$21 billion divestment hits Nigeria’s oil, gas sector hard

Nigeria’s oil and gas sector is currently feeling the impact of about $21 billion in divestments by oil multinationals, as its upstream capital expenditure assumes a downward trend.

The regulatory uncertainty of the sector before the enactment of the Petroleum Industry Act (PIA) 2021 and fossil fuel divestment schemes forced by energy transition and COVID-19 are the main cause of the divestments, according to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

Reports indicate that the country’s yearly capital expenditure in the upstream has slumped by over 74 per cent in the past eight years.

The country’s total yearly upstream capital expenditure decreased from $27 billion in 2014 to less than $6 billion in 2022.

The biggest investors including Shell, ExxonMobil, Total, Chevron and Eni have since 2010 started clawing back their investments in the country through divestment strategies.

However, Nigeria is showing increased natural gas and oil reserves in the short term, indicating a bounce back.

The NUPRC has reported that Nigeria’s oil and condensate reserves are 31.06 billion barrels of oil and 5.906 billion barrels of condensate. Associated gas reserves are 102.32 trillion cubic feet while non-associated gas reserves are 106.51 trillion cubic feet.

The Chief Executive Officer of Oando Energy Resources, Ainojie Alex Irune, said despite the ongoing divestments, African economies, including Nigeria, need to be given time to switch to using gas as a transition fuel.

Executive Chairman of Africa Energy Chamber, NJ Ayuk, noted that more investments and production are needed to counter expected demand growth in the future.

He believes that the continent needs to leverage its immediate resources to eliminate energy poverty, as Africa is a gas continent.

The Minister of State for Petroleum Resources, Timipre Sylva, had said the oil firms are leaving Nigeria due to the volatile environment, which impacts negatively on their operations.

Sylva said Nigeria’s situation had become precarious because of the myriad of challenges affecting the oil sector.

He noted that while Nigeria is trying to attack the challenges, the destruction perpetrated by vandals was destroying investors’ confidence in the oil and gas industry.

He identified Nigeria’s biggest problem as insecurity of the pipelines, saying there is a lot of pollution due to theft and pipeline vandalism which has put Nigeria in a tough situation.