Nigeria on voicemail as investors respond to Angola’s $50 billion call

Nigeria’s grip on Africa’s oil production throne is waning as neighboring Angola gains popularity among international oil companies.

Investment in Angola’s oil sector increased by 96 percent between 2022 and 2023, with investments of almost $50 billion recorded in the last five years, according to data from the National Agency for Oil, Gas and Biofuels (ANPG). Angola.

In the next five years, investments of around 71 billion dollars are planned, which do not include investments in incremental production, said Jerónimo, president of the ANPG board of directors, in a note to the state company’s investors.

Also read: Why TotalEnergies chose Angola instead of Nigeria for a $6 billion project

Since 2017, Angola has been carrying out aggressive industrial reforms to ensure a transparent and competitive oil and gas market.

The country introduced a six-year licensing round in 2019 that guarantees annual investment opportunities in exploration for foreign players.

The most recent of these – a 12-block tender covering the Lower Congo and Kwanza basins – saw 53 bids, underscoring the magnitude of interest in Angolan oil and gas.

José Barroso, Angola’s secretary of state for oil and gas, explained that the country’s national regulator and concessionaire, ANPG, will continue to aggressively promote the industry, driving bidding rounds in line with national production targets.

Barroso affirmed that Angola offers regulatory flexibility in terms of oil and gas agreements.

“In addition to production sharing agreements under the six-year licensing round, the country introduced a risk reduction alternative in 2020, which allows the award of risk services contracts when the licensing process is unlikely public tender is successful,” Barroso said in an interview. monitored by BusinessDay.

He added: “A permanent offer program started in 2021 also allows the ANPG to negotiate new contracts with operators without offering a round of offers. Additional reforms include a Tax Benefits Code enacted in 2022, which creates incentives for oil companies.”

According to Barroso, the government is open to discussing the terms and finding a balanced agreement that provides adequate returns for investors.

He added that the government is open to the renewal of licenses, thus ensuring a solid and long-term relationship between oil companies and the State.

“With oil accounting for more than 30 percent of GDP, 70 percent of government revenue and 90 percent of exports, the plan ensures that oil and gas production remains a top priority for the next few years. ten years,” Barroso said.

With vast oil reserves estimated at 37.1 billion barrels, Nigeria punches below its weight.

Oil is the lifeblood of Africa’s largest economy. It provides about half of the government’s revenue and almost all of its foreign exchange earnings, as well as a large part of its presence on the world stage.

But it has also been underutilized as a resource for Nigeria’s 200 million people in the 64 years since its discovery due to bureaucratic bottlenecks, hiring delays and low local participation since Royal Dutch Shell first tapped a well in the swamps of the Niger Delta.

“Nigeria loves to open issues without closing them. You love to debate. There is always a new legislature in Nigeria about a new oil law. When there are such ongoing debates, it is difficult for investors looking for a long-term structure to know which direction to take,” said Patrick Pouyanne, CEO of TotalEnergies.

Pouyanne, who spoke to panelists at the Africa CEO Forum in Kigali, Rwanda, said inconsistency in policy-making decisions led to the diversion of the project from Nigeria to Angola, a country with a more stable political framework.

“We have countries that have perfectly integrated policies like Angola. So we went to Angola and announced a very big $6 billion project earlier in the week because their framework is stable. So we know where we are going,” Pouyane said.

Security concerns in the Niger Delta, the heart of Nigeria’s oil industry, have long been a deterrent to investors, according to experts surveyed by BusinessDay.

Earlier this month, the Nigerian government kicked off processes for the 2024 round of oil bidding, but ongoing concerns over a forced merger of bidders, accusations of favoritism and high signing bonuses could derail the process.

At stake are 12 oil blocks and five deep offshore assets from last year’s bidding exercise.

BusinessDay’s findings showed that of the more than 60 companies that won approvals in the latest round of marginal bidding, only about five have started production.

“Nigeria cannot afford to be complacent,” says Folabi Ogunrinola, a Lagos-based energy analyst. “Angola has made a very compelling case to investors, and Nigeria needs to address the challenges that have made it a less attractive option in recent years.”