A Review of the Nigerian Energy Industry

Nigerian companies jostle to snap up oil blocs

Nigeria offshore oil27 March 2014, Sweetcrude, Lagos – Indigenous Nigerian companies and traders are stepping up deals to gain access to the West African country’s petroleum sector by aggressively bidding for fields sold off by the majors.

Several companies have been pre-qualified to compete for Shell’s stake in the most coveted OML 29, which produces around 62,000 b/d and 40 standard cubic feet of gas/day, sources close to the process said Wednesday.

Nigerian energy trading company, Talevras, Swiss-based Aiteo IS45 and Nigeria’s Seplat, which is controlled by France’s Maurel & Prom, offered bids of over $2 billion for the asset which houses the Olobiri, Santa Barbara and Odeama fields, the sources said. Heritage Oil, trading house Glencore and Nigeria’s Transcorp are also in the running.

Shell is selling its 30% stake in four blocks, with France’s Total and Italy’s Eni also set to profit from their 10% and 5% interests. State-owned Nigerian National Petroleum Corporation holds the remaining 55%.

Shell declined Wednesday to comment on reports that a final decision is expected in April.

The other blocks for sale include OML 24, OML 25 and OML 18 which the Nigeria’s Dangote is bidding for. Dangote in trying to line up oil and gas to feed a new refinery, which is expected to come on stream in 2016.

In April 2013, the group announced plans to invest $9 billion in a new 400,000 b/d refinery in Nigeria, which would double the nation’s refining capacity.

Shell has already earned $2.7 billion from assets sales in Nigeria since 2010 as majors choose to offload onshore fields in the Niger Delta, where divestments are growing due to maturing fields, oil theft and the government’s policy to boost local participation in the sector.

These divestments are not viewed as a mass wave of IOCs exits from Nigeria in the near-future but rather represents a re-balancing of portfolios towards the offshore which now accounts for at least 80% of Nigeria’s total production.

Moreover, Shell still retains ownership in 30 onshore blocks, while the company continues to invest in oil and gas projects in Nigeria, according to Ecobank’s head of energy, Rolake Akinkugbe.

The company last week said it plans to take the Final Investment Decision on the large-scale Bonga Southwest project by December this year. The project discovered in 2001 will produce 225,000 b/d at full capacity comes on-stream in 2020.

Shell with operating partner ExxonMobil is also investing substantially in expansion of the Erha deepwater field which came on stream in 2006. The Erha north phase 2 project is expected to begin production in 2015 at 50,000 b/d. The Erha deepwater field came on stream in 2006 at 150,000 b/d.

Further investigation also continue with Shell and its partners, Total and Eni, on the expansion of the Nigeria Liquefied Natural Gas Project. A seventh train would increase the capacity at the plant to over 30 million mt/year from 22 million mt/year.

Some local Nigerian companies own more than 100 blocks across Nigeria’s oil-producing regions, and own at least 30 marginal fields.

While Akinkuge said those figures are likely to double over the next few years, they will still require partnerships to meet the funding requirements to raise funds for the current wave of divestments, which is likely to exceed $5 billion Seplat is finalizing its deal to buy Chevron’s stakes in OML 53, 53 and 55, having outbid Nigeria’s Brittania-U’s bid for the blocks. Shell and Chevron are jointly developing the Ohaji South field in OML 53 and the Assa North field in neighboring block OML 21.

The development in which Chevron has a 20% stake is designed to supply some 1 billion cubic feet/day to the domestic gas market.

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