How Six Oil Coys Earned $38.5bn Revenue in 12 Months Amid Drop in Sector’s Contribution to GDP

Emmanuel Addeh in Abuja

Six key operators, including four International Oil Companies (IOCs) and two indigenous oil and gas firms recorded a total revenue of $38.5 billion in 2023, a new document released by the federal government has shown.

The newly-launched ‘Compendium for Investment in Nigeria’s Oil and Gas Industry’ by the Ministry of Petroleum Resources indicated that despite the huge revenue, the oil sector’s contribution to Nigeria’s Gross Domestic Product (GDP) dropped from 9.77 per cent in Q3 in 2019 to 5.48 per cent in Q3, 2023.

Nigeria largely depends on oil and gas export for its foreign exchange earnings, although the sector has struggled for about four years in terms of ramping up crude oil production as well as ensuring the seamless working of the downstream.

According to the document, the IOCs, including Shell, raked in $10.5 billion; ExxonMobil made $9.2 billion; Chevron made a total revenue of $8 billion, while Total Energies earned a gross revenue of $7.5 billion.

On the other hand, the two Nigerian oil companies profiled in the report showed that Seplat earned $1.8 billion, while Oando’s revenue was $1.5 billion in the 12 months of last year. However, these figures were before the recent rash of divestments from the IOCs to the Nigerian oil firms.

In all, despite the $38.5 billion revenue, Shell which controls 27 per cent of the oil market among the six companies, made a net profit of $1.8 billion; ExxonMobil earned $1.6 billion; Chevron’s was $1.2 billion, while Total Energies earned a net profit of $900 million.

Seplat’s net profit was $300 million, according to the document, while Oando’s was $250 million, with the entire net profit by the six companies hitting $6.050 billion during the period.

Aside Shell’s 27 per cent share of the oil sector, ExxonMobil controlled 24 per cent during the period under review; Chevron had a share of 18 per cent; Total Energies’ share of the market was 15 per cent, while Seplat and Oando Plc had 5 per cent market share apiece.

“The oil and gas sector experienced a robust recovery in 2023, with total revenue reaching $38.5 billion, a significant increase compared to previous years. This growth is attributed to rising global oil prices production increase and capacities.

“The total net profit for the sector rose to $6.05 billion, reflecting improved operational efficiencies and cost management strategies. Companies like Shell, ExxonMobil, and Chevron continue to dominate the market, collectively accounting for nearly 70 per cent of total revenue.

“Indigenous players, such as Seplat and Oando, are gradually increasing their market share and earnings, focusing on local production and distribution. This shift reflects a growing trend towards local content development and self-sufficiency,” the document added.

Besides, the federal government data showed that crude oil production has been dipping since 2015, hitting 2.2 million barrels per day that year; 2 million bpd in 2016; 2.1 million bpd in 2017; 2.3 million in 2018; 2.2 million bpd in 2019 and 1.8 million bpd in 2020.

In the same vein, in 2021 the slump in crude oil production continued, dropping to 1.6 million bpd; 1.5 million bpd in 2022 and 1.4 million bpd in 2023.

On the challenges impacting earnings and hobbling activities in the sector, the government document blamed the regulatory environment; impact of external factors; increasing environmental concerns, among others.

“The complex regulatory landscape and policy changes can impact operational efficiency and investor confidence, affecting earnings. Dependence on global oil prices means that external economic factors, such as geopolitical tensions and shifts in demand, can significantly influence revenues.

“The scrutiny on necessitate investments in sustainable technologies, environmental practices may potentially impacting short-term earnings,” it added.

In all, the report stated that with ongoing investments in exploration and production, alongside a shift towards cleaner energy, the sector is expected to continue a growth trajectory.

In addition, it said that companies will increasingly focus on sustainable practices and technologies, which may reshape their earnings structures in the coming years.

It noted that as the government continues to encourage local content participation, indigenous oil and gas companies are expected to play a larger role in exploration.

On future oil production outlook, the document recommended the application of Artificial Intelligence (Al) to optimise exploration and production processes while Enhanced Oil Recovery (EOR) techniques should be deployed to increase oil recovery from depleted reservoirs.

Noting that oil exports are a vital source of foreign exchange, essential for stabilising the naira and supporting imports, the report stated that oil exports significantly affect Nigeria’s balance of payments, making the economy vulnerable to global oil price shocks.