Big benefits of investing in Africa's upstream sector

Fiyinfolu Okedare is director at Forvis Mazars in Nigeria

Nigeria, Africa's largest oil producer, has a well-established oil and gas industry producing in 2020 an average of 1.9m barrels of oil per day and 130,3Gl of sales gas.

With over 220 fields and more than 160 operators, despite challenges such as political instability and the impact of Covid-19, the market is projected to grow.

The Nigerian oil and gas upstream market is estimated at 133.9Ml in 2024, rising to 143.9Ml by 2029, with a compound annual growth rate (CAGR) of 1.45%.

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Chevron Nigeria Limited exemplifies a successful operator in the Nigerian upstream sector.

With a presence for over 50 years, Chevron has consistently invested in local infrastructure and community development, demonstrating a commitment to sustainable operations.

The company operates multiple oil mining leases and is involved in joint ventures with the Nigerian National Petroleum Corporation (NNPC), accounting for a huge portion of the country’s oil production.

Focus on innovation

Chevron's focus on innovation, including advanced drilling technologies and gas infrastructure development, positions it as a leader in optimising production and minimising environmental impact.

Currently, five major international oil companies (IOCs) – Chevron, Eni, ExxonMobil, Shell, and TotalEnergies – are active in Nigeria. Together, they hold equity in over 110 Oil Mining Licenses (OMLs) and account for approximately 45% of the country’s oil production and 40% of gas sales.

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Furthermore, these companies control around 69% of Nigeria’s remaining commercial oil reserves and 74% of its gas reserves, presenting new opportunities for investors interested in brownfield assets with significant growth potential.

Recent developments, including two multi-billion-dollar asset sales to local players by international majors and new sector reforms, are generating cautious optimism within the market.

Revitalised investment market

Despite ongoing challenges related to security and theft, these changes could pave the way for a revitalised investment climate in Nigeria's upstream sector.

Ghana has emerged as a key player in West Africa’s oil landscape, particularly with the Jubilee Field, which has seen significant production since its discovery.

Tullow Oil and Kosmos Energy are notable operators with strong track records in the region.

Their focus on sustainable practices and community engagement has helped mitigate risks, making Ghana an attractive destination for further investment.

Investment potential in West Africa is immense, fuelled by proven reserves of 32.5bn barrels of oil and 5,29Pl of gas.

Key opportunities include:

• Established exploration and production (E&P) companies provide robust avenues for investment. Investors can benefit from existing production capabilities and experienced management teams.
• Collaborating with local partners enhances access to regulatory expertise and community relations, mitigating risks associated with new market entries.
• Investing in existing fields needing redevelopment offers cost-effective production increases.
• West Africa’s deepwater basins hold significant untapped potential, making investments in these areas high-reward and high-risk.
• Companies focused on developing innovative technologies for efficiency and safety are critical for the sector's future. Investments in these areas promise significant returns.

Southern frontier

While Nigeria leads in oil production, Southern Africa presents a growing frontier for upstream investments.

Angola's rich offshore reserves, particularly in deepwater exploration, present significant investment opportunities.

Companies like Eni and BP have successfully operated in the region for years, contributing to the development of local capacity and technology transfer.

As Angola seeks to revitalise its oil sector through strategic partnerships and modernisation, investors can find lucrative opportunities in this evolving landscape.

Mzansi for sure

South Africa is similarly rich in untapped resources, particularly in its offshore basins.

The country’s upstream sector, traditionally focused on coal, is beginning to embrace oil and gas exploration, particularly offshore.

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TotalEnergies and Shell are leading initiatives to explore untapped reserves, combining their expertise with local knowledge.

The country’s transition to cleaner energy sources is fostering a dynamic investment environment, particularly for companies that can balance traditional oil and gas activities with renewable energy ventures.

TotalEnergies has made significant strides through its exploration activities off the coast of the Western Cape. The company has invested in several offshore blocks and has made notable discoveries in the region. Its commitment to sustainable energy practices, including investments in renewable energy projects, showcases TotalEnergies' dual focus on traditional and emerging energy markets, making it an attractive partner for future investments.

The recent discoveries of vast natural gas reserves in Mozambique have positioned the country as a potential hub for LNG production.

Companies like Anadarko and TotalEnergies have made significant investments in LNG projects, highlighting the importance of long-term strategic planning.

These investments not only promise substantial returns but also contribute to local economic development through job creation and infrastructure enhancement.

Lucrative opportunities

The Southern and West African upstream oil and gas sector presents lucrative investment opportunities, particularly for companies with a proven track record.

As demonstrated by the successes of Chevron in Nigeria and TotalEnergies in South Africa, strategic investments and collaborations can yield substantial returns.

By focusing on established players and understanding the local landscape, investors can position themselves to capitalise on the region's promising future.