Nigeria is
dominating the development of local independent upstream oil & gas
companies in Africa. This is capitalism at work. Nigeria’s independents are
helping to increase the country’s oil & gas production. They now contribute
27% of the county’s production, up from 12% a decade ago.
WoodMac noted in a March post that
major multinational oil & gas companies were scaling back their non-core
and mature assets, which presented opportunities for local independent
companies to grab those assets. This has happened. Indigenous African companies
now own 8% of overall African production, up from just 1% in 2020. In the post,
they give six reasons why Nigerian companies are at the epicentre of homegrown
African production:
1) Nigeria
has the right resource opportunities for independents –
with over 500 small and medium oil & gas fields onshore or in shallow
water, and over 100 local independent companies, there are ample opportunities.
2) Local
firms are better placed to deal with high country risk – there
are regulatory and operational risks for foreign companies, which is likely why
there are few smaller foreign independents operating in the country. This has
created more space for local indigenous companies, better positioned to
navigate Nigeria’s complexities.
3) Nigerian
government policies favour local companies – it is
an expected benefit to prioritize local domestic companies.
4) The
country has a strong domestic skills base –
withdrawal of the majors has left a viable skilled workforce, and there are
initiatives in place to further train and build up that workforce.
5) Mature
assets have been available as Majors withdraw – since the 2014
crash, oil majors have let more mature assets become available on the market.
The revenue from the purchased assets has allowed the indigenous companies to
build up their portfolios and obtain better financing for other projects.
6) Indigenous
companies were able to raise finance – before 2015,
obtaining financing was easier, so that the companies could build up their
asset values and revenue.
In a
May 5 article, WoodMac’s Simon Flowers and Gavin Thompson summarized the growth
of Nigerian independents:
“Ambitious and entrepreneurial local companies leapt
upon a unique set of circumstances, not least the Majors’ divestment of their
non-core onshore and shallow-water portfolios. Supportive government policies
and a strong domestic skills base – often acquired from the leading
international oil companies – have helped underpin growth. With over 100 local
players active across its upstream sector, Nigeria boasts Africa’s most diverse
corporate landscape.”
Less investment has resulted in
Nigeria’s liquids production dropping from 2 million barrels per day to 1.6
million barrels per day. The country has a very ambitious goal of increasing
that production to 3 million barrels per day by 2030. They note that increased
output from marginal fields, nimbler operating models, higher risk tolerance,
and close relationships with government have led to significant competitive
advantages for local independents. As the graph below shows, Nigerian
independents make up 8 out of the 10 top independents on the continent.
“With a combined value of US$12 billion, Nigerian
companies represent around 75% of the African independents peer group value.”
Nigerian independents hold about
one-third of the country’s natural gas reserves, and gas development is
currently being pursued along with gas-to-power projects. These independent
companies are planning to spend billions.
Barriers to the success of these
Nigerian companies include the age of the assets. Most are pre-2000. This makes
the economics marginal, and financing is currently one of the biggest obstacles
since these companies don’t have the large balance sheets of multinationals.
The government has helped a lot in promoting these local independents, but
there remain significant risks, and three key needs are: 1) increasing facility
uptime, 2) accelerating project approvals, and 3) ensuring security. Some of
these companies are looking beyond Nigeria for growth as well.
They note that the majors are
nearly done divesting in Nigeria. Their future focus will be on deepwater
offshore projects and LNG exports with higher investment returns.
“Shell’s announcement of the development of its
deepwater Bonga North project in late 2024 was Nigeria’s first deepwater final
investment decision in more than a decade. That is likely a taste of things to
come. Backed by supportive fiscal policies, Bonga South West Aparo
(Shell-operated), Usan West and Owowo West (ExxonMobil-operated), Etan Zabazaba
(Eni-operated) and the shallow-water Ima Gas Field (TotalEnergies 40%
participation) are expected to follow.”
References:
Nigeria’s
oil and gas independents come of age: Realising ambitious plans for production
growth. Simon Flowers and Gavin Thompson. Wood MacKenzie. May 5. 2026. Nigeria’s oil and gas independents
come of age | Wood Mackenzie
The
unstoppable rise of Africa’s upstream independents: Six key factors are making
Nigeria the epicentre of operations for the continent’s indigenous oil &
gas firms. Martijn Murphy, Ian Thom, and Babawale Scott. Wood MacKenzie. March
16, 2026. The unstoppable rise of Africa’s
upstream independents | Wood Mackenzie
No comments:
Post a Comment