Thirst for Nigeria oil fades as exploration drops

For Africa’s biggest oil-producing country, the idea of getting private capital to explore for new oil fields in 2021 may be off the table as international oil companies (IOCs) are not only reducing their exploration workforce but also cutting the search for new fossil fuel fields.

With IOCs such as Shell, Chevron and others accounting for more than 70 percent of Nigeria’s daily crude production, the above development will be a huge concern for a nation that currently has about 13 billion barrels of oil equivalent presently untapped in its deep offshore area.

Amid a global energy transition, nothing is escaping the 2021 winds of change now sweeping through oil majors, not even the exploration team that for more than a century powered its profits by discovering billions of barrels of oil.

For most oil majors, hundreds have left the oil exploration team in recent months, either transferred to help develop new low-carbon activities or laid off, current and former employees told Reuters last week.

British Petroleum has decimated its oil and gas exploration team from more than 700 a few years ago to less than 100 people in 2021, with the rest either laid off or moved to low-carbon energy divisions that remains top priority for the future.

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Data from Rystad Energy showed new onshore and offshore lease acquisitions by the world’s top five oil companies fell to the lowest in at least five years in 2020, a trend that may likely continue in 2021.

“Of course, much of this decline was caused by the pandemic, but it is also the pandemic that is spurring a potentially permanent change in the agenda of Big Oil, which is also expected in 2021,” Rystad Energy analyst Palzor Shenga said.

Earlier in October 2020, Exxonmobil said it was cutting its operations by 1,600 positions through the end of 2021.
According to an Exxon spokesperson, the company is conducting country-by-country reviews, which could result in a 15-percent reduction in its global workforce.

The company anticipates 14,000 contractors and employees to be affected by the already announced programmes.

The exodus is the starkest sign yet from inside the companies of its rapid shift away from oil and gas, which will nevertheless be its main source of cash to finance a switch to renewables for at least the next decade.

Most experts say the reduction in exploration activities is fully justified by the change in priorities for most Big Oil who are all about renewable energy, electric vehicle (EV) charging, and energy storage now.

At least half of Nigeria’s total crude output is from offshore oilfields, helping to offset declining production from mature onshore assets. But recent discoveries have remained undeveloped in the face of regulatory and legislative uncertainty.

Nigeria currently has a total of 390 oil blocs that have been discovered, and only 179 of them have been awarded to individuals and corporations, while 211 blocs are yet to be awarded, data from Nigeria’s Department of Petroleum Resources showed.

The situation is more chaotic as international energy companies working in Nigeria are worried that proposals in the country’s long-delayed oil industry law will deter investment in new offshore projects.

“Nigeria is facing growing competition for new investments. Nigeria was able to attract only $3 billion, or 4 percent, out of the $70 billion committed on new projects in Africa between 2015 and 2019,” Mike Sangster, managing director of Total SE’s Nigeria unit, told lawmakers at a hearing in Abuja.

Nigeria risks a bleak future by not preparing for life after oil cash. By 2050, the country’s population would have doubled from current level to 400 million, but the government acts unaware of what is coming.