The ongoing disinvestment by international oil companies (IOCs) operating in Nigeria’s oil and gas industry may be causing alarm in some quarters, but the country’s oil industry leaders say the move is good for indigenous participation in core upstream activities.

Chevron, ConocoPhillips, Total, Agip, and Shell’s Nigerian unit, Shell Petroleum Development Co. of Nigeria Ltd. (SPDC), the largest oil company in Nigeria, have announced either the sale or plans to sell some of their oil holdings in Nigeria.

“SPDC has been following a strategy of selective divestments of its onshore portfolio, concentrating the operating footprint into a smaller, more contiguous area, while supporting the government’s policy of encouraging investment by indigenous companies in the Nigerian oil and gas industry,” said Mutiu Sunmonu, the company’s managing director.

Since 2010, SPDC has sold its interest in eight oil mining licenses (OMLs) for a total of US $1.8 billion, Sunmonu disclosed. Total and Eni also have sold their shares in at least five oil blocks in the country since that year.

However, Shell plans to sell four more onshore blocks in its disinvestment drive. They are OMLs 18, 24, 25, and 29 located in the Niger Delta, according to oil officials familiar with the company. The blocks, they said, have a combined production of around 70,000 b/d.

“Unabated crude oil theft, lower output from some of the fields, and troublesome relationships with host communities are partly the reasons for the intended sales,” an oil expert in Lagos said. He added Shell wanted to redirect its efforts offshore, where its assets are considered safer and not prone to militant attacks and production disruption.

In a clear confirmation of this position, Sunmonu said “Nigeria remains an important part of Shell’s portfolio, with clear growth potential, particularly in deepwater and onshore gas. This strategic review marks another step in re-focusing the SPDC portfolio.”

ConocoPhillips also in December 2012 said it had agreed to sell its oil assets in Nigeria to Oando Energy Resources Inc., a subsidiary of Oando Plc. ConocoPhillips aims to raise money to join in the drilling for shale oil in the US. Oando said in a release dated Oct. 10, 2013, that it initially paid a $435 million deposit to ConocoPhillips and requires approximately $1.2 billion to complete the acquisition of the ConocoPhillips Nigerian upstream oil and gas business by Nov. 30, 2013.

ConocoPhillips had expected the deal to close in the first half of 2013.

Oando Energy Resources Inc. said in the release that it had received commitment letters for up to $815 million of bank credit facilities which “will be largely applied towards payment of the purchase price in respect of its proposed acquisition of ConocoPhillips’ Nigerian upstream and gas business.”

Pade Durotoye, CEO of Oando Energy Resources, said “the receipt of the commitment letters represents an important step towards closing the ConocoPhillips acquisition and concludes the second stage in our financing plan, having initially paid a $435 million deposit to ConocoPhillips.”

Top Nigerian oil officials have dismissed insinuations by some that the recent spate of disinvestments of certain onshore assets by some IOCs may lead to crisis in Nigeria’s oil and gas industry.

Andrew Yakubu, managing director of state-run Nigerian National Petroleum Corp. (NNPC), said the reported disinvestments “are not only healthy for the oil and gas industry in Nigeria but would also go a long way in promoting effective indigenous participation in core upstream activities.

“These are not withdrawals in the real sense of withdrawals. The fact is that a number of these IOCs are moving into more challenging frontiers in the deep offshore and are leaving the onshore blocks which they consider less challenging,” Yakubu said in a NNPC news release.

According to Yakubu, major players that are divesting have actually been sitting on those acreages and have allowed them to go fallow for years without significant development.

“So it is only fair for them to release these blocks so that others, especially the indigenous operators can have the blocks and grow in the upstream business. This indeed is a good development, and I think we are moving in the right direction,” Yakubu said.

Local oil companies led by the Nigerian Petroleum Development Co. (NPDC), the E&P arm of the NNPC, produce a small percentage of Nigeria’s oil.

Of the 2.48 MMb/d of oil produced by Nigeria in 2012, the entire production by indigenous companies totaled 276,000 b/d, accounting for about 11% of the country's production in that year, Segun Adeniyi, a spokesman for former Nigerian President Umaru Yar’Adua, said in a paper published in This Day.

The IOCs produce around 90% of Nigeria’s oil annually. But that figure could go down in the next few years if the indigenous companies now acquiring IOCs’ oil and gas assets get their acts together: raise the necessary finance, acquire technology, and put in place good management and technical staff.

Also, the Nigerian government must ensure policy consistency in the oil and gas industry, create an enabling environment for the indigenous and IOCs to thrive, reduce or stamp out endemic oil theft, illegal bunkering, piracy, destruction of gas assets in the Niger Delta, and ensure the passage of the Petroleum Industry Bill (PIB). The bill was initially drafted in 2008 to provide a legal and regulatory framework for the Nigerian Petroleum Industry. It hasn’t been passed into law by the Nigerian parliament.

The indigenous oil and gas producers include the NPDC, Sepalt Petroleum, Pan Ocean, Oando Energy Resources, Seven Energy Ltd., and South Atlantic Petroleum.

Yakubu believes the disinvestment by the oil majors offers immense opportunities for NPDC, the nation’s indigenous flagship upstream operator, to grow its capacity and capability especially as it thrives to meet the aggressive target of daily crude production of 250,000 b/d by 2020.

If that happens, it will help Nigeria’s efforts to raise its daily production to 3 MMb/d by 2020. Nigeria also plans to increase its oil reserves to 40 Bbbl from the current 35 Bbbl by the same year.