Oil and gas investment in Nigeria has fallen to a record low, a new report by Renaissance Capital Limited revealed. The Russia-based investment bank said that the under-investment and chronic infrastructure issues plaguing the country’s oil sector manifested in a multi-decade production low of less than 1.5 million barrels of oil per day in December 2021.
It said the recovery in January this year offered some optimism, but the outlook remained uncertain.
The report said: “Shell’s and Exxon’s announced divestment plans in Nigeria, if completed, would transfer most of Nigeria’s oil production from the onshore and shallow water terrains (about 65 per cent of total production in 2021) to indigenous control, at a time when global oil and gas financing is drying up.
“Nigeria’s oil sector is facing an unprecedented level of under-investment, with declines reflecting a near halt of upstream investment across all terrains since the pandemic’s outbreak,” it stated.
RenCap said since the start-up of Egina deepwater project in the late 2018, only one or two new oil projects had come on stream. It said: “The near-term project pipeline screens thin, with Total’s Ikike (about 40,000bopd), Amni’s Tubu (about 30,000bopd) and Shell/Seplat’s ANOH (30,000-40,000bopd of condensates) some of the scheduled 2022 start-ups.
“In total, Rystad, an oil and gas consultancy, estimates Nigeria’s project pipeline to add up to 100,000bopd of production by the mid-2020s, not enough to offset declines.”
According to the report, Nigeria’s oil sector challenges has been exacerbated by a challenging operating environment, unattractive fiscal terms and oil majors’ exodus.
The report said, “Nigeria’s onshore oil sector is probably one of the most challenging operationally in the industry, with issues such as local opposition, oil spills, militant activity, crude evacuation constraints and logistical bottlenecks.
“Navigating Nigeria’s onshore oil sector requires strong know-how and indigenous partners, qualities and connections which only a handful of companies possess, thereby raising high barriers to entry for new entrants,” it added.