By NJ Ayuk
Nigeria, a previous bright spot on big oil and gas investors’ radar screens, has dimmed substantially as investor attention is increasingly drawn to new and emerging developments in Namibia, Ivory Coast, Angola and the Republic of Congo.
With two-thirds or more of its revenue coming from oil, investor flight is a serious problem for Nigeria.
Big foreign players, including TotalEnergies and Shell, are exiting or shifting their priorities in Nigeria, rattled by a variety of deleterious forces: an uninviting regulatory environment, lack of transparency, safety issues, vandalism and theft, among other factors.
For a country whose economy is dependent on fossil fuels, the divestment by majors, totalling around £17 billion (R400bn) since 2006, is catastrophic. Nigeria’s 37 trillion barrels of reserves can do the country no good underground.
Among those looking to pull out of the country, at least in part, is France’s TotalEnergies. The company is seeking to sell its share of Shell Petroleum Development Company of Nigeria, Limited, although it will continue to have 18% of its investments in Nigeria.
TotalEnergies CEO Patrick Pouyanne says his company hasn’t explored for oil in Nigeria for 12 years, explaining: “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.”
TotalEnergies’ stance highlights the obvious – investors want predictable environments and simple, trustworthy systems of regulation. A dearth of the factors seems to have trumped the fact that Nigeria contains large reserves that could be tapped.
Five global oil companies are working in the country, but three of those – Shell, Eni and ExxonMobil – are selling in-country assets valued at £1.8bn, £4bn, and £11.9bn, respectively.
Shell and Eni have stated an intent to continue operating in Nigeria’s offshore sector, and ExxonMobil has expressed a commitment to continued investment in Nigeria.
Nigerian companies such as Seplat, Aiteo and Eroton have moved quickly to buy divested assets. As has the Nigerian government, which has been named top bidder for 57 oilfields and granted licences to 130 firms for development.
Where the investments are going
Ivory Coast, Namibia, the Republic of Congo and Angola are drawing investors’ attention away from Nigeria.
Shell is pursuing deepwater blocks in Ivory Coast for exploration, while large Italian firm Eni has just added offshore Block CI-205 to its vast Murene Bailene discovery of 2021. Production from the Baleine discovery has shot Ivory Coast’s production to 30 000 barrels per day (bpd), a number that is expected to rise an astonishing 556% to 200 000 bpd by 2027.
All this is happening while Ivory Coast is successfully emphasising carbon-reducing technologies and natural gas as a transition fuel.
Overseas investment has also spurred significant recent discoveries in Namibia.
Notable among recent Namibian discoveries is TotalEnergies’ Venus Discovery, for which the French major is seeking approval to move ahead by the close of 2025. Venus is expected to produce up to 180 000 bpd of oil.
TotalEnergies is also looking to invest $600 million (R11bn) in exploration and production in the Republic of Congo’s Moho Nord deep offshore field this year. This kind of investment is evidence that the company is in the Republic of Congo to stay.
Angola, too, has become a major investment site for TotalEnergies. The firm’s CEO has said it would invest $6bn in energy in Angola, as “a country with a more stable policy framework”.
Outlook
It has been estimated that Nigeria requires $25bn of investment a year to keep its production at 2 million bpd — a level that would sustain the nation’s economy. Historically, 2014 marked the peak of investment in Nigerian oil, at $22.1bn.
The federal government is strategising for increased oil production to meet the fiscal need in an environment where vandals have attacked pipelines and stolen oil – factors the government has claimed as reasons it has fallen short of its 1.5 million bpd Opec quota.
Looking to improve the figures in the remainder of 2024, the government’s target is 1.78 million bpd. Although recent problems on the Trans Niger Pipeline and maintenance by oil companies have dropped output, President Bola Tinubu expects a return to target levels.
By using every available well to increase production and revenue, the government aspires to increase crude production to 2.6 million bpd by 2027.
In April 2024, Nigeria began a new oil and gas licensing round, with an attached promise to investors that the process would be transparent. The new round is intended to help stem the flow of investments to African competitors like Angola and Namibia by easing the process of acquiring oil blocks.
The new licensing round offers 19 onshore and deepwater oil blocks, plus an additional 17 deep offshore blocks. These were chosen for their attractiveness to foreign investors who have the necessary finances and technical savvy to develop the areas.
Successful bidders will be held to precise exploration timelines.
Bidding had begun on seven offshore blocks in 2022 but was delayed for the installation of a new government – just the sort of shaky situation large foreign investors like to avoid.
With that experience in mind, Nigeria must work tirelessly to mitigate not only government instability, but other factors that discourage investment, be they regulatory hurdles, lack of transparency or safety and security issues.
NJ Ayuk is the executive chairperson of the African Energy Chamber
BUSINESS REPORT