Lagos, Nigeria — 19 September 2013 – Locally-owned oil companies are boosting their share of Nigeria’s oil production by gaining ownership of oilfields in unstable areas of the country as international energy companies would appear to be in retreat.
For more than five decades, Royal Dutch Shell plc, Exxon Mobil Corporation, Chevron Corporation, Total SA and Eni SpA pumped about 97% of Nigeria’s output, according to figures provided by state-owned Nigerian National Petroleum Corporation, reports Bloomberg News. That fell to 90% in 2006, and is set to shrink further to about 60% in five years’ time “if the current divestment trend continues,” said Rolake Akinkugbe, a London-based energy analyst for Ecobank Research, in an e-mailed response to questions.
Shell and Chevron are selling assets that can produce 300,000 barrels a day from nine onshore and shallow-water oil leases. Stakes in 13 other fields have been sold jointly by Shell, Total and Eni since 2010, with most of them bought by smaller Nigerian companies, including Seplat Petroleum Development Company, First Hydrocarbon Limited and Neconde Energy Limited.
As international energy companies led by Shell and Chevron give up onshore and shallow water fields plagued by persistent unrest, violence and crude theft in the oil-rich Niger River delta, smaller Nigerian companies are taking over, expanding their output capacity.
“These divestments represent the single largest opportunity for indigenous Nigerian firms with the requisite expertise, partnerships and capital to ascend into the league of major upstream players,” Akinkugbe said. “If they overcome the operational difficulties they will become increasingly instrumental to Nigeria meeting its output target of 3 million barrels a day by 2020, she added.
Local companies are probably “better off dealing with some of the security challenges in the Niger delta than the foreign companies,” said Bismarck Rewane, CEO of Lagos-based Financial Derivatives Company, a business advisory group, in a phone interview. “It’s easier for them to communicate with the communities and win their sympathy,” he added.
Nigeria, OPEC’s seventh-largest producer, pumped more than 2 million barrels of crude a day last month, according to data compiled by Bloomberg. It has Africa’s biggest crude reserves after Libya, more than 36 billion barrels.
Source: Bloomberg News. For more information, click here.