The diverse and divergent views expressed by experts at the just concluded Nigerian International Energy Summit (NIES2022) in Abuja, with the theme “Strategies for Confronting the Energy Transition”, vividly exposed the uncertain future of crude oil exploration and production in Nigeria. One thing that became glaringly obvious from all speakers was the move by what are regarded as International Oil Companies (IOCs) operating in Nigeria in selling off their assets under all manner of excuses and leaving the country.
One of the experts at the event and former Minister of Petroleum Resources, Dr Ibe Kachikwu said “divestment of assets by some IOCs is beyond the global push for energy transition”. Kachikwu noted that the IOCs, including Shell and Exxon Mobil have divested some of their Nigeria assets in the past few years, citing the need to diversify their portfolios, but promptly added that “there is need for the companies to be engaged in further discussions regarding the move.”
The Managing Director/CEO of Nigeria National Petroleum Corporation (NNPC) Limited, Mele Kyari, also at the NIES2022 said bluntly that the “International Oil Companies are divesting. They are leaving our country. That is the best way to put it”. He added however that “they are not leaving because opportunities are not here but because companies are shifting their portfolios where they can add value and not just that, but where they can also add to the journey towards carbon net-zero commitment.”
Put differently, these ‘oil majors’ are leaving Nigeria in droves because compared to other environments, the country is no longer conducive enough for them, and for the ‘new businesses’ they might diversify into (including clean/renewable energy transactions).This development, to say the least, is portentous for Nigeria which, in the short-to-mid-term, will still depend heavily on earnings from crude oil production and export for the running of its economy. Unfortunately, this exodus of the IOCs is sector-wide, covering upstream, midstream and downstream operators. Thus, the ombudsman of the extractive industry, the Nigerian Extractive Industries Transparency Initiative (NEITI) says the recurrent issues of oil theft and vandalism were some of the reasons responsible for the gradual divestment by IOCs and big firms in the downstream sector. Executive Secretary of NEITI, Dr Ogbonnaya Orji at NIES2022 in Abuja lamented that Nigeria lost 260.15 mbbls to crude theft in the last five years.
He said “this is a huge problem that is currently impacting very negatively and seriously, especially on our downstream and midstream operations,” stressing that many IOCs and big firms are gradually divesting in the downstream sector because the problems of oil theft, vandalism, and deliberate sabotage have been quite difficult to manage.
Giving some insight into its virtual exit from Nigeria, Texas-based IOC, Exxon Mobil said it was choosing to sell the entire ‘shallow water assets’ of one of its Nigerian subsidiaries, Mobil Producing Nigeria Unlimited, to Seplat Energy, arguing that the sale would support the company’s divestment strategy. Specifically, the sale agreement includes Mobil Development Nigeria and Mobil Exploration Nigeria’s equity ownership of Mobil Producing Nigeria Unlimited, translating to a 40 percent stake in four mining licenses. This translates to more than 90 shallow-water and onshore platforms and 300 producing wells.
On its part, in 2021, Royal Dutch Shell announced its plan to offload onshore Nigerian oil assets in a bid to move to cleaner energy. Shell said it was discussing with the federal government to sell its onshore oil assets in the country. The deal has since come through.