An early sign of an expected wave of divestments by oil majors due to the challenges of low prices and restrained demand caused by the global health crisis has kicked off as Total is seeking to sell off a number of Angolan oilfields.
The above development is scary for Nigeria which is desperate to increase its oil reserves as a fall in investment last year has put some strain on the country’s oil and gas sector.
On Wednesday, Reuters reported that Total could raise around $300 million from the sale of its 20 percent stake in Angola’s offshore Block 14, which includes the Tombua-landana, Kuito fields as well as a cluster of fields in the offshore territory.
Those disposals are expected to include a number of stakes in Angolan oilfields, where production is generally more complex and expensive than other basins, Reuters said quoting two sources close to the sector.
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Analysts at British multinational investment bank and financial services HSBC, however, estimate that Total will sell around 200,000 BPD of production over the coming decade to meet its target of keeping production unchanged until 2025.
Total and rivals including British Petroleum, Chevron and Exxon Mobil aim to sell tens of billions worth of oil and gas assets around the world in the coming years to reduce debt that ballooned following the collapse in oil prices due to the coronavirus crisis.
For European companies, the sales are also part of a long-term strategy to shift away from fossil fuels to renewable energy and power markets to reduce greenhouse gas emissions.
The general shift in is bad news for countries for long-standing producers such as Nigeria, Angola and Algeria while Senegal, Mauritania, Uganda and Mozambique, which were looking forward to becoming substantial producers in the near future will also be affected.
“The oil industry is expected to be in turmoil for a long while to come, particularly on the continent,”Siva Prasad, a senior analyst at research firm Rystad Energy said.
There is a further risk of outright cancellation for certain large projects whose operating costs would be incompatible with sustained oil prices below $40 per barrel.
These include Shell’s Bonga Southwest project in Nigeria, Tullow Oil’s South Lokichar project in Kenya, Phase 3 of Sonatrach’s Hassi R’mel development in Algeria and Woodside’s Sangomar 1 field in Senegal.
“Sub-saharan Africa, a perceived high-potential but also high-risk zone, is more in the crosshairs than other regions of the world,” Prasad said in a note seen by Businessday.
For a frontier market with the population of Nigeria, oil majors not looking in the direction of Nigeria should be a big worry for the government as it has dire implications for social welfare and economic growth.
The government’s many failings with attracting foreign direct investment most especially in the oil and gas sector have meant Nigerians have grown poorer as economic growth is slower than population growth.
The continued delay in the reform of the Nigerian petroleum industry has resulted in the loss of at least $20billion indirect investments annually, Nigerian Natural Resource Charter (NNRC) said.
This means that despite obvious opportunities in the oil and gas sector, Foreign Direct Investment (FDI) is not rushing into Nigeria as the government continues to maintain a stranglehold on sectors that can attract foreign investment at the detriment of the economy and the people.
Some experts have recommended that for Nigeria to turn the tide against its declining oil and gas investments there must be deliberate multi-agency efforts to bring about needed reforms. But the efforts must start with bringing credibility to both fiscal and monetary policies.
