Wednesday, November 06, 2019 /01:33PM / By CSL Research / Header Image Credit: The Guardian
In a recent publication, Reuters reported that
Chevron- Nigeria's 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.
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