Nigeria, Africa’s largest oil producer, has been overlooked by two of the biggest American oil companies in their 2024 spending plans. Chevron and ExxonMobil have announced their budgets for next year, which include investments in new oil and gas projects around the world, but none in Nigeria.
The two oil majors have recovered from the 2020 crisis with bumper cash flows in 2021 and are making plans to boost their capital spending next year. Capital discipline and higher returns to shareholders are expected to remain top priorities.
However, Nigeria is missing from their list of priority areas, despite having several major projects in the country that have been stalled for years. Chevron ignored Nigeria’s 100,000-barrels-per-day (bpd) Nsiko offshore deepwater project, while ExxonMobil was silent about Nigeria’s 80,000bpd Bosi oil field, the 110,000bpd Uge deepwater project, and the Owowo oil reserve field.
Nigeria is not the only country that has been snubbed by the US oil giants. They have also reduced their presence in other African countries, such as Angola and Equatorial Guinea, as well as in the North Sea and the Gulf of Mexico. Instead, they have shifted their focus to the Americas, especially the US shale and the Guyana offshore discoveries, where they have lower costs and higher returns.
The decision by Chevron and ExxonMobil to leave Nigeria out of their 2024 budgets reflects the challenges that the country faces in attracting investment to its oil and gas sector. Nigeria has been struggling with insecurity, oil theft, vandalism, regulatory uncertainty, fiscal disputes, and a lack of infrastructure. These factors have deterred many international oil companies from developing their assets in Nigeria and have prompted some of them to sell their stakes to local or regional players.
Nigeria is not alone in facing these difficulties. Other oil-producing countries in Africa and elsewhere have also seen a decline in investment from the US and European oil majors, who have been under pressure from shareholders and environmental activists to reduce their carbon footprint and transition to cleaner energy sources. Some of these countries have tried to lure investors by offering incentives, such as lower taxes, longer contracts, and more flexible terms.
However, Nigeria has not been able to do the same, due to its complex and outdated legal framework, which has been pending for over a decade. The Petroleum Industry Bill (PIB), which aims to overhaul the sector and make it more attractive and competitive, has been stuck in the parliament for years, amid political wrangling and vested interests. The bill is expected to be passed this year, but it is unclear if it will address the concerns of the investors and the host communities.
Despite the bleak outlook, some analysts believe that Nigeria still has the potential to revive its oil and gas industry, if it can implement the necessary reforms and resolve the security and environmental issues. Nigeria has an estimated 37 billion barrels of proven oil reserves and 200 trillion cubic feet of gas reserves, which could provide a source of revenue and energy for the country and the region. Nigeria also has a large domestic market and a strategic location, which could make it a hub for gas exports and regional integration.
Moreover, Nigeria still has some partners who are willing to invest in its oil and gas sector, such as China, India, and some African countries. These partners have different motivations and expectations than the US and European oil majors and may be more tolerant of the risks and challenges that Nigeria poses. They may also be more interested in developing Nigeria’s gas resources, which have been largely untapped and underutilized, and which could play a key role in Nigeria’s energy transition and economic diversification.
Therefore, Nigeria still has a chance to turn its oil and gas sector around, if it can seize the opportunities and address the obstacles that it faces. The passage of the PIB could be a catalyst for this change if it can create a conducive and competitive environment for investment and development. Nigeria also needs to improve its security and governance and foster a more inclusive and sustainable approach to its oil and gas resources. By doing so, Nigeria could regain its position as a leading oil and gas producer in Africa and the world.
Source: BusinessDay
