TotalEnergies, Chevron show appetite for Nigeria’s deepwater assets after Shell’s $5bn deal

With zero foreign investment in early 2023, to billions pledged by year’s end – what lies behind the country’s dramatic offshore turnaround, and what are the challenges?

The languishing oil sector in Nigeria seems poised for a renaissance as international energy majors signal fresh interest in its deepwater prospects. TotalEnergies and Chevron, the only international oil companies (IOCs) to participate in Nigeria’s first oil block auction since 2007, are eyeing further opportunities.

“My company has a lot of appetite,” says Victor Bandele, TotalEnergies‘ deputy managing director for deepwater assets. He points to the company’s impressive track record: Apo field in 2009, followed by Usan in 2012 and Egina in 2018, which reached peak production of 200,000 barrels per day.

Yet challenges persist. Several major projects remain stalled, including TotalEnergies’ Preowei, Shell’s South West Aparo, ENI’s Zabazaba-Etan, Chevron’s Nsiko and ExxonMobil’s Bosi and Uge. The Egina field is declining, leaving its floating production facility underutilised. However, recent government incentives have sparked renewed interest in maximising these assets through potential tie-backs.

Investment climate improving
Shell’s Bonga North project, with recoverable resources exceeding 300 million barrels of oil equivalent, represents a significant vote of confidence. In December, Shell announced a $5bn final investment decision (FID) on the Bonga North project, the largest oil investment in Nigeria in over a decade.

“Deepwater accounted for about 40% of Nigeria’s production last year. But it could have been more,” says Ronald Adams, managing director of Shell Nigeria Exploration and Production Company, adding that exploration activities have revealed “significant deepwater opportunities”.

The investment climate appears to be improving. TotalEnergies secured an FID on its Ubeta gas field in June 2024, after new non-associated gas incentives were introduced in February.

“The appetite grows with the right environment,” Bandele says, though he notes that projects Nigeria loses often end up in Angola. “My company has a lot of stakes in Angola; anything I am not doing well here goes to Angola.”

Chevron, too, sees potential. “When fiscal terms are right, the environment is right, then we should be able to deliver not just for Chevron’s benefit but for the country as well,” says Maureen Ikeneku, the company’s general manager of wells. The firm has renewed three deepwater leases for 20 years and is expanding its Agbami field operations, one of the country’s largest deepwater discoveries.

Shift to deepwater
The shift to deepwater makes strategic sense. Plagued by crude theft and pipeline vandalism onshore, IOCs have retreated to deeper waters where such risks are minimal. With an estimated 13 billion barrels of crude reserves in deepwater zones, the potential is substantial.

The terrain also holds significant associated and non-associated gas reserves, crucial for Nigeria’s energy future.

Yet success is not guaranteed. Adams emphasises the need for streamlined approval processes and consistent policy enforcement. Recent reforms, including tax incentives, local content compliance requirements and reduced contracting timelines, are welcome steps.

However, in Nigeria’s complex operating environment, maintaining a stable investment climate may prove as challenging as drilling in deep waters.

The country must now build on this momentum, suggests Adams, through “fiscal and regulatory policies that are fit-for-purpose, forward-looking and competitive”. Nigeria’s deepwater revival hinges on sustaining these improvements – and convincing IOCs that the waters ahead are both profitable and navigable.

Source: The Africa Report