AFRICANGLOBE – Talk about opportunities in crises, and Nigeria, Africa’s largest economy, may be a model country to look at. The recent downward shifts in oil prices has tremendously disrupted global economics particularly for economies like Nigeria’s which are oil dependent; but all of this may be a blessing in disguise for indigenous players.
2015 is an election year for Nigeria, this in itself comes with economic uncertainties, and when coupled with the ambiguities from oil, the end result has been a hesitation from foreign investors as they await the moves of the government in the coming year. Valid fears exist that the country’s delicate democracy may be stressed, and could translate in a more volatile business and economic landscape.
Also, elections cost money, and the country has seen depleting reserves in recent times; the aftermath of the elections could therefore be a significantly poorer country, definitely not a turn-on for foreign investors. All of these hesitations from foreign players could be an opportunity for local players to up their game, and tighten their grip on the Nigerian Oil & Gas sector, this would potentially set them up for huge gains if the situation is reversed in the near future.
“Most exploration is at a standstill because investors don’t know what will happen after next year’s election. Once the election is over and stability resumes, oil activity will kick in again,” said Gogomary Oyet, Head of Environment, Health and Safety at Oando Plc, at the Africa Oil & Gas Summit in Sandton, South Africa.
Before the global oil crisis, some strategic shifts and divestments had been ongoing in the sector which saw the sales of marginal oil field assets by International Oil Companies (IOCs). A notable move was that of Shell in line with its cost reduction strategy and desire to operate away from the interference of local communities. Local players and investors have moved to acquire such assets and this is creating an incentive for more divestments and sales by IOCs.
In half a decade, IOCs will have to renew their licenses and this will entail a detailed plan for more investments and involvement in Nigeria. Given that IOCs favor deep-sea and offshore operations as the best growth options, it is safe to assume that these corporations will seriously evaluate other assets and sell off those that do not meet a certain threshold in terms of return on investment. These are all opportunities for indigenous players.
These shifts in favour of indigenous players are good for a number of reasons. First off, they promote the efforts of the government in encouraging local content. Secondly, these local players have proved to be better managers of community conflict; Oando Plc, one such indigenous player, has experienced no significant operational disruptions despite its huge infrastructure such as rigs set up in the Niger Delta area.
With these trends, local players like Seplat, Shoreline Natural Resources, First Hydrocarbon Nigeria and Oando Energy Resources could properly position within the sector and produce some 50,000 to 100,000 barrels of oil per day in the near future. These are Nigeria’s oil operators to watch out for, going forward.
By: Emmanuel Iruobe