• Saturday, March 02, 2024
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Oil majors’ assets sell-off tasks capacity of local operators

oil rig

The recent quest by oil majors to divest stakes from troubled Nigerian onshore operations may expose the financial and technical capabilities of local companies in meeting the country’s ambitious target of realising four million barrels per day of oil production and 40 billion crude oil reserves in the near future.

The Nigerian oil and gas industry has in the past two decades seen a surge in the number of indigenous players, buoyed by the Federal Government’s initiatives and divestment of assets by International Oil Companies operating in the country.

A number of indigenous operators have emerged as key players in the industry, with more access to oil and gas assets on the back of the government’s marginal field programme and recent divestments by the IOCs.

These indigenous companies have proved their mettle by scaling up production capacity significantly over the past five to seven years.

They have made rapid gains on their IOC counterparts in terms of technical expertise and financial capability.

Read also: Shell divestment: Gas provides a way in for Nigeria’s local operators

For instance after Aieto’s audaciously purchase Oil Mining Lease (OML) 29 in 2015 for $2.8 billion, reputedly Shell’s biggest onshore producing asset in Africa following an open and competitive world-class bid, the company’s successfully ramped up crude production from an average of 23,000 bpd to 90,000 bpd.

Nigeria’s largest listed oil and gas firm by market value Seplat Energy Plc currently produces about 48,000 to 5,000 barrels of oil equivalent per day and also supports the government on completion of the Amukpe to the Escravos pipeline.

In the first half of 2021, Seplat Energy completed the Oben-50 and Oben-51 gas wells, which are now producing at a combined rate of 60 MMscfd of gas and 4,000 bopd of condensates.

Similarly, Oando Energy Resources (OER) is currently producing an average of 43,000 barrels (6,800 cubic metres) per day of oil equivalent.

Nestoil, another indigenous oil firm, is the largest indigenous Engineering, Procurement, Construction & Commissioning (EPCC) service provider for IOCs in Nigeria & Sub-Saharan Africa.

The same cannot be said of Erin energy and Savannah Petroleum both mid-sized the firms continue to gasp for breath as it sweeps in an ocean of losses over major assets acquired.

Joe Nwakwue, chairman of the Society of Petroleum Engineers (SPE) observed that some indigenous operators have been able to raise capital to acquire seemingly marginal assets from IOCs and have maintained production levels.

“Local operators have even been able to poach top talent from IOCs and are excellently run. This has contributed positively towards increasing the percentage of Nigerian production coming from local operators,” he added.

Charles Akinbobola, energy analyst at Lagos-based Sofidam Capital is optimistic about the prospects of indigenous players, particularly their tenacity in the face of challenging macroeconomic headwinds.

Some analysts believe that local operators for whom the Federal Government designed a local content policy have an opportunity to prove their mettle.

“For me, I believe that the local content policy in the Nigeria Oil and Gas industry was designed to prepare Nigerians to play a major role in the industry,” said Chuks Nwani, an energy lawyer based in Lagos.

Nigeria’s oil and gas industry content development act was created in 2010 to promote indigenous participation in the sector.

The law has made it mandatory for any foreign-owned company seeking to carry out operations in the upstream sector of the economy to do so by involving Nigerians in the composition of the company, project execution, and procurement of equipment.

In November last year, First E&P announced the commencement of oil production from the Anyala West field in OML 83 and 85. The company had in June 2015 acquired Chevron’s 40 per cent stake in the two oil blocks.

ND Western said in July last year that it had a very ambitious growth plan to take its gas production to above 510 million standard cubic feet per day in the next few years, and grow oil production to above 60,000 barrels per day in our medium-term plan.

“Our plan is to build robust midstream and downstream businesses and certainly, we will acquire more assets as the opportunity becomes available,” the managing director/chief executive officer, Eberechukwu Oji, said in an interview with our correspondent.