IOCs to divest 250,000bpd worth of equity in 2015 — PwC

20 January 2015, Lagos – Nigeria may not have seen the end of divestments in the oil and gas sector going by the findings of PricewaterhouseCoopers’, PwC, a management and advisory services firm.

Offshore oil rigs

Offshore oil rigs

The firm disclosed this in its review of the oil and gas industry in Nigeria in 2014. It estimated that by the end of 2015, the International Oil Companies, IOCs, operating in Nigeria would have sold at least 250,000 barrels per day worth of equity in onshore and shallow water producing assets in the Niger Delta region.

PwC maintained that these divestments represent the single largest opportunity for indigenous companies to participate in the upstream oil and gas industry. The transfer of operatorship to the buyers of these assets will go a long way in demonstrating government’s commitment to the local content policy. This will in turn unlock enormous local contractor, financing and other opportunities.

It also said that public scrutiny and growing regulatory compliance requirements in many developing countries post the April 2010 Deepwater Horizon disaster in the Gulf of Mexico, is forcing companies to recognise Security, Health, Environment and Quality (SHEQ) as a serious area of business focus. The consequences of non-compliance are significant fines and penalties.

Multinational oil companies are also driving SHEQ requirements within their own companies as they require their business units around the world to implement their stringent policies no matter where they operate.

The review also said that gas flaring is also expected to continue to be a challenge, although there has been some improvement with some companies reporting a reduction in flaring volume from their facilities.

There has been about 75 percent reduction in flaring between 2003 and 2012, and flaring intensity by around 60 percent over the same period. Also, some gas-to-liquid projects that are coming on stream are expected to make positive impact as regards flared volume.

There is a need however, for increased investment in gas utilisation and the creation of a viable market for gas. The government is expected to take the lead on this, it added.

As regards National Oil Company, NOC and IOCs partnership, PwC said the primary concern of operators is centered around significant cuts in budgets and delay in budget approval, as there is also the consequent challenge of alternative funding.

It however said that the industry’s outlook is positive, as operators can look forward to an exciting and dynamic future in an ever-changing competitive landscape characterised by divestments and new acquisitions as new market entrants continue to seek a share of the industry’s significant growth potential.

“The onus however sits with governments to ensure that they continue to provide acceptable regulatory environments with attractive fiscal systems. The main difficulty that investors have is the risk associated with uncertainty.”

Should uncertain regulations persist especially surrounding the passage of the PIB, the country might become less attractive to new investments which is considered very important in increasing the country’s revenue,” it concluded.


– Vanguard

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