Nigeria Needs Strong Fiscal Policies to Retake Oil Industry Hub Position-Expert

The executive chairman of the African Energy Chamber (AEC) NJ Ayuk, has advised Nigeria to overhaul existing fiscal policies to return its oil and gas industry into significance.

Ayuk, expressed deep worries that Nigeria, a previous bright spot on big oil and gas investors’ radar screens, has dimmed substantially as investor attention is increasingly drawn to new and emerging developments in Namibia, Ivory Coast, Angola, and the Republic of Congo.

With two-thirds or more of its revenue coming from oil, investor flight is a serious problem for Nigeria, he said.

Ayuk drew the country’s attention to the fact that big foreign players, including TotalEnergies and Shell, are exiting or shifting their priorities in Nigeria, rattled by a variety of deleterious forces: an uninviting regulatory environment, lack of transparency, safety issues, vandalism, and theft, among other factors.

He noted that for a country whose economy is dependent on fossil fuels, this divestment by majors, totaling around £17 billion since 2006, is catastrophic and that Nigeria’s 37 trillion barrels of reserves can do the country no good underground.

Among those looking to pull out of the country, at least in part, is France’s TotalEnergies. The company is seeking to sell its share of Shell Petroleum Development Company of Nigeria, Limited (SPDC), although it will continue to have 18 per cent of its investments in Nigeria.

TotalEnergies Chief Executive Officer (CEO), Patrick Pouyanne said, his company hasn’t explored for oil in Nigeria for 12 years, explaining, “There is always a new legislature in Nigeria about a new petroleum law. When you have such permanent debates, it’s difficult for investors looking for long-term structure to know what direction to go,” he added.

TotalEnergies’ stance highlights the obvious investors want predictable environments and simple, trustworthy systems of regulation. A dearth of these factors seems to have trumped the fact that Nigeria yet contains large reserves that could be tapped.

Five global oil companies are still working in the country, but three of those Shell, Eni, and ExxonMobil are selling in-country assets valued at £1.8 billion, £4 billion, and £11.9 billion, respectively.

Both Shell and Eni have stated an intent to continue operating in Nigeria’s offshore sector, and ExxonMobil has expressed a commitment to continued investment in Nigeria.

Nigerian companies such as Seplat, Aiteo, and Eroton have moved quickly to buy divested assets. So has the Nigerian government, which has been named top bidder for 57 oilfields and granted licenses to 130 firms for development.

“I am pleased to see indigenous companies seizing these opportunities created by divestments. I also urge them to take serious measures to control emissions and limit flaring, as large international firms have. In doing so, they will be taking care of their own families, neighbors, friends, and fellow citizens, while building top-notch reputations.” said Ayuk.

He advised that large or small companies Nigeria must never choose one or the other and that International oil companies, national oil companies, independents, and indigenous companies all have important roles to play in Nigeria’s economic growth.

He warned that Ivory Coast, Namibia, the Republic of Congo, and Angola are drawing investors’ attention away from Nigeria.

He went further to inform that Shell is pursuing deepwater blocks in Ivory Coast for exploration, while large Italian firm Eni has just added offshore Block CI-205 to its vast Murene Bailene discovery of 2021.

To him, “Production from the Baleine discovery has shot Ivory Coast’s production to 30,000 barrels per day (bpd), a number that is expected to rise an astonishing 556% to 200,000 bpd by 2027. All of this is happening while Ivory Coast is successfully emphasizing carbon-reducing technologies and natural gas as a transition fuel.

“Overseas investment has also spurred significant recent discoveries in Namibia, earning the country the nickname, “new Guyana.” (That South American country’s crude oil production soared by a yearly average of 98,000 bpd from 2020 to 2023, making Guyana the third-fastest growing non-OPEC oil-producing country.)

Notable among recent Namibian discoveries is TotalEnergies’ Venus Discovery, for which the French major is seeking approval to move ahead by the close of 2025. Venus is expected to produce up to 180,000 bpd of oil.”

“TotalEnergies is also looking to invest $600 million in exploration and production in the Republic of Congo’s Moho Nord deep offshore field this year. As I have said before, this kind of investment is evidence that the company is in the Republic of Congo to stay.

“Angola, too, has become a major investment site for TotalEnergies. The firm’s  CEO has said it will invest $6 billion in energy in Angola, as “a country with a more stable policy framework,” he added.

Ayuk, however, observed that March 2024 brought some much-needed federal policy reforms to Nigeria’s petroleum industry in the form of presidential executive orders and policy directives. The reforms are aimed at improving the country’s investment environment and reinvigorating growth in its petroleum industry.