By Gideon Osaka
The recent approval of four oil assets divestment by the Nigerian government has further reinforced the future plans of international oil companies (IOCs) sending mixed signals that could impact the oil sector and economy at large both positively and negatively.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in October announced the approval of the assets sale which its Chief Executive Officer, Gbenga Komolafe, disclosed as Mobil Producing Nigeria Unlimited (MPNU) to Seplat Energy Offshore Limited, Equinor Nigeria Energy Company Limited to Project Odinmin Investments Limited, Nigerian Agip Oil Company Limited to Oando Petroleum and Natural Gas Company Limited and TotalEnergies EP Nigeria Limited to Telema Energies Nigeria Limited.
In recent years, IOCs have been divesting significant portions of their onshore and shallow water assets in Nigeria, part of a broader retreat by the oil majors as they focus on newer, more profitable operations and renewable energy projects. The trend is accelerating as the international firms, though not entirely leaving Nigeria, are focused on deep-water projects in Africa’s largest oil producer.
Valuechain reports that the current wave of divestments is driven by a combination of global factors. IOCs are under increasing pressure from shareholders and environmental advocates to reduce their carbon footprints and align with global climate goals. Nigeria’s onshore operations, plagued by oil theft, pipeline vandalism, and community conflicts, have become less attractive compared to the more stable deep-water operations and investments in renewable energy.
“This is not just a local issue; it’s part of a global energy transition,” says Dr. Ifeanyi Okeke, an energy economist. “Nigeria, like other oil-dependent nations, must adjust to a world where oil is no longer king,” he emphasised.
According to the NUPRC boss, Gbenga Komolafe, “What the industry has experienced is portfolio rationalisation which is not uncommon in other jurisdictions. Divestments give opportunities for more investments and increased local participation in the upstream. We are therefore confident that new asset holders will conduct operations in a vigorous and business-like manner for optimal value creation for enhanced energy security and sustainability in the near term.”
The divestment details
Before the recent approval, Exxon Mobil, Equinor, Italy’s Eni and TotalEnergies had all struck deals to offload onshore and shallow water blocks to domestic producers for more than a decade. Last year, ExxonMobil announced its plan to sell four onshore oilfields to Seplat, an indigenous energy company, for about $1.3bn. The acquisition was originally planned to be consummated by mid-2022 but was delayed. Norway’s Equinor said last November, it entered into an agreement to sell its local business to Chappal Energies Mauritius Ltd. The deal was completed through Project Odinmim, a special-purpose vehicle owned by the Mauritian company. Eni, announced in September last year that it would sell its onshore subsidiary to Oando, a local company.
The divestments align with Nigeria’s broader objectives to boost local participation and enhance operational efficiency in the oil sector. For example, the completion of the ExxonMobil-Seplat acquisition will significantly strengthen Seplat’s position, increasing its production capacity by 186% and expanding proven oil reserves by 170%. The deal underscores a shift toward sustainable energy strategies, with opportunities for developing Nigeria’s vast gas reserves. Similarly, Oando’s acquisition of NAOC would double its stake in key assets, including 40 oil and gas fields, gas processing plants, and pipelines. This will position the company as a dominant player in Nigeria’s energy transition efforts. Equinor and TotalEnergies transactions further embed Nigerian companies in controlling strategic assets, ensuring local expertise and revenue circulation within the country.
Although the divestment of Shell Petroleum Development Company Limited’s assets to Renaissance Africa Energy Company Limited could not scale regulatory test, as recently announced by the regulator, the interest expressed by Shell in divesting from onshore fields remains strong as the oil giant continues to provide the regulator with all the required information to close out the sale. Shell on January 16 announced its exit from Nigeria’s onshore and shallow water operations after agreeing to sell the business to a consortium of five, mostly local, companies, opting to focus future investments in the potentially more lucrative deep offshore fields. NUPRC declined to approve the sale because the Renaissance consortium could not show it could manage the assets.
Overall, the recent divestments have far-reaching positive and negative implications for the economy, local communities, and the future of Nigeria’s energy landscape.
Implications
For Nigeria, where oil revenue accounts for about 80% of government earnings and 90% of foreign exchange, the exodus of major oil companies from mostly onshore and shallow water assets, poses significant economic risks. The divestments could lead to a shortfall in government revenue, increased unemployment, and reduced foreign direct investment in the sector. The exit of major IOCs from onshore operations reflects persistent challenges like pipeline sabotage, theft, and environmental degradation in the Niger Delta.
Local companies like Seplat and Oando Plc are expanding their portfolios, hoping to extract value from assets deemed non-strategic by the IOCs. While this may boost local content and indigenous participation in the sector, concerns remain about the technical and financial capacity of these firms to manage the complex operations.
On the other hand, local oil firms, often the buyers of these divested assets, see opportunity where others see risk. With the international majors stepping back from these onshore and shallow water assets, analysts see an opportunity for local Nigerian players to increase their market share in acquiring these assets. The divestitures are providing an opportunity for local firms to develop the onshore market. They are more likely to hire local talent, giving Nigerians the opportunity to advance to high-ranking positions in the oil and gas industry and boosting the domestic corporate sector as they step into the void.
Onshore oil operations in the Niger Delta have long been associated with environmental degradation and social unrest. With local companies taking over, communities are cautiously optimistic about better engagement and more attention to environmental remediation. Yet, the transition has not been seamless.
“Divestment must not mean abandonment,” warns Nnimmo Bassey, a prominent environmental activist. “The Nigerian government must ensure that these new operators adhere to strict environmental standards and that IOCs fulfill their obligations before exiting.”
Consultancy Westwood Global Energy Group says that the upcoming years will present an exceptional chance for indigenous oil companies to take the lead in onshore and shallow-water exploration, with drilling and production likely to increase at least to the end of this decade.
Still, the departure of IOCs from onshore does not mean they are exiting the country altogether. Offshore sites – which lack the security challenges of onshore – are increasingly attractive to the majors. Industry data shows that about 13bn of Nigeria’s over 37bn barrels of proven oil reserves are in the deepwater sector.
TotalEnergies has pledged to invest, with a focus on offshore oil projects and gas production. Shell is looking at a $5bn offshore oil investment opportunity in Nigeria’s Bonga North offshore project and has pledged to spend a further $1bn in five to 10 years to boost natural gas output for domestic supplies and exports.
The divestment trend underscores the urgent need for Nigeria to diversify its economy and develop alternative energy sources. The government has recently launched initiatives to promote gas as a transition fuel, positioning Nigeria as a regional hub for Liquefied Natural Gas (LNG) and Compressed Natural Gas (CNG) production.
Additionally, renewable energy projects are gaining traction, with investments in solar, wind, and hydroelectric power. While these efforts are commendable, experts caution that the transition will require significant investment, policy consistency, and stakeholder collaboration.
The ongoing divestments in Nigeria’s oil and gas sector are both a challenge and an opportunity. They highlight the vulnerabilities of an oil-dependent economy but also present a chance to rethink Nigeria’s energy future. With the right policies and investments, Nigeria can turn this period of transition into a catalyst for sustainable growth and development.
As the country navigates this critical phase, the stakes are high, but so too are the possibilities for a more diversified and resilient energy landscape.