen behind Libya in terms of output.”

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Nigeria has the capacity to pump around 2.2 million bpd of crude and condensate but in recent months, its output has been languishing below 1.55 million bpd. The country only pumped 1.23 million bpd of crude and 300,000bpd of condensate last month, according to Platts Analytics.

Gail Anderson, research director for sub-Saharan Africa at Upstream, believes there are “not many” takers for the “high-cost, emissions-intensive assets” that are being disposed of by large oil producers in the Niger Delta.

“The impact of this on the country’s foreign direct investment (FDI) will likely persist beyond 2021,” Anderson said.

International oil companies have been “selling assets mostly in shallow waters” under a process “supported by the Federal Government to support local producers that were perceived as better able to deal with insecurity issues, in particular in the Niger Delta”, Aurélien Mali, lead analyst for Africa at ratings agency Moody’s, said.

Global oil producer, Shell, is among the big producers that recently kick-started a disinvestment drive from its oil assets in the Niger Delta.

Hard hit by the oil spills that have resulted in lawsuits from affected communities in and around the Niger Delta, and insecurity that has culminated in pipeline sabotages, Shell is currently in talks with the government to divest all of its operated joint venture (JV) licences held by its subsidiary Shell Petroleum Development Company (SPDC), including a 30 percent interest in 19 oil and mining leases (OMLs).

Other large international oil companies disinvesting from Nigeria include Total, which said in January 2021 that it had completed the divestment of its interest in onshore Oil Mining Lease (OML) 17 to the Nigerian company TNOG Oil & Gas. Total operated under a joint venture partnership with Shell and Italian firm Agip Oil Company in the OML 17 — both of which are also disinvesting from the project.

Beyond lack of investments, a new wave of security threats in Nigeria has emerged that could further dent Nigeria’s production.

“Lately, there have been groups in communities in the Niger Delta, who while seeking for cash and attention, have been vandalising oil pipelines,” a Nigeria-based official at a Western oil company said. “Disruption to operations of oil companies in the Niger Delta is rising by the day due to the activities of these vandals.”

Three days ago, a militant group in the Niger Delta region code-named Bayan-Men blew up an oil facility producing about 5,000bpd of condensates operated by the Nigerian Agip Oil Company (NAOC) in Ogba-Egbema-Andoni Local Government Area, Rivers State.

The angry militants, who destroyed oil well, OB5 (Obiavu-5) in the area, accused the oil firm of failing to deal directly with the host communities, insisting that they were fighting for justice for their people.

The commander of the Bayan-Men said the company refused to allow the people to benefit from their operations in the area, adding that the firm was neck-deep in divide and rule.

“The action was because Agip has refused to allow the people to benefit from their operation in the area,” the group said, saying, “More are still coming if Agip does not engage directly with the communities of Omoku and give them what is due them.”

Eni was not immediately available for comment on the incident.

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