Indigenous Operators: IOCs’ Divestment to Unlock 500m Barrels of Oil, 3trn Cubic Feet of Gas Reserves in Nigeria

Peter Uzoho

Some indigenous Nigerian oil and gas operators have said the divestment by international oil companies (IOCs) from the onshore and shallow water terrains will help the country to unlock over 500 million barrels of oil reserve and over three trillion cubic feet (TCF) of gas reserve if the transition is well managed by the government.
They also lamented the deliberate under-investment in the industry for the past 15 years, saying that was largely responsible for the persistent decline in Nigeria’s oil production from the high of 2.6 million barrels per day (bpd) to now 1.5 million bpd.

They equally demanded the introduction of a robust and up-to-date regulatory architecture as well as a review of the Petroleum Industry Act (PIA) to meet the demand of the industry that has grown from less than less than 15 operators to now 50, in addition to the challenges of energy transition and associated funding constraints.

The speakers including the Chief Executive Officer of Aradel Holdings, Mr. Adegbite Falade; Chief Operating Officer of Seplat Energy, Mr. Sam Ezugworie; Chairman/Chief Executive Officer of Britannia-U, Mrs. Uju Ifelika; and Chief Executive Officer of Heirs Energies Limited, Mr. Osayande Igiehon, made the assertions in Lagos at the Pre-conference Workshop of the Nigerian Association of Petroleum Explorationists (NAPE).
The theme of the event was “Leveraging Divestment and Local Content Capacity to Enhance Nigeria’s Oil and Gas Industry: Challenges and Opportunities.”

In his presentation, Falade allayed fears over divestment by the IOCs, noting that divestment is an opportunity that should be embraced and exploited for Nigeria’s benefit.
According to him, “Divestment has the potential to unlock over 500 million barrels of oil reserve and over three trillion cubic feet of gas reserve in Nigeria. So, divestment is not bad for the sector and we need to embrace it.”
He said there has been a deliberate under-investment in the oil and gas industry in the last 15, which is responsible for the production decline being witnessed

The Aradel boss called for the review of the architectural guidelines of the Nigerian oil and gas industry.
He pointed out that the regulators have not scaled up in the past 20 years to meet the demands of the industry that has grown from about 15 operators to 50 operators that are currently existing.
In his intervention, Seplat COO, Ezugworie regretted that Nigeria’s oil production has stagnated at just 1.5 million bpd despite the increase in the number of indigenous operators.
He said the IOCs were leaving the onshore and shallow blocks and moving to the offshore and deepwater operations.

Ezugworie stressed the need for Nigeria to maximize the divestment opportunity by building more local firms that have capacity like the ‘Big 5’ in order to grow the sector.
The Big 5 are Seplat, Aradel, First E& P, Waltersmith and Platform Petroleum.
While questioning whether the PIA has attracted any major investment in the industry since it came into effect in 2021, the Seplat COO submitted that there must be Key Performance Indicators (KPIs) to measure the success of regulations in the industry.

Contributing, CEO of Britannia-U, Ifejika, advocated that the industry regulators must be proactive enough to address emerging challenges in the Nigerian upstream petroleum sector.
She argued that only seven companies have recorded success out of the 24 that there awarded marginal fields during the 2003/2004 bid round.
She added that even the last marginal field bid round conducted in 2020 has not produced any good result as none of the companies that were awarded fields has achieved first oil.
Ifejika, however, called on the government to arrest the investment and production decline in the oil and gas industry by putting in place favourable fiscal terms and adoption of pragmatic regulatory approach.

In his presentation, Chief Executive Officer of Heirs Energies Limited, Mr. Osayande Igiehon, said Nigeria’s oil and gas industry was experiencing a remarkable transition from the IOCs to indigenous players, noting that the wave of divestment which started 20 years ago has grown both in size and complexity.
Represented by the Chief Financial Officer of Heirs Energies, Mr. Sam Nwanze, Igiehon stated that with IOCs divesting, local firms have the chance to acquire assets, boosting Nigerian participation and control in the oil and gas value chain.

He said: “This creates opportunity for growth as indigenous players have the opportunity to better balance risk and growth. Local content policies provide more jobs for Nigerians and improve workforce capabilities, reducing reliance on foreign expertise.
“With divestment, there is room for indigenous companies to adopt and invest in new technologies, enhancing operational efficiencies and cost savings.
“The need for local suppliers, service providers, and subcontractors grows, strengthening the wider Nigerian oil and gas ecosystem.”

However, Igiehon mentioned that the journey of leveraging divestment and local content capacity in the country’s oil sector has been fraught with challenges.
He listed the challenges as funding and financial constraints, explaining that access to capital for local companies to acquire assets has been a challenging one.
He added that lack of financial discipline and management as well as technical and operational capacity gaps were also some of the challenges impeding the country’s capacity to maximize the opportunities in divestment.

The Heirs Energies CEO therefore, emphasized the need for improved infrastructure to support local operators, from transportation to processing facilities and to adjust the commercial shift particularly for gas.