Indigenous oil and gas producer, Oando, has projected that it will double its production to 50,000 barrels per day of oil equivalent with the ‘imminent’ closure of its landmark deal with Eni.

Oando’s Chief Operating Officer, Alex Irune, told S&P Global Commodity Insights at the weekend that the firm intends scaling up to 100,000 bpd by 2029, thanks to new drilling and security improvements.
The Nigerian company’s bid to buy the Italian major’s entire Nigerian upstream business reflects a major shift in Africa’s biggest oil producer, with local firms replacing departing International Oil Companies (IOCs).

In the wide-ranging interview, Irune disagreed that approvals had been an issue. “What we are seeing is a careful, considered approach to ensuring that the country isn’t materially impacted in a negative way, ensuring the indigenous players are able to straddle the horse and ride it into the horizon,” he said.
Oando which will become one of Nigeria’s biggest domestic producers through the agreement is “working through the obligations under the Share Purchase Agreement” and is “on track” to close the deal this quarter, Irune said

S&P said the estimated $500 million acquisition covers four oil producing blocks OMLs 60, 61, 62 and 63, which comprise a joint venture alongside the Brass terminal, onshore exploration concessions and power plants.
Eni currently holds a 20 per cent operating stake in the JV alongside Oando with 20 per cent and state-owned Nigerian National Petroleum Company Limited (NNPC) with 60 per cent.

Oando, which is run by Adewale Tinubu is currently producing 25,000 bpd, according to Irune, through myriad Nigerian assets. Following the deal its JV stake will rise to 40 per cent.
Production rises over the next five years will be achieved through drilling programmes on marginal fields, particularly Qua Iboe (OML 13) and Ebendo (OML 56).
“We’ll be drilling four to five wells on these two fields over the next 18 months. Both fields have easy access to export terminals, including the Escravos pipeline system in the case of OML 56,” he emphasised

The Eni agreement was first signed in September. It follows home-grown Seplat’s battle to take over ExxonMobil’s onshore business. Meanwhile, Shell has agreed to sell its onshore assets to a consortium of mostly local companies and Equinor has signed a deal to divest its assets to Mauritius-based Chappal Energies.
The trend indicates an IOC exodus from mature African basins and a shift towards frontiers like Namibia and Guyana, less carbon intensive projects and less risky offshore developments.
But questions have been asked about the capacity of the domestic companies to operate major assets and finance new drilling at a pivotal moment for Nigeria’s oil sector.

Nigeria produced 1.45 million bpd of crude in March, according to the Platts OPEC Survey from S&P Global Commodity Insights, well below its capacity of 2.5 million bpd, due to underinvestment, inadequate exploration and the scourge of crude theft in the Niger Delta.
However, Irune insists that local firms were well-equipped to rejuvenate the sector.

“The government is certainly in support of this transition and keen to see indigenous players step into those roles and deliver,” he said. “If you look at the local companies that have stepped forward…there’s no doubt that the indigenous capacity exists,” he added.
Asked about the apparent delays in approvals, Irune added: “Acquisitions of this nature are relatively novel and for the first time the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has set a framework for divestment where there are certain criteria that you must get through to qualify, and that process takes its course

At the same time, local ownership could actually reduce theft, which was costing Nigeria 400,000 bpd in August 2023, according to the government’s security adviser, by giving communities a bigger stake in the success of the industry.
“My personal opinion is having indigenous players will definitely improve issues around fairness and this need to engage in sabotage and theft,” he said.
Collectively, smaller companies can build a more cohesive and collaborative oil sector, he said. “We’re not going to be ‘siloed’ global companies with headquarters in Houston. Nigeria is our headquarters,” he pointed out.

Nevertheless, Irune identified three key steps that must be taken for Nigeria’s oil industry  and the member of the Organisation of Petroleum Exporting Countries (OPEC) production to reach its potential.
“Across the country, security has been the biggest thing. The worst thing is to plough all this investment into these assets and not be able to flow the oil or the gas. We see that getting better.

“The idea is as that improves, a lot of the production that’s stuck behind-pipe would very easily come into play and without much capex deployment we’d see an uptick in those production numbers,” he argued, pointing to recent security improvements in the western Niger Delta.

Secondly, Irune said legislative changes and reforms to the recently adopted Petroleum Industry Act (PIA), such as President Bola Tinubu’s recent raft of executive orders aimed at encouraging investment are required.

“The PIA provides that platform, but it’s not perfect. There are changes that need to be made to improve the act and those engagements are ongoing right now. Thirdly, industry stakeholders need to be ‘impatient’ to spur rapid development in the sector,” Irune said.

He added: “If you are able to execute your drilling in three months instead of four months, you are able to move the molecules to where they need to be without disruption and you have the right laws that allow you to monetise the midstream and downstream components, you would be surprised how much investment would in turn come back into the country