y Daniel Edegbai
Nigeria’s oil and gas upstream sector is ripe for more sophisticated local operators to take over the spheres of all technical operations, pushing away their foreign counterparts. The 2010 local content act and the new PIA continue to strengthen local firms like KEGOZ in their quest to offer technical and operating support to E & P companies.
Again, with the large gas reserve of about 206.5tn trillion cubic feet, Nigeria’s declaration of 2021 to 2030 as the decade of gas further strengthens investment opportunities in the sector, such that, aside the conventional revenue streams, additional income can be obtained in the area of gas de-flaring and carbon credit/carbon offsets.
Despite this good news, one major setback for local operators like KEGOZ lies in the ownership of state-of-the-art equipment, which could help provide competitive pricing advantage, logistics agility, and highly trained personnel, by way of technology transfer.
Aside from this, the transition we are experiencing in Nigeria, from importation of refined petroleum products to simply importation of crude is a development that is expected to shrink based on Nigeria’s FG’s drive to ramp up crude production to 3mbpd by 2030.
This would mean that Nigeria is expected to become self-reliant in this sector as it relates to crude and refined products. As of now, however, crude oil imports to Nigeria hovers between 3rd and 4th largest import by value.
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The missing link, however, is that the finance sector lacks the necessary alignment to support the sector’s growth due to knowledge gaps and funding mechanisms. Indigenous oil companies are emerging as key players, yet there is a lag in support from indigenous funders, raising questions about their involvement in the sector.
What are indigenous funders doing? Why are they lagging behind? Oil and gas equipment are highly specialized and of course capital intensive. Most of the services companies are shouldering these burdens, largely from the free cash flow to the firm, rather than from debt finance.
The impact is seen around thinning liquidity and very high capex to income ratio, and loss of opportunities from capital allowance, amongst others. The marginal field licensees are not left out, despite that these are brown fields, most are not able to access funding.
Hence, the tendency to lose the field is expected to come in in June 2026. One thing is, however, necessary here: there must be a deliberate focus on the marginal licensees. They may not have the books to support the volume of funding required. But reserve-based lending structures, FTSA deals, crude off-takers and the licensees forum can help a great deal.
If we can get crude production figures up to 3mbpd and more, and other refineries aside Dangote, commence operations, and if the managers of our economy are able to enforce fiscal discipline, then we can begin to see the similitude of an economy with resilient infrastructure.
