In recent years, a shift has quietly unfolded within Nigeria’s oil industry: an exodus of international oil companies from various parts of their operations. The latest development came on Tuesday, January 16th, when Shell announced the sale of its onshore oil production business in Nigeria. The deal involves the sale of the 68-year-old Shell Petroleum Development Company of Nigeria (SPDC) to a consortium of local and international companies for a minimum of $1.3 billion. This acquiring consortium, known as Renaissance, comprises Switzerland-based Petrolin and four Nigerian oil producers: ND Western, Aradel Energy, First E&P, and Waltersmith.
“While Shell is not entirely exiting Nigeria, this sale marks the conclusion of an era for the company, which has been a cornerstone of the country’s oil industry for nearly a century,” stated Zoë Yujnovich, Shell’s integrated gas and upstream director.
Shell’s decision to divest from its onshore business reflects a broader trend among international oil majors operating in Nigeria. Equinor, a Norwegian firm, spent much of last year divesting its Nigerian entity, culminating in its sale to the little-known local company, Chappal Energies, in November. This move signaled the end of Equinor’s over three-decade-long presence in Nigeria. The pattern extends further.
In September, Italy’s Eni announced plans to sell its onshore subsidiary to Oando, another local entity. Prior to that, China’s Addax sold its four oil blocs to the state oil company NNPC. Additionally, US giant ExxonMobil is in the process of selling four onshore oilfields to Seplat, a Lagos and London dual-listed energy company, for approximately $1.3 billion.
The common thread across these divestments is the withdrawal from onshore and shallow water assets. These areas have been plagued by theft, vandalism, and environmental concerns, making them increasingly unattractive to international operators. Consequently, oil majors are redirecting their focus to offshore assets, which offer greater profitability and reduced operational risks. Nina Koch, Equinor’s senior vice president for Africa operations, described this move as part of the company’s “strategy to optimize its international oil and gas portfolio and focus on core areas.”
Amidst the exodus of international players, opportunities emerge for local companies to expand their market share. These firms, lacking the capital for offshore investments, find potential in acquiring distressed assets. Notably, Dangote Group, with its $20 billion refinery, stands to benefit from reduced competition. However, challenges persist for all stakeholders.
Dangote and other local players must navigate complex operational and environmental issues that have plagued legacy companies. The departure of international oil majors signals a shifting landscape in Nigeria’s oil sector, with implications for both local and global stakeholders. As the industry evolves, stakeholders must adapt to seize opportunities and address ongoing challenges to ensure sustainable growth and development.
Moving forward, the Nigerian government faces the task of fostering a conducive environment for investment while addressing the issues that have driven international oil companies away. Enhancing security measures, improving regulatory frameworks, and promoting sustainable practices are essential steps to attract investment and stimulate growth in the oil sector.
Furthermore, the transition presents an opportunity for Nigeria to strengthen its domestic capabilities and promote indigenous participation in the oil industry. By empowering local companies and fostering innovation, Nigeria can build a more resilient and inclusive oil sector that contributes to long-term economic prosperity and social development.
While the departure of international oil companies signifies a significant shift in Nigeria’s oil landscape, it also opens new avenues for local players and underscores the need for strategic reforms. By embracing change and harnessing local expertise, Nigeria can chart a path towards a more sustainable and prosperous future in its oil industry.
