Oando projects drastic growth after $783m acquisition, eyes production increase 

Nigeria’s energy company, Oando PLC, is poised to significantly enhance the country’s oil reserves and production capacity following its landmark $783 million acquisition of the Nigerian Agip Oil Company (NAOC) from Italian energy giant Eni. Recently recognized in South Africa as the “Deal of the Year,” this acquisition is set to boost Oando’s oil reserves by over 98 per cent and support Nigeria’s goal of increasing oil production to over 2 million barrels per day.

With numerous oil fields in Nigeria remaining underutilised amid divestment and the reluctance of international oil companies to invest in shallow water assets, companies like Oando are stepping up to fill the gap. Their efforts provide critical opportunities for the country, particularly as Nigeria faces the risk of stranded oil and gas reserves in the wake of the global energy transition.

Oando had won the ‘Deal of the Year’ award at the recently concluded Africa Energy Week (AEW) in Cape Town, South Africa even as the Group Chief Executive of the company, Wale Tinubu noted that the wave of divestments and acquisitions in the oil sector in Africa has the potential to reshape the continent’s energy future.

The NAOC acquisition follows Oando’s initial entry into the ConocoPhillips/NAOC/NNPC Joint Venture (JV) in 2014 when the company purchased ConocoPhillips’ operations in Nigeriaand by extension, its 20 per cent stake in the JV.

Tinubu, during the latest acquisition had said: “It is a win for Oando, and every Indigenousenergy player, as we take our destiny in our hands, whilstplaying a pivotal role in this next phase of the nation’s upstream evolution. With our assumption of the role of operator, our immediate focus is on optimising the assets’ immense potential, advancing production, and contributing to our strategic objectives.”

The strategic move of the acquisition has increased Oando’s stake in the JV and participating interests in Oil Mining Leases (OMLs) 60, 61, 62, and 63 from 20% to 40 per cent granting the company operational control over the assets. It also increased Oando’s ownership stake in all NEPL/NAOC/OOL Joint Venture assets and infrastructure which include 40 discovered oil and gas fields, of which 24 are currently producing, approximately 40 identified prospects and leads, 12 production stations, approximately 1,490 km of pipelines, three gas processing plants, the Brass River Oil Terminal, the Kwale-Okpai phases 1 & 2 power plants (with a total nameplate capacity of 960MW), and associated infrastructure.

The $783 million acquisition from Eni is a is seen as a significant milestone for Oando with possibility of a far-reaching implications for not only the company but also the energy industry and the nation’seconomy.

Oando’s acquisition of a 20 per cent stake in OMLs 60, 61, 62, and 63 has substantially augmented its operational footprint in Nigeria’s oil and gas sector. The deal also significantly expanded Oando’s reserve base, increasing its total reserves by 98 per cent to approximately 1 billion barrels of oil equivalent (MMboe).

This substantial growth from 505.6 MMboe positions Oando among Nigeria’s largest Indigenous oil producers, enabling it to make a greater contribution to the country’s energy security and export capabilities. By increasing domestic oil production and exports, Oando’s expanded operations have the potential to positively impact Nigeria’s economy through higher oil revenues.

Moreover, it provides access to an extensive and diverse infrastructure network, comprising 1,490 km of pipelines, 12 production stations, three gas processing plants, and the Brass River Oil Terminal. Control over such critical infrastructure not only enhances operational efficiency but also offers a strategic advantage in the supply chain. By optimising production and transportation processes, the company can reduce costs and improve profitability, a crucial factor in navigating the complexities of the global oil market.

The benefits to Nigeria include increased revenue, job creation, and local content development. The acquisition is expected to boost Nigeria’s GDP by increasing oil production from the assets. As a major oil-producing nation, Nigeria’s economy is heavily reliant on the oil and gas sector. Increased production and subsequent revenue generation can stimulate growth across various sectors, particularly in regions like the Niger Delta, where Oando operates. This is in addition to the divestments leading to an end in capital repatriation to the parent companies of traditional IOCs, which are headquartered in foreign countries. As an indigenous company, Oando (and other acquiring local players) can now retain foreign currency earnings from the sale of its production output.

READ ALSO:Oando boosts oil reserves by 98% with $783m NAOC acquisition 

Reportedly, the approach to the acquisition sets it apart from the typical international oil companies, which are viewed to often prioritise profit over local community welfare.

By focusing on local content development and providing long-term, stable employment for Nigerian workers, the company is demonstrating a commitment to aligning business success with national economic and social goals. This investment in Nigerian talent underscores the importance of supporting indigenous companies that prioritise the welfare of Nigerians alongside their commercial interests.

The acquisition marks a significant milestone for the company and Nigeria’s oil and gas sector. As an indigenous company, Oando’s expanded control over critical oil and gas assets strengthens Nigeria’s domestic energy production capacity. This strategic move positions the organisation as a leading force in the Nigerian oil sector, where foreign companies have traditionally dominated. Now, the firm’s emergence is a commendable example of the potential for indigenous companies to drive the future of the country’s oil and gas industry.

This move is particularly noteworthy in the context of the recent exodus of international oil companies (IOCs) from onshore and shallow water operations in Nigeria. Major players like Shell, TotalEnergies, and ExxonMobil have divested or reduced their onshore operations due to challenges such as economic instability, insecurity, and difficulties accessing foreign exchange. In contrast, Oando’s bold move demonstrates the potential for indigenous companies to fill the void left by IOCs and drive the future of Nigeria’s oil and gas industry. This shift is crucial for Nigeria’s national strategy of increasing local participation and ownership in its oil sector, further reinforcing the goals outlined in the Petroleum Industry Act (PIA).

On a global scale, this acquisition enhances Nigeria’s reputation as a country capable of fostering large-scale Indigenousparticipation in energy production. It sends a positive signal to international investors and energy markets, demonstrating that local companies like Oando can operate major assets efficiently and sustainably, even in challenging economic environments. This welcome development will encourage increased investment in Nigeria’s energy sector, bolstering the country’s ability to manage and sustain growth in the face of global energy transitions.

For the firm, this achievement underscores its strategic foresight and commitment to innovation, sustainable development, and positioning itself at the forefront of Nigeria’s energy future. By capitalising on the withdrawal of international players and expanding its portfolio, Oando demonstrates its resilience and ability to thrive in a dynamic and uncertain global energy landscape.

Oando’s acquisition of NAOC not only strengthens the company’s position in the oil and gas industry but also provides an opportunity to expand its corporate social responsibility (CSR) initiatives through the Oando Foundation. The Foundation has been actively involved in projects focused on education, community development, and environmental sustainability. With the increased resources and operational scale resulting from the acquisition, these initiatives are better positioned for greater momentum.

The acquisition is expected to generate increased revenue, a portion of which can be allocated to the Foundation’s efforts to improve educational access and infrastructure in host communities. By expanding its footprint, the foundation can scale up its investments in building and renovating schools, providing teacher training, and granting scholarships to students in underserved areas through future-fit curriculum that provides them with requisite skills to compete.

On the environmental front, the company has shown a strong commitment to responsible practices, including reducing gas flaring, and investing in cleaner energy projects. The acquisition enhances its capacity to develop these sustainability programs further. By integrating its newly acquired assets, which include key gas infrastructure, the organisation can contribute more significantly to Nigeria’s “Decade of Gas” initiative, aligning with the country’s energy transition goals and reducing carbon emissions.

Furthermore, the increased control over its operations provides the firm with a platform to deepen its community engagement and environmental stewardship. Oil-rich regions, which have historically been affected by oil-related environmental degradation, stand to benefit from enhanced focus on environmental stewardship, management, and social development. What is more, the charity organisation’s initiatives can be scaled up to mitigate the effects of climate change and improve community resilience to environmental challengesthrough relevant sustainability initiatives.

Looking ahead, the acquisition positions the company strategically to capitalise on Nigeria’s energy transition. With enhanced production capacity and a stronger focus on gas development, Oando is well-positioned to contribute to the country’s push towards cleaner energy sources and just transition. The company has also underscored its intent to further explore renewable energy opportunities by leveraging its subsidiary, Oando Clean Energy Limited’s investments in innovative renewables, energy-efficient projects, and the carbon market, diversifying its portfolio, and futureproofing the business against shifts in global energy demand.