International oil companies have decided to leave Nigerian onshore resources alone and focus on developing deepwater offshore deposits, due to the dangers (such as kidnapping, sabotage, and theft) associated with onshore production in Africa’s largest producer.
After more than 40 years operating in Nigeria, Shell is leading the migration from onshore to offshore plants, selling eight of its onshore leases over the past three years. Chevron has just announced it plans to sell five fields, and Total and Eni have also sold shares in some of their assets as they look to follow suit and leave the land.
Rolake Akinkugbe, the head of oil and gas research at Ecobank Research, told Bloomberg that “due to the increased level of oil theft and disruptions, a number of oil companies have started selling blocks in the troubled areas and moving to deep water offshore blocks. The move offshore is being viewed as a longer-term solution to the challenges faced onshore and in the shallow waters.”
The majority of attacks have been carried out by the Movement for the Emancipation of the Niger Delta(MEND), with Bloomberg suggesting that Nigeria’s oil output fell by 28% between 2006 and 2009. In 2009 the government offered amnesty to thousands of the militant fighters, leading to a fall in the number of attacks and an increase in production. But last year crime picked up as the rebel groups decided that the government hadn’t kept to the agreed terms of the amnesty offer by meeting demands and increasing the local benefits from crude oil production.
MEND has announced that it has renewed its attacks on the oil industry.
With output now on hold at nearly 40 percent of all onshore fields due to the armed attacks, and the increasing investment in offshore developments, deepwater platforms, which only began producing 10 years ago, now account for more than half of the country’s entire output.
This piece has been cross-posted from Oil Price with permission.