Nigerian oil and gas producer Oando will double its production to 50,000 b/d of oil equivalent with the “imminent” closure of its landmark Eni deal, before scaling up to 100,000 boe/d by 2029 thanks to new drilling and security improvements, its chief operating officer said.
Oando’s Chief Operating Officer, Alex Irune, told S&P
Global Commodity Insights at the weekend that the firm intends scaling up to
100,000 bpd by 2029, thanks to new drilling and security improvements.The
Nigerian company’s bid to buy the Italian major’s entire Nigerian upstream
business reflects a major shift in Africa’s biggest oil producer, with local
firms replacing departing International Oil Companies (IOCs).
In the wide-ranging interview, Irune disagreed that
approvals had been an issue. “What we are seeing is a careful, considered
approach to ensuring that the country isn’t materially impacted in a negative
way, ensuring the indigenous players are able to straddle the horse and ride it
into the horizon,” he said.Oando which will become one of Nigeria’s biggest
domestic producers through the agreement is “working through the obligations
under the Share Purchase Agreement” and is “on track” to close the deal this
quarter, Irune said.
S&P said the estimated $500 million acquisition covers
four oil producing blocks OMLs 60, 61, 62 and 63, which comprise a joint
venture alongside the Brass terminal, onshore exploration concessions and power
plants.Eni currently holds a 20 per cent operating stake in the JV alongside
Oando with 20 per cent and state-owned Nigerian National Petroleum Company
Limited (NNPC) with 60 per cent.
Oando, which is run by Adewale Tinubu is currently producing
25,000 bpd, according to Irune, through myriad Nigerian assets. Following the
deal its JV stake will rise to 40 per cent.Production rises over the next five
years will be achieved through drilling programmes on marginal fields,
particularly Qua Iboe (OML 13) and Ebendo (OML 56).“We’ll be drilling four to
five wells on these two fields over the next 18 months. Both fields have easy
access to export terminals, including the Escravos pipeline system in the case
of OML 56,” he emphasised.
The Eni agreement was first signed in September. It follows
home-grown Seplat’s battle to take over ExxonMobil’s onshore business.
Meanwhile, Shell has agreed to sell its onshore assets to a consortium of
mostly local companies and Equinor has signed a deal to divest its assets to
Mauritius-based Chappal Energies.The trend indicates an IOC exodus from mature
African basins and a shift towards frontiers like Namibia and Guyana, less
carbon intensive projects and less risky offshore developments.But questions
have been asked about the capacity of the domestic companies to operate major
assets and finance new drilling at a pivotal moment for Nigeria’s oil sector.
Nigeria produced 1.45 million bpd of crude in March,
according to the Platts OPEC Survey from S&P Global Commodity Insights,
well below its capacity of 2.5 million bpd, due to underinvestment, inadequate
exploration and the scourge of crude theft in the Niger Delta.However, Irune
insists that local firms were well-equipped to rejuvenate the sector.
“The government is certainly in support of this transition
and keen to see indigenous players step into those roles and deliver,” he said.
“If you look at the local companies that have stepped forward…there’s no doubt
that the indigenous capacity exists,” he added.Asked about the apparent delays
in approvals, Irune added: “Acquisitions of this nature are relatively novel
and for the first time the Nigerian Upstream Petroleum Regulatory Commission
(NUPRC) has set a framework for divestment where there are certain criteria
that you must get through to qualify, and that process takes its course.”
At the same time, local ownership could actually reduce
theft, which was costing Nigeria 400,000 bpd in August 2023, according to the
government’s security adviser, by giving communities a bigger stake in the
success of the industry.“My personal opinion is having indigenous players will
definitely improve issues around fairness and this need to engage in sabotage
and theft,” he said.Collectively, smaller companies can build a more cohesive
and collaborative oil sector, he said. “We’re not going to be ‘siloed’ global
companies with headquarters in Houston. Nigeria is our headquarters,” he
pointed out.
Nevertheless, Irune identified three key steps that must be
taken for Nigeria’s oil industry and the
member of the Organisation of Petroleum Exporting Countries (OPEC) production
to reach its potential.“Across the country, security has been the biggest
thing. The worst thing is to plough all this investment into these assets and
not be able to flow the oil or the gas. We see that getting better.
“The idea is as that improves, a lot of the production
that’s stuck behind-pipe would very easily come into play and without much
capex deployment we’d see an uptick in those production numbers,” he argued,
pointing to recent security improvements in the western Niger Delta.
Secondly, Irune said legislative changes and reforms to the
recently adopted Petroleum Industry Act (PIA), such as President Bola Tinubu’s
recent raft of executive orders aimed at encouraging investment are required.
“The PIA provides that platform, but it’s not perfect. There
are changes that need to be made to improve the act and those engagements are
ongoing right now. Thirdly, industry stakeholders need to be ‘impatient’ to
spur rapid development in the sector,” Irune said.
He added: “If you are able to execute your drilling in three
months instead of four months, you are able to move the molecules to where they
need to be without disruption and you have the right laws that allow you to
monetise the midstream and downstream components, you would be surprised how
much investment would in turn come back into the country.”
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