In a recent publication, Reuters reported that Chevron – Nigeriaís third-largest oil producer is looking to sell-off a number of its oil assets in the country as the company wants to focus on growing its US shale output. This is in line with moves by the company’s top rivals, Exxon Mobil and Shell, to dispose of some of their Nigerian oilfields.
Over the years, the oil companies have reduced their stakes in the Nigerian oil industry amidst political instability, the uncertain security situation in the Niger-Delta, the impasse on the Petroleum Industry Bill (PIB), human and environmental right controversies, just to mention a few.
The country’s oil industry suffered a major setback as the global price of oil nose-dived in 2014. This resulted in leaner profit margins for international oil companies (IOCs), causing a steep drop in upstream spending by IOCs in the sector. The downbeat outlook on the price of oil has continued to weigh on IOCs interest in the sector making it difficult for Nigeria to launch large offshore oil developments to ramp up the local production.
The Group Managing Director (GMD) of the Nigerian National Petroleum Corporation (NNPC), Mele Kyari noted that the country intends to increase production to 3mbpd within the next two or three years.
New investments are crucial in securing Nigeria’s future oil production, as such, the country has brought to the fore once again its plans for restructuring the industry by pushing for the passage of the PIB. Senate President, Ahmed Lawan, disclosed that the PIB will be passed before the end of 2020.
The Petroleum Industry Bill (PIB) was first introduced to the National Assembly in December 2008. Drafts of the bill, however, became very contentious due to objections from the international oil companies (IOCs) and the Nigerian National Petroleum Corporation (NNPC). Consequently, the bill was never passed into law.
In our opinion, the move by IOCs to downscale their stakes in Nigeria’s oil and gas industry bodes well for indigenous businesses who have gradually expanded their footprints in the most strategic sector of the economy. From a macroeconomic standpoint, we believe the implementation of indigenisation policy in the oil industry will ease capital repatriation pressure and its attendant impact on the local currency.