Nigeria oil industry: Indigenous companies come to the fore

The government of Nigeria particularly keen to promote the participation of Nigerians in the country’s oil industry, whether as skilled workers employed by foreign firms, or via domestic companies competing against the majors in their own right.

Such companies have the potential to gain experience within the country that can then be put to use on projects in other parts of the world.

Previous administrations in Abuja have announced similar pledges with limited success but a generation of Nigerian companies are making serious inroads in the oil industry and have benefited in part from the sale of upstream assets by the majors.

Described within the country as ‘indigenous’ oil companies, leading domestic firms include Sapetro, Shoreline Natural Resources, Seplat and Oando Oil and Gas. The term is used in many African countries in this way, although it would not be used in this way in the West.

According to various sources within the country, an average of $1bn is being invested in upstream projects by Nigerian companies. Indeed, it is notable that the NSE’s oil and gas index jumped by 122% during the course of 2013.

Oando is involved in many strands of the oil and gas sector, including in urban gas distribution. It is now seeking to greatly expand its upstream operations through the acquisition of Nigerian assets held by US giant ConocoPhillips. As African Business went to press, the deal was due for completion by 31st March, pending the consent of the Minister of Petroleum resources.

Oando’s shareholders have already approved plans to raise N250bn ($1.54bn) to fund the purchase through a combination of bonds, a N50bn ($300m) rights issue and a range of other means. The company, which is listed in Lagos, Johannesburg and Toronto, has already paid a $450m deposit to secure the deal.

Another Nigerian upstream company was named African Indigenous Company of the Year in January. South Atlantic Petroleum Company (Sapetro), which has assets in Benin and in the Mozambique Channel as well as in Nigeria, has been one of the first to venture into other parts of Africa.

The Mozambique Channel blocks lie in Madagascan and Terres Australes et Antarctiques Françaises (TAAF) territory. TAAF acreage is held by the French sovereign territory.

Chief executive Martin Trachsel said: “This region was definitely underexplored in the last decade. Most companies were exploring in West Africa. It’s part of a general trend of people looking for more oil. New technology has also contributed to the string of new discoveries. The industry is innovative. It always finds new plays and new ways of finding oil and gas.”

In its home market, Sapetro holds a 5% stake on OPL 246, alongside French firm Total (24%), NNPC (10%), China National Offshore Oil Corporation (CNOOC) (45%) and Petrobras of Malaysia (16%).

Production on the deepwater Egina Field on the block is scheduled to come on stream in 2017 and should reach 150,000 b/d at peak production via a floating production storage and offloading vessel (FPSO) with storage capacity of 2.3m barrels. The block has already yielded more than 200m barrels of condensate on the Akpo Field to date.

In neighbouring Benin, it holds 100% interest in Block 1, on which it announced an 87m barrel discovery last October. Benin’s Minister for Mines and Energy, Barthelemy Kassa, has stated that his government hopes to see production begin this year but that could be overly ambitious.

Yet another Nigerian firm, The Chrome Group, was named runner-up in the same awards. It holds equity in OML 40 and operates under the brand names Starcrest Nigeria and Elcrest Exploration and Production Nigeria, alongside partner Eland Oil & Gas.

Another Chrome Group subsidiary, Kaztec Engineering, manufactures oil and gas platforms and other ancillary equipment. Kaztec has set up a joint venture with Addax Petroleum to set up an engineering yard at the Snake Island Integrated Free Zone in Lagos, where FPSO vessels can be constructed and pipeline services provided.

This will be the first FPSO manufacturing plant in sub-Saharan Africa, as the industry is currently dominated by South Korean and Asian shipyards