INTERVIEW: After ‘home truths’, Nigeria finally turning tide on oil output, investment: presidential advisor

The shift from international majors to local producers in Nigeria's onshore will boost oil output towards 2 million b/d in 2025 and ultimately drive an economic diversification agenda that was long considered impossible, the special advisor on energy to President Bola Tinubu told Platts.

In a wide-ranging interview on the sidelines of the International Energy Week conference in London, Olu Verheijen said a combination of onshore deals, security improvements and fiscal incentives, particularly for deepwater oil and gas, had fueled a sense of optimism in Nigeria's key industry.

"We've spent the last 18 months laying the groundwork for a continued resurgence and positioning for growth in the oil and gas sector," said Verheijen. "After several years of decline in investments, we spent a lot of time telling ourselves some home truths and rolling up our sleeves and making sure that we could compete for capital, which we've successfully done in the last year."

Africa's biggest crude producer has witnessed a years-long production slump due to theft and sabotage in the restive Niger Delta, field maturation and underinvestment.

However, official data from the Nigerian Upstream Petroleum Regulatory Commission shows a sharp jump in recent months to 1.74 million b/d of crude and condensate, although it remains below Nigeria's estimated 2.2 million b/d production capacity.

"We have achieved a 500,000 barrels production gain in 18 months with a much more enhanced and coordinated security approach," said Verheijen, adding that Abuja had "set ambitious targets of about 2 million b/d of production this year."

Officials say a "state of emergency", launched in the oil sector in 2024, has made huge strides in combatting crude theft, which has previously cost Nigeria as much as 400,000 b/d, according to lawmakers.

Execution capacity

In 2024, Nigeria's oil sector underwent a radical transformation, with oil majors Shell, TotalEnergies, Eni, ExxonMobil and Equinor agreeing deals to offload onshore and shallow water assets to a host of local upstarts, ending their decades-long tenures in the Delta.

While skeptics pointed to the shallower pockets and more limited experience of companies like Seplat, Oando, Chappal Energies and the Renaissance consortium of five mostly Nigerian companies, proponents said they would help tackle theft and drive output growth through a greater commitment to the sector.

"The acquisitions by local independents are critical to meeting our short-term production targets. For our mature onshore terrain, a lower cost structure and higher social capital with communities will be critical to success," Verheijen said.

The roughly 300,000 b/d gap between current output and the 2 million b/d target will be closed, she said, by "Seplat, Renaissance and a few other independents."

"Our ability to stabilize our monetary and fiscal framework is tied to the execution capacity of our local independents. They're much more invested," Verheijen added. "The additional fiscal income that comes into the government coffers from their production will help drive much needed investment in infrastructure and other sectors of the economy, so we can start to diversify away from oil and gas."

Oil accounts for over 90% of Nigeria's foreign exchange earnings and a large chunk of government revenues. Diversification away from hydrocarbons has eluded one administration after another, despite the country's wealth of talent and huge, young population.

In the longer term, Verheijen said, oil production growth will be driven by IOCs in the deepwater offshore, where they have gravitated following their exits from onshore and shallow water projects.

"The IOCs are focused on deepwater and integrated gas which requires their high-powered capital and technical expertise," she said.

To that end, Abuja has sought to incentivize offshore investment through competitive fiscal terms. "We have made sure that we have competitive fiscals, and we've improved speed of execution. Where we felt that our fiscals were not competitive, we've closed those gaps, particularly around our deepwater and our non-associated gas. So, you've seen investments come in."

In December, Shell announced it had taken a final investment decision on the huge Bonga North offshore oil project, expected to add 110,000 b/d by 2030, while ExxonMobil in September pledged $10 billion for deepwater projects, according to Abuja. Chevron in January acquired a stake in deepwater block OPL 215.

Decade of Gas

Beyond crude, Verheijen insisted progress had been made in gas and downstream sectors. Nigeria holds the world's eighth largest gas reserves but has largely failed to exploit them in recent years, even as the Russian invasion of Ukraine sparked a European rush for alternatives to Russian gas. The 22 million mt/year Nigeria LNG project, its most high profile, remains under force majeure with only two of its six trains currently operating.

Privately, Nigerian officials say the country should pursue gas production ahead of oil, given its huge reserves and the domestic power and industrial uses it would bring. The country is currently four years into its "decade of gas".

Verheijen said the tide was starting to turn, with improvements to fiscal terms boosting "the reliability of supply to NLNG", but noted there was more work to be done.

After TotalEnergies and NNPC took a final investment decision on the Ubeta gas field last year, "more similar projects are expected this year," she said. "In order to continue delivering on our gas agenda, we need to ensure bankable, creditworthy domestic and regional offtake and related infrastructure to connect supply to these markets."

On the downstream side, Verheijen said President Tinubu's reforms had allowed free enterprise to flourish, illustrated most prominently by the startup of the Dangote refinery, which is still ramping up to its full 650,000 b/d capacity having experienced teething issues since coming online in early 2024.

"The main thing that we have done is to liberalize that sector. And that's what's allowed Dangote and other entrepreneurs in the downstream sector to have a commercially viable business for the first time in decades," Verheijen said.

However, she noted that there are "trade-offs between enabling forex earnings from crude supply and driving our energy self-sufficiency and adding more value to our crude."