Nigeria’s top indigenous energy solutions provider, Oando PLC, has announced that Nigerian Agip Oil Company (NAOC), an Eni subsidiary, has been successfully acquired.
This momentous occasion, which was marked by a signing ceremony in London, ushers in a new era for the Nigerian energy industry.
For local actors like Oando, who, 68 years after oil was discovered in Oloibiri, are now in a position to lead and manage oil and gas assets that were previously controlled by international oil companies, it’s a watershed moment. The deal, which was first revealed in September 2023, looks to improve both the company’s and the industry’s prospects.
The timing of this deal is very odd – it was made precisely ten years after Oando acquired ConocoPhillips’ Nigerian stake for $1.8 billion, making the business a joint venture (JV) partner on the asset with NNPC E&P Ltd (NEPL) and NAOC. Oando’s daily oil production increased from about 4,500 barrels to 50,000 barrels as a result of the ConocoPhillips agreement.
Wale Tinubu, Group Chief Executive of Oando PLC, commented on NAOC’s takeover, saying:
“Today’s announcement is the culmination of ten years of hard work, resilience, and an unwavering belief that we would realise our ambition. It is a win, not just for Oando, but for every indigenous energy player as we take our destiny in our hands. This is a new dawn for the Nigerian energy sector, and we are confident that indigenous companies will play a pivotal role in this next phase of the nation’s upstream evolution. With our assumption of the role of operator, our immediate focus is on optimizing the assets’ immense potential in contributing to our strategic objectives, whilst complementing the nation’s plan to boost production outputs.
Looking to the future, we will continue to pursue strategic opportunities that provide enhanced growth and value creation for our stakeholders, particularly in clean energy, agri-feedstock sector, as well as infrastructure and mining.”
As a result of the transaction, Oando’s ownership stake in the Joint Venture assets and infrastructure increased to 40%. These include the Kwale-Okpai phases 1 & 2 power plants (with a total nameplate capacity of 960MW), the Brass River Oil Terminal, approximately 1,490 km of pipelines, forty discovered oil and gas fields, of which twenty-four are currently producing, approximately forty identified prospects and leads, twelve production stations, and three gas processing plants.
Additionally, it will greatly increase the company’s production reserves, which are currently at 505.6MMboe, to 1.0Bnboe.
International oil corporations that operate in Nigeria have been pursuing divestment strategies for the past ten years, with an emphasis on getting out of shallow water and onshore properties while holding onto interests in deep water. Due to variables like decreasing output and rising operational risks, the trend points to an IOC exodus from mature African basins.
This is causing a movement towards frontiers like Namibia and Guyana, where there are chances for less hazardous offshore ventures and less carbon-intensive projects. Due to a combination of underinvestment, sluggish exploration activity, and widespread oil theft and sabotage in the unrest-plagued Niger Delta, Nigeria’s oil production has significantly fallen short of its capacity to produce nearly 2 million barrels of crude and condensate annually. The nation produced 1.47 million b/d in May 2024, as per S&P Global Commodity Insights’ Platts OPEC Survey.
Dr. Ainojie Irune, Executive Director of Oando PLC & Chief Operating Officer of Oando Energy Resources, stated that domestic businesses are in a good position to revitalize the industry in an interview with S & P Global Commodity Insights.
“There is no doubt that indigenous capacity exists if you look at the local companies that have stepped forward,” he stated.
Following the successful completion of Eni’s asset sale to Oando, which established a precedent for the industry, we expect additional asset divestments as other indigenous companies step up their efforts to meet the necessary legal, financial, and regulatory requirements for the deal to be completed.
To name a few, Seplat Energy announced in February 2022 that it would buy ExxonMobil’s entire stake in its shallow water business, Mobil Producing Nigeria Unlimited (MPNU); Chappal Energies, an indigenous player, announced in November 2023 that it had entered into a sale agreement with Norwegian oil company Equinor for its Nigerian entity; and Shell agreed to sell the Shell Petroleum Development Company of Nigeria Limited (SPDC), its Nigerian onshore subsidiary, to Renaissance Consortium for $2.4 billion.
It is anticipated that these divestment agreements will bring in new money, technology, and experience, all of which will contribute to higher oil production, lower carbon emissions, and more job possibilities for Nigerians in the sector. When it comes to community ties, operational flexibility, and local knowledge, Indigenous businesses have a clear advantage. This advantage presents unmatched chances to maximize value generation within the industry when combined with global best practices.
“In my personal opinion, having indigenous players will definitely improve issues around fairness and this need to engage in sabotage and theft,” Dr. Irune stated in reference to the involvement of Indigenous people. Independents working together can create an oil industry that is more unified and cooperative, he claimed.
Gbenga Komolafe, the chief executive of the Nigerian Upstream Petroleum Regulatory Commission, stated the following during a May event in Abuja: “Our view as a commission is that the IPPG and other prospective indigenous players should perceive the IOCs’ divestments in some of the upstream assets as an opportunity rather than a threat to the development of the Nigerian upstream petroleum sector.”
He continued, “It is undoubtedly the correct time to turn inwards in the sector in order to increase the capabilities of local content in value addition and optimize the development of the country’s hydrocarbon resources. As a result, we encourage Indigenous players throughout the value chain to use their skills and innovation to promote vitality and capacity utilization in the business.”
The future seems bright for Nigeria and Africa as a whole, as well as for Oando and its stakeholders. This deal generates cash flow immediately and has the potential to have a major medium-term impact on both the company’s cash flow and the Nigerian economy as a whole. Analysts are equally upbeat about this development’s possible advantages, especially its economic ones and its increasing participation in local content. In Nigeria’s oil and gas sector, Oando continues to break new ground while surpassing expectations.
The IOC noted that NAOC Ltd.’s participating interest in SPDC JV (Shell Production Development Company Joint Venture-operator Shell 30%, TotalEnergies 10%, NAOC 5%, NNPC 55%) is not included in the transaction’s perimeter and will remain in Eni’s portfolio as the Oando-Eni deal comes to an end with Eni fully divesting from its Nigerian subsidiary, NAOC.
