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LAGOS — Nigeria’s push to revamp its oil industry was given a boost with the announcement of two deals that point to growing investor optimism over President Bola Tinubu’s economic agenda.
Tinubu’s government aims to increase earnings from crude sales to fund the development of infrastructure projects in various sectors. Nigeria is Africa’s biggest crude oil exporter and sales make up around 90% of the country’s foreign exchange earnings.
Oil giant Shell said it will invest in a deep-water reserve in southern Nigeria that could produce 110,000 barrels of oil per day, beginning at the end of the decade. The announcement on Monday did not specify the amount being invested and came days after ExxonMobil’s business in the country was acquired by energy company Seplat for $1.2 billion.
Shell Nigeria’s Bonga North project will complement a two decade-old floating production storage and offloading operation that produced its one billionth barrel of oil last year, the company said. The Bonga North facility contains more than 300 million barrels of oil equivalent.
ExxonMobil Nigeria’s sale was first mooted in 2022 but was only approved by Nigeria’s president in October. The business is involved in a joint venture with state-owned oil company NNPC that contributes 12% of Nigeria’s crude oil production, a Seplat investor disclosure this month said.
Listed in Lagos and London, Seplat becomes one of Nigeria’s top oil industry players with the acquisition. The assets it takes over include over 600 wells the company said are operating at below a third of their production capacities. The company plans to revive the wells to resume production.
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In recent years, multinational oil companies have been angling to divest from their interests in Nigeria, to focus resources on markets deemed easier to operate in and recoup earnings from. Pipeline vandalism and pollution in the oil-producing Niger Delta region had become significant cost burdens and discouraged further investment.
On Wednesday, Shell’s bid to sell its onshore assets in Nigeria to Renaissance Africa Energy — a consortium of Nigerian and Swiss companies — for up to $2.4 billion was approved by the country’s deputy oil minister. TotalEnergies, Equinor, and ENI are among the other oil majors to have completed sales of their onshore oil and gas businesses in Nigeria this year, in addition to ExxonMobil.
However, Shell’s Bonga North investment is seen by many as a big win for Tinubu.
Step Back
Tinubu’s administration and appointees at government agencies have overseen a deep-rooted economic overhaul since the president took office last year. Far-reaching policy changes include deregulating the petrol sector, floating the exchange rate, requiring higher capital bases for commercial banks, and proposing an overhaul of the nation’s tax architecture.
Many of these changes have pinched hard on consumer purchasing power and inflation remains at a decades-old high of 34.6%. That said, energy investors seem eager to do business in the country.
The View From London
“The Tinubu government is ending the year looking much stronger on energy,” said Clementine Wallop, a London-based director for sub-Saharan Africa at Horizon Engage, a New York-headquartered consultancy.
The administration has “worked hard” to improve incentives that could increase the inflow of foreign direct investment next year, Wallop said, and “changes under way on local content and contracting times, and initiatives on non-associated gas could be game changers.”