As more and more oil majors become drawn to secure offshore sites, local consortiums are stepping in to fill the void left by their departure from onshore fields.
The most recent foreign oil major to announce plans to exit Nigeria’s onshore oil market is TotalEnergies, which has operated in the country for decades.
Following Shell’s divestment in January, the French energy company plans to sell its 10% share in the Shell Petroleum Development Company of Nigeria (SPDC).Nigeria’s primary oil producing region, the Niger Delta, is frequently referred to as the most oil-polluted area in the world. Each year, thousands of leaks happen due to both sabotage and inadequate infrastructure. These jeopardize international oil companies’ (IOCs’) attempts to comply with social and environmental regulations. The industry’s ombudsman is the Nigerian Extractive Industries Transparency Initiative (NEITI).
It asserts that ongoing issues with vandalism and oil theft were some of the reasons IOCs and other big businesses gradually withdrew from the downstream industry. According to a March 2022 estimate by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) of the federal government, crude oil theft cost more than $3.3 billion between January 2021 and February 2022.Essentially, it’s a real challenge because extracting this oil in the Niger Delta is against our [environmental, security, and health] policies, as stated by TotalEnergies CEO Patrick Pouyanné during the company’s annual results presentation.
NUPRC reported in May that the country has divested assets worth $21 billion, while annual upstream capital expenditures fell by 78% from $27 billion in 2014 to less than $6 billion in 2022. Oil companies also run the risk of communities suing for past oil spill damages and lost livelihoods, demanding financial compensation. The communities’ arguments might be strengthened by recent developments in Dutch and UK courts.Oil tycoons leave Nigeria’s onshore resourcesAs more and more oil majors become drawn to secure offshore sites, local consortiums are stepping in to fill the void left by their departure from onshore fields.
Not just TotalEnergies is a well-known brand leaving the onshore scene. Shell announced at the beginning of the year that it had reached an agreement to sell its 30% stake in the Nigerian Shell Petroleum Development Company (SPDC) to Renaissance, a group of five companies, four of which were local. In addition to providing additional financing of $1.3 billion to fund SPDC’s share of a joint venture with the government’s Nigerian National Petroleum Corporation (NNPC) and other oil companies to supply the Nigeria Liquid Natural Gas (NLNG) plant, Shell will loan the consortium $1.2 billion to cover funding requirements.
Meanwhile, Norwegian major Equinor triggered the sale of its Nigerian operations to Chappal Energies, a Nigerian energy firm. With the transaction, the Norwegian energy company’s three-decade direct collaboration in Nigeria comes to an end. During that time, the business extracted over a billion barrels of crude oil from the Agbami field. In September, Italy’s Eni agreed to sell its Nigerian onshore subsidiary Agip Oil Company to local company Oando.
