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Nigeria Enhances Investment and Accelerates Local Company Participation with Marginal Field Opportunities

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With over 36 billion barrels of oil and 200 trillion cubic feet of natural gas, as well as the active participation of global oil majors including TotalEnergies, Shell, Chevron, and ExxonMobil, Nigeria is intensifying efforts to exploit its significant resources and establish itself as a globally competitive oil and gas industry. With the country experiencing a downturn in production – attributed to ageing oilfields, non-performing marginal fields, OPEC enforced production cuts and the global pandemic – as well as declining investment trends, the government has made significant progress to enhance upstream activity and attract investment back into the sector.

Notwithstanding the recently passed Petroleum Industry Bill (PIB) – which has been a key driver in attracting foreign capital – Nigeria’s refocusing on marginal field developments has enhanced both domestic and international investment as well as local company participation. The country has 57 marginal oilfields in the resource-rich Niger Delta area, and by incentivizing development, the government is committed to increasing revenue generation, job creation, technology transfer and opportunities for indigenous firms.

In a bid to monetize marginal field resources across the country and increase indigenous company participation, the Department of Petroleum Resources (DPR) launched a Marginal Bid Round on the June 1, 2020 – the first to be launched in 18 years. With 57 oilfields on offer, the demonstrated interest was astounding, leading to 591 companies applying to be pre-qualified for the bid rounds. To date, 161 applicants have been shortlisted of which 50% have met the conditions and have been awarded the rights to develop.

The marginal bid round marks a significant moment for the country’s energy sector, and demonstrates the value that local companies will continue to play in driving oil and gas exploration and production. Bid round winners included Nigerian firms A.A. Rano Nigeria Limited; Shafa Exploration, Matric Energy, and Vhelblerg Exploration, to name a few. With over $500 million expected to be generated from the signature bonuses for the 57 marginal oilfields, the country has not only created the opportunity to significantly enhance local company participation, but has driven up revenue, job creation, and local capacity.

Marginal fields have a role to play in increasing domestic production capacity, which has been evident with the first Nigerian marginal bid round in 2003. Since the bid round, 16 marginal fields have been producing, contributing two percent of total daily production in the country. The recent bid round is expected to significantly increase this figure, demonstrating the value of marginal fields, the role of domestic upstream companies, and the opportunities that demonstrated political will can create for energy sector growth.

“Nigeria can serve as a trend for other resource-rich countries looking to monetize marginal field resources. The country’s successful marginal bid round in 2020, coupled with an investment ready domestic sector and market driven PIB, will significantly increase oil and gas investment despite the reduced capital expenditure climate. At African Energy Week (AEW) in Cape Town, Nigeria will not only promote its marginal field success, but drive a strong discussion on resource monetization, investment strategies, and capacity building regarding the domestic oil and gas sector,” stated NJ Ayuk, Executive Chairman of the African Energy Chamber (AEC).

With a primary focus on emphasizing the role that the oil and gas industry plays in Africa’s energy future, AEW 2021 in Cape Town is focused on promoting Nigeria’s sectoral achievements, including the PIB and the marginal bid round. By providing a platform for enhanced dialogue and increased engagement for African and international stakeholders, AEW 2021 is dedicated to driving the future of African oil and gas. With a Nigerian delegation coming to Cape Town in November, led by H.E. Chief Timipre Sylva, Minister of State of Petroleum, and Nigerian National Petroleum Corporation Group Managing Director Mele Kyari, Nigerian investment opportunities will be showcased to global stakeholders, including both large- and small-scale developments.

AEW 2021, in partnership with South Africa’s Department of Mineral Resources and Energy DMRE, is the AEC’s annual conference, exhibition and networking event. AEW 2021 unites African energy stakeholders with investors and international partners to drive industry growth and development and promote Africa as the destination for energy investments.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Nigeria Targets $5bn Investments in Oil and Gas Sector, Says Government

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Nigeria is setting its sights on attracting $5 billion worth of investments in its oil and gas sector, according to statements made by government officials during an oil and gas sector retreat in Abuja.

During the retreat organized by the Federal Ministry of Petroleum Resources, Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, explained the importance of ramping up crude oil production and creating an environment conducive to attracting investments.

He highlighted the need to work closely with agencies like the Nigerian National Petroleum Company Limited (NNPCL) to achieve these goals.

Lokpobiri acknowledged the challenges posed by issues such as insecurity and pipeline vandalism but expressed confidence in the government’s ability to tackle them effectively.

He stressed the necessity of a globally competitive regulatory framework to encourage investment in the sector.

The minister’s remarks were echoed by Mele Kyari, the Group Chief Executive Officer of NNPCL, who spoke at the 2024 Strategic Women in Energy, Oil, and Gas Leadership Summit.

Kyari stressed the critical role of energy in driving economic growth and development and explained that Nigeria still faces challenges in providing stable electricity to its citizens.

Kyari outlined NNPCL’s vision for the future, which includes increasing crude oil production, expanding refining capacity, and growing the company’s retail network.

He highlighted the importance of leveraging Nigeria’s vast gas resources and optimizing dividend payouts to shareholders.

Overall, the government’s commitment to attracting $5 billion in investments reflects its determination to revitalize the oil and gas sector and drive economic growth in Nigeria.

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Nigeria’s Rig Count Surges by 23% in February 2024

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In February 2024, Nigeria’s oil and gas exploration activities surged with rig count increasing by 23% compared to the previous year.

The rig count, a crucial index measuring upstream activities, climbed to 16 rigs from the 11 rigs recorded during the same period in 2023.

This leap in exploration activities comes as a positive development for Nigeria’s oil and gas sector, indicating growing momentum and investor confidence in the industry.

Gbenga Komolafe, Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), attributed this sustained surge to the positive impact of the recently enacted Petroleum Industry Act (PIA).

The PIA, with its provisions for institutional governance, efficient administration, and attractive fiscal regimes, has created a conducive environment for investment and operations in the country’s oil and gas sector.

Despite the remarkable increase in exploration activities, Nigeria’s crude oil production for the month declined to 1.32 million barrels per day (mbpd), compared to January’s output of 1.46 mbpd.

This decrease highlights the challenges faced by the Nigerian oil industry, including infrastructure constraints, security issues in oil-producing regions, and operational disruptions.

To further enhance exploration efforts, Komolafe announced a strategic partnership with TGS-Petrodata to acquire approximately 56,000 square kilometers of 3D Seismic Gravity data, focusing on the Niger Delta deep and Ultra Deep Offshore regions.

This initiative aims to mitigate risks associated with exploration in challenging environments, with investors financing the project and resulting revenues to be shared between the government and TGS.

Looking ahead, Komolafe expressed optimism about sustained growth in oil exploration activities throughout 2024, with plans for an upcoming oil licensing round, a critical step in implementing the nation’s PIA and driving further advancements in the oil and gas sector.

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NNPC Faces Mounting Subsidy Burden as Oil Prices Skyrocket

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Petrol - Investors King

The Nigerian National Petroleum Corporation (NNPC) is facing an increasingly daunting subsidy burden as oil prices continue to surge.

Investigation has revealed that escalating crude oil prices pose a significant challenge to Africa’s largest oil producer, placing immense pressure on the government’s finances and the state-owned NNPC.

Brent, the benchmark for Nigeria’s crude oil, has skyrocketed from an average of $77 in January to as high as $86 per barrel.

While this surge in oil prices could potentially boost funding for Nigeria’s 2024 budget, which is anchored on a benchmark of $77.96 per barrel, the country’s inability to meet production quotas hampers its capacity to capitalize on the revenue influx from oil sales.

One of the primary consequences of soaring oil prices is the ballooning petrol subsidy burden borne by the NNPC.

Despite the government’s imposition of a cap on petrol retail prices, the widening gap between the landing cost and the pump price necessitates substantial subsidies to sustain consumer affordability.

Charles Akinbobola, a Lagos-based energy analyst, elucidated that the combination of a higher exchange rate, elevated oil prices, and static petrol retail prices compounds the subsidy dilemma for Nigeria.

With the country’s limited refining capacity mandating the importation of all petroleum products, the subsidy burden further intensifies, straining NNPC’s resources.

The opacity surrounding the subsidy program, coupled with reports of NNPC’s utilization of Nigeria LNG dividends to fund petrol subsidies, raises concerns about transparency and accountability.

Faith Akinnagbe, an energy lawyer, emphasizes the urgency of disclosing NNPC’s subsidy expenditures to ensure public accountability and oversight.

As Nigeria grapples with the repercussions of surging oil prices, the NNPC faces an uphill battle in managing its burgeoning subsidy obligations amidst fiscal constraints and economic uncertainties.

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