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Indigenous oil companies boost production as majors retreat

By on September 20, 2013

Nigerian-owned oil companies are boosting their share of the country’s crude output by taking up fields in restive areas as international energy companies retreat, according to a study by Ecobank Research.

For more than five decades, Royal Dutch Shell, Exxon Mobil Corporation, Chevron Corporation, Total SA and Eni SpA pumped about 97 per cent of the country’s output, according to figures provided by the Nigerian National Petroleum Corporation.

Bloomberg reported on Wednesday that that fell to 90 per cent in 2006 and was set to shrink further to about 60 per cent in five years “if the current divestment trend continues,” a London-based energy analyst for Ecobank Research, Rolake Akinkugbe, said in an e-mailed response to questions.

Shell and Chevron are selling assets that can produce 300,000 barrels a day from nine onshore and shallow-water oil leases.

Stakes in 13 other fields have been sold jointly by Shell, Total and Eni since 2010, with most of them bought by smaller Nigerian companies, including Seplat Petroleum Development Company, First Hydrocarbon Limited and Neconde Energy Limited.

As international energy companies led by Shell and Chevron give up onshore and shallow water fields plagued by persistent unrest, violence and crude theft, smaller indigenous companies are taking over, expanding their output capacity.

“These divestments represent the single largest opportunity for indigenous Nigerian firms with the requisite expertise, partnerships and capital to ascend into the league of major upstream players,” Akinkugbe said.

If  they overcome the operational difficulties, they “will become increasingly instrumental” to Nigeria meeting its output target of three million barrels a day by 2020, she said.

Local companies are probably “better off dealing with some of the security challenges in the Niger Delta than the foreign companies,” the Chief Executive Officer, Financial Derivatives Company, a business advisory group, Mr. Bismarck Rewane, said in a telephone interview, adding that it was easier for them to communicate with the communities and win their sympathy.

Nigeria, OPEC’s seventh-largest producer, pumped more than two million barrels of crude a day last month, according to data compiled by Bloomberg.

Eleven local companies, including Seplat, South Atlantic Petroleum, Seven Energy, First Hydrocarbon and Sahara Energy Field have been short-listed to buy the Chevron fields on sale, Lagos-based Africa Oil+Gas Report reported on August 29.