Brownfield investment opportunities are emerging in Nigeria as international oil companies accelerate energy transition strategies and divest non-core assets, The energy transition is pushing the IOCs to divest Nigerian assets despite positive project economics.

 

There are five international oil companies (IOCs) present in Nigeria – Chevron, Eni, ExxonMobil, Shell and Total Energies. Collectively, they have equity participation in over 110 oil mining licenses (OMLs) and are responsible for 45% of Nigeria’s oil production and 40% of sales gas. Moreover, they hold 69% and 74% of the remaining commercial oil and gas reserves, respectively. However, Nigeria’s upstream landscape is changing – and that could create opportunities for investors seeking brownfield assets with growth potential.

 

Following many years of growth in capital spending, the global upstream industry was forced to implement capital discipline measures following the 2014-15 oil price crash. Absolute spend decreased under the pretext of better discipline; relative spend, on a per barrel basis, fell as operators realized efficiency gains. However, the significant drop in investment in Nigeria goes beyond capital discipline alone.

 

Despite the profitability of their Nigerian assets, the IOCs are under increased shareholder pressure to accelerate their energy transition strategies. They’re reshaping their global portfolios towards lower emissions intensity operations and divesting non-core assets. For the three Euro Majors (Eni, Shell and Total Energies) the average emission intensity of their Nigeria assets is significantly higher than that of the rest of their portfolios. Divesting Nigerian assets is therefore one lever to reducing the emissions intensity of the overall portfolio.

 

The energy transition is pushing the IOCs to divest Nigerian assets despite positive project economics. These are assets with sufficiently positive remaining value will present attractive opportunities for potential investors.

​

in addition to the divestment drivers from the IOCs, there are several reasons why investors are increasingly interested in upstream opportunities in Nigeria:

​

• Project economics. Recent increases in oil prices and better capital discipline have significantly improved project returns, with further potential upside post-Petroleum Industry Bill.

• Brownfield economics. Investment returns are typically better, with shorter payback periods, in brownfield projects compared to greenfield developments.

• World-class resources. Nigeria has 9.1 billion barrels (bnbbls) remaining oil reserves (of which 87% is onstream) plus 17.2 bnbbls of contingent resources (66% onstream).

• Gas. Nigeria has largely untapped gas potential, with over 175 trillion cubic feet (tcf)of remaining resources.

• Existing infrastructure. Nigeria has a large, established oil and gas industry that dates to the 1950s.