New dawn for indigenous operators in Nigeria’s petroleum industry

After several decades of being dominated by multinationals, Nigeria’s petroleum industry is seeing increasing participation by local operators.

Indigenous companies have purchased billions worth of assets from firms such as Eni, Shell, Chevron and Total in the past five years.

Shell, along with many other oil majors is going through a broad process of asset sales in the country in an effort to cut costs and boost profits.

Other companies, including Total, Eni, Chevron and ConocoPhillips, are divesting from Nigeria’s oil and gas sector, which has been plagued by rising oil spills, sabotage and industrial-scale theft from Nigerian wells and pipelines of up to 150,000 barrels a day.

Shell recently sold its 30 per cent shares in four oil blocks in the Niger Delta — Oil Mining Licence (OML) 18, 24, 25, 29 — as well as a key pipeline, the Nembe Creek Trunk Line.

Oando’s $1.79 billion purchase of ConocoPhillips’ Nigerian interests, and other indigenous companies like Seplat, Afren have mustard courage to acquire many of the assets that where hitherto controlled by International Oil Companies (IOCs).

Aiteo’s recent purchase of some IOCs assets and its ability to create a niche for itself in the country’s oil and gas industry, has been described as a major breakthrough for indigenous operators in the country.

Aiteo is one of Africa’s fastest-growing energy leaders. “We are an integrated energy group with a clear vision for the future and the experience and assets necessary to provide oil and gas on a regional and global scale. We discover, produce, store and deliver energy resources to marketplaces worldwide.

“We are working on opportunities to responsibly develop energy resources in some of the world’s most significant basins, including the huge potential of the Niger Delta basin in West Africa’s offshore fields, and of the Benue Trough”, it said.

According to the company, it is strategically focused with major prospects for immediate revenue growth and market penetration through exploration and production, bulk petroleum storage, refining of petroleum products, trading, marketing and supply and power generation and distribution.

“Each of these areas holds massive potential, with global focus on the future of energy generation, significant oil and gas reserves still to be found throughout Africa, and a large number of alternative revenue streams to be found in the refinement of different petroleum products and derivatives”, it added.

The Minister of Petroleum Resources, Diezani Alison-Madueke, believed that the divestments by IOCs is a blessing to indigenous operators in the petroleum industry.

Alison-Madueke, noted that the trend actually provides opportunity for indigenous oil and gas companies to become active players in the upstream sub-sector of the industry.

She explained that with the divestments, indigenous oil and gas companies now have opportunity to acquire the assets being divested as springboard for the development of local capacity.

The minister stated that the divestments by the IOCs were creating opportunities for indigenous oil and gas companies to partake of the upstream sector of the industry and grow capacity.

“Let me allay your fears that the spate of divestments would not lead to crisis in the nation’s oil and gas industry, rather the divestment by the majors is changing the onshore corporate landscape and creating material brownfield opportunities for upstream players looking to enter the Nigerian upstream space,”Alison-Madueke noted.

She observed that the divesting IOCs were not leaving the country but only shifting their focus from onshore to the more challenging frontiers of deep offshore which currently accounts for 60% of Nigeria’s production.

“The IOCs remain very much present in Nigeria. Shell still retains ownership of 34 onshore blocks while Total, ExxonMobil, and Chevron are still committing large amounts of capital to assets offshore Nigeria,” she explained.

Highlighting the opportunities inherent in the divestment, Alison-Madueke stated: “The indigenous Nigerian companies have been presented with the opportunity to develop local operatorship capacity as well as boost local production and consequently grow into major upstream players”.

She cited the Nigerian Petroleum Development Company (NPDC), the upstream subsidiary of the Nigerian National Petroleum Corporation (NNPC), as an example of indigenous Nigerian company that has tapped into the opportunity provided by the divestment to transform from a small time player with a production of 60,000 barrels per day (bpd) in 2007 to a mid-size player with a current production of over 140,000 bpd through the assignment of 55% equity in 8 divested blocks.

She disclosed that NPDC has grown to become the biggest producer and supplier of gas to the domestic market through its aggressive development of the assets assigned to it from the divestment process, adding that the Federal Government was ready to strengthen and support the company toachieve its medium term objective