In recent years, major international oil companies (IOCs) have shifted focus from onshore to offshore operations, reshaping the Nigerian oil industry. Oil giants like TotalEnergies, Eni, ExxonMobil, Shell, and Equinor are making this strategic move to deep offshore fields, driven by challenges in onshore operations.
These companies are selling their onshore assets to local oil firms. This approach strengthens local companies’ capacity to manage and operate oil fields, contributing to the growth of Nigeria’s oil industry.
Why Are Oil Giants Divesting from Onshore to Offshore?
The shift of Nigeria’s oil divestments to offshore operations stems from several challenges in the onshore oil sector. Onshore fields have faced frequent oil spills, theft, sabotage, and operational inefficiencies. Nigeria’s complex network of pipelines, oil wells, gas plants, export terminals, and power plants has been vulnerable to theft and vandalism. These issues have led to costly repairs and numerous legal disputes.
In 2023, Nigeria lost the opportunity to produce and sell about 65.7 million barrels of oil due to pipeline vandalism and theft. The government estimated the financial loss at over 2 trillion naira.
These challenges have not only burdened the country’s oil industry but also led to expensive lawsuits and compensations. Shell’s ongoing legal battles over oil spills and environmental damage in the Niger Delta illustrate the cost of onshore operations.
Five Oil Giants Divesting Onshore Assets
- TotalEnergies is selling its 10% stake in Shell Petroleum Development Company (SPDC) to Chappal Energies for $860 million. The deal is set to close by December 31, 2024. This divestment aligns with the company’s strategy to exit Nigeria’s onshore oil sector and focus on offshore operations. TotalEnergies plans to invest billions of dollars in offshore fields.
- Eni sold its entire stake in Nigerian Agip Oil Company (NAOC) to Oando for $783 million in 2024. This reflects the broader trend of IOCs moving away from onshore and shallow water assets in favor of more lucrative deep offshore fields.
- ExxonMobil has committed $10 billion to offshore oil operations in Nigeria, including $2.5 billion annually to increase production. The company also sold its onshore assets to Seplat Energy for $1.3 billion, underscoring its pivot to offshore fields.
- Shell Nigeria is dealing with a legal challenge over its $1.3 billion sale of its onshore oil and gas business to Renaissance Africa Energy. The Nigerian Upstream Petroleum Regulatory Commission blocked the deal. Shell aims to concentrate its investments on deep offshore fields, where the returns are higher and operational risks are lower.
- Equinor has agreed to sell its Nigerian operations to Chappal Energies Mauritius Ltd., which includes a 53.85% stake in OML 128 and a 20.21% stake in the Agbami oil field. The sale could bring in up to $1 billion. This deal marks Equinor’s strategic shift toward offshore assets.
Key Question For Nigeria’s Oil Future
As the divestment wave continues, oil giants are increasingly focusing on offshore fields, which provide greater security, fewer risks, and potentially higher returns. This shift signals a new phase for Nigeria’s oil sector, with deep offshore fields becoming a major area of interest.
However, key questions remain: How can Nigeria boost its investment in deep-water facilities? What strategies should the government adopt to attract more investment in these fields while prioritizing environmental protection and sustainability?
Also, can Nigeria’s infrastructure, such as pipelines and export terminals, adapt to the needs of a growing offshore oil sector?
