“Oil Transactions Decline Sevenfold Amid Investor Disinterest.
In recent years, Nigeria’s oil and gas sector has experienced a significant downturn in corporate deals between privately held businesses and investors. The scale of these transactions, which include mergers, acquisitions, asset sales, and debt financing, has dramatically decreased from $20 billion in 2015 to just $3 billion in 2023. This reduction marks the lowest level of deal activity in the sector in eight years.
The decline in transactions is critical as these deals drive investments, infrastructure improvements, and economic growth. They are essential for enhancing technical expertise and living standards. However, several factors have contributed to the slump in deals, including frequent theft, vandalism, militant attacks, and regulatory changes, which create uncertainty and deter investment. Additionally, infrastructure deficits and stringent local content policies complicate international deals, adding complexity and costs.
The PwC report highlights a brief period of stability in investment levels from 2016 to 2018, followed by a steady decline. Despite a slight uptick in Q1 2024, with transactions reaching $4 billion due to shifts in asset ownership among Nigerian onshore assets, the overall trend remains downward. Major oil companies like ExxonMobil, Equinor, and Eni have been selling assets to local players such as Seplat Energy, Oando, and Chappal Energies.
These sales are part of a broader trend of international oil companies divesting from onshore and shallow water assets, often due to the challenges of operating in the Niger Delta. While local companies see an opportunity to increase production and fill the gap left by international firms, the process has been slow due to regulatory and legal hurdles. For instance, the approval of ExxonMobil’s $1.3 billion sale to Seplat faced significant delays.
Despite these challenges, local companies believe they can increase Nigeria’s oil production by 200,000 barrels per day if the government expedites deal approvals. Recent deals, such as Eni’s sale to Oando and Equinor’s transfer of assets to Chappal, signal a potential shift in the sector, with local firms playing a more prominent role. However, the successful execution of these transactions and subsequent production increases will depend on overcoming regulatory, legal, and operational obstacles.
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