Uche Cecil Izuora
Top world crude producer companies, Shell and ExxonMobil are exerting greater influence in Nigeria’s deepwater exploration as Nigeria pushes to rebuild its energy industry from the ground up.
Shell has doubled down on Nigeria’s deepwater sector, taking a final investment decision on Bonga North and pursuing Bonga South West.
Bonga North is expected to deliver peak production of 110,000 barrels per day, with first oil by the end of the decade. Bonga South West has been stalled for years, but Abuja is now using targeted incentives to push the project toward a final investment decision.
ExxonMobil is also moving back into growth mode as it has advanced plans for Usan, Owowo and Bosi, with potential investments running into the tens of billions of dollars if the larger projects move ahead.
For much of the past decade, the dominant story was international oil companies selling onshore and shallow-water assets, reducing exposure to theft, sabotage and regulatory uncertainty. Now the focus is moving offshore, where security risks are lower, project sizes are larger and new fiscal terms can make development more attractive.
Nigeria is presenting itself as a major gas province with long-term export ambitions. The government is pushing foreign investors to look at gas not only as a domestic fuel, but as the backbone of industrial growth, regional power supply and future LNG exports.
The Ajaokuta-Kaduna-Kano pipeline and the Obiafu-Obrikom-Oben pipeline are key to that strategy. Abuja wants more gas moving into northern Nigeria, deeper supply across the domestic market and eventual links into the West African sub-region and North Africa. Nigeria wants to supply African markets first, then position itself as a more important gas supplier to Europe.
Shell has enlisted nine Nigerian banks to back a new $3 billion finance facility for indigenous oil and gas contractors, addressing one of the industry’s biggest obstacles: access to capital.
At the same time, the Nigerian Content Development and Monitoring Board has launched a program to train more than 10,000 workers for the next wave of upstream projects. Local participation has already climbed from less than 5 per cent before the 2010 Local Content Act to more than 61 per cent with the increase linked to more than $20 billion in domestic investment.
Nigeria is not only trying to recover lost crude production, but working to turn itself into Africa’s dominant refining, gas, capital markets and energy export hub.
The clearest test is the Dangote Refinery, a 650,000-barrel-per-day plant that has already changed Nigeria’s fuel market and is now preparing for what could become the largest IPO in African history.
Dangote Refinery is seeking to raise around $4 billion at a valuation of roughly $40 billion, a listing that would place one of Africa’s most important industrial assets directly inside Nigeria’s capital market.
The IPO would test whether Nigeria’s stock exchange will be able to support a transaction of global scale, and whether local and international investors are ready to value Nigeria as more than a crude-export story.
Dangote has already turned Africa’s largest oil producer into a major refiner. For years, Nigeria exported crude and imported gasoline, diesel and jet fuel. That model weakened the naira, drained foreign exchange and left the country exposed to fuel shortages, and Dangote has started to reverse the damage.
The refinery is now supplying Nigeria’s domestic market and exporting fuel into West Africa and beyond. It has also become a major player in aviation fuel, giving Nigeria a role in refined product markets that used to be dominated by overseas refiners and trading hubs.
But Dangote’s rise has exposed Nigeria’s biggest weakness. The refinery needs reliable crude supply, but Nigeria still struggles to deliver enough of its own crude to feed its flagship plant. Dangote has had to import crude from other producers, including the UAE and Libya, because domestic supply has not always been sufficient or reliable.