Despite the current downturn in the global oil and gas sector, some indigenous operators in Nigeria are stepping up efforts to snap up more assets as part of their expansion plans, ’FEMI ASU writes
While they are still smarting from the impact of the COVID-19-induced collapse in oil prices and demand, indigenous firms in the country are poised to increase their participation in the nation’s oil and gas industry.
The Nigerian oil and gas industry has in the past two decades seen a surge in the number of indigenous players, buoyed by the Federal Government’s initiatives and divestment of assets by International Oil Companies operating in the country.
A number of indigenous operators have emerged as key players in the industry, with more access to oil and gas assets on the back of the government’s marginal field programme and recent divestments by the IOCs.
In a bid to boost local participation, the Federal Government encouraged the IOCs to surrender their marginal fields for assignment to indigenous concession holders.
A marginal field is any field that has been discovered and has been left unattended for a period of not less than 10 years, from the date of first discovery, or such field as the President may, from time to time, identify as a marginal field, according to the Department of Petroleum Resources.
In 2003, 24 marginal fields were awarded to 31 indigenous firms. This brought about the emergence of a new generation of smaller Nigerian producers, with one of them, Waltersmith Group, inaugurating a 5,000-barrels-per-day modular refinery in Imo State in November last year.
“As it is today, I think probably about half of us are currently in production. If we have about 50 per cent rate of success, I think it is positive. I think it is just for the government to leverage that because those who successfully developed these fields are not going to remain one-field companies,” the Chairman of Waltersmith, Mr Abdulrazaq Isa, told our correspondent in a recent interview.
He said his company took an asset that was abandoned for over 20 years, with reserves of about 17 million barrels, and went ahead to do some exploratory work to ramp up overall reserves to about 24 million barrels.
“We have produced about 12 to 13 million barrels out of it. We then took the risk to build a refinery that has its feedstock on the outstanding level of reserves,” he added.
Niger Delta Exploration & Production Plc said recently that it had recovered over 19 million barrels and over 90 billion standard cubic feet of gas since the first production from its Ogbele marginal field in 2005.
In June 2020, the Department of Petroleum Resources launched the second marginal field bid round for indigenous companies and investors interested in participating in the exploration and production business in the country.
The DPR said in July that over 600 companies had applied to bid for the 57 marginal oil fields made available by the Federal Government.
Earlier this month, the regulator said 161 successful companies had been shortlisted to advance to the next and final stage of the bid round.
In what is the latest divestment in the nation’s oil industry, three IOCs sold their combined 45 per cent interest in Oil Mining Lease 17 and related assets in the Eastern Niger Delta to TNOG Oil and Gas Limited, an integrated energy company founded by Mr Tony Elumelu.
Shell Petroleum Development Company of Nigeria Limited, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited assigned their interests of 30 per cent, 10 per cent and five per cent respectively in the lease to TNOG Oil and Gas.
TNOG Oil and Gas is a related company of Heirs Holdings Limited and Transnational Corporation of Nigeria Plc, both of which have Elumelu as their chairman.
The deal, which was announced last Friday, was described by Heirs Holdings as one of the largest oil and gas financings in Africa in more than a decade, with a financing component of $1.1bn provided by a consortium of global and regional banks and investors.
The company said in a statement that TNOG Oil and Gas would have sole operatorship of the asset.
OML 17 has a current production capacity of 27,000 barrels of oil equivalent per day and, 2P reserves of 1.2 billion barrels of oil equivalent, with an additional one billion barrels of oil equivalent resources of further exploration potential, according to the statement.
“The acquisition of such a high-quality asset, with significant potential for further growth, is a strong statement of our confidence in Nigeria, the Nigerian oil and gas sector and a tribute to the extremely high-quality management team that we have assembled,” Elumelu said.
An energy expert and a former board member of the Nigerian National Petroleum Corporation, Alhaji Abdullahi Bukar, told our correspondent that the local operators could increase their contribution to total oil and gas production in the country if given access to more reserves.
“We have sufficient technical knowledge to do anything. In fact, the tragedy is that because we have not allowed our people to develop that much, we see other countries going to Europe and other places for people to develop them when they could come to Nigeria, where we will be able to do it cheaper and then we start to produce all the equipment and other things we needed,” he said.
He described the divestment as a good development, saying, “I think Heirs Holdings and Transcorp should move very fast, and turn those reserves into economic benefits for the country as quickly as possible.
“I hope they will also be able to not just do it as a commodity but also refine it in-country. Nigeria should not just produce raw materials and export them as raw materials; we should add value to them.”
While the marginal field programme has put more assets in the hands of local players, the recent divestments by the IOCs are largely responsible for the increase in oil production from them.
Indigenous operators that have acquired divested assets include Frontier Oil Limited, Seplat Petroleum Development Company Plc, First Hydrocarbon Nigeria Company Limited, Neconde Energy Limited, ND Western Limited, Oando Plc, Aiteo Eastern E&P Company, Eroton Exploration & Production Company and First Exploration & Petroleum Development Company Limited.
In November last year, First E&P announced the commencement of oil production from the Anyala West field in OML 83 and 85. The company had in June 2015 acquired Chevron’s 40 per cent stake in the two oil blocks.
ND Western said in July last year that it had a very ambitious growth plan to take its gas production to above 510 million standard cubic feet per day in the next few years, and grow oil production to above 60,000 barrels per day in our medium-term plan.
“Our plan is to build robust midstream and downstream businesses and certainly, we will acquire more assets as the opportunity become available,” its Managing Director/Chief Executive Officer, Mr Eberechukwu Oji, said in an interview with our correspondent.