Nigeria
Nigeria is a member of OPEC and has historically been Africa’s largest crude oil producer. The country possesses over 37 billion barrels of proven oil reserves and more than 200 trillion cubic feet (Tcf) of natural gas. The key basins for oil production include the Niger Delta (both onshore and offshore) and the Deepwater Bight of Bonny.
In 2021, the Petroleum Industry Act (PIA) was passed, which significantly overhauled the fiscal terms governing the oil sector. This legislation commercialized the Nigerian National Petroleum Corporation (NNPC) by transforming it into NNPC Ltd. It also introduced the Host Community Development Trust to support local communities.
Major players such as Shell, TotalEnergies, Chevron, and ExxonMobil are investing heavily in offshore production as part of the ongoing deepwater expansion. Additionally, Nigeria is focusing on a gas-centered future through its “Decade of Gas” initiative, which emphasizes gas-to-power projects, industrial gas use, and liquefied natural gas (LNG) development.
Ghana
Ghana discovered oil in 2007 with the Jubilee field and achieved its first oil production in 2010. The country currently produces approximately 160,000 barrels per day. Key production fields include Jubilee, TEN, and Sankofa, all of which are deepwater offshore sites.
Ghana has established transparent legal and regulatory frameworks for its oil sector. The Petroleum Commission is responsible for overseeing upstream regulation, while the Ghana National Petroleum Corporation is actively involved in exploration and partnerships. There is a strong focus on gas monetization to enhance domestic power generation, and the country is expanding its oil production through drilling campaigns and upgrades to floating production, storage, and offloading (FPSO) units.
Key Investor Priorities in African Oil & Gas
When investing in oil and gas in Africa, we focus on a mix of global sector fundamentals and Africa-specific factors. This approach strikes a balance between risk management, value creation, and strategic positioning within the continent’s dynamic political, economic, and resource environments.
Resource Quality and Asset Potential
- Low breakeven costs: Fields with favorable economics even at moderate oil prices.
- Gas monetization potential: Especially important in gas-rich countries.
- Large, untapped reserves: Preference for basins with significant upside.
Political and Regulatory Stability
- Transparent legal frameworks: Stable licensing regimes, fiscal terms, and contract enforcement (e.g. Ghana).
- Minimal political interference: Avoiding jurisdictions with excessive renegotiations, nationalizations, or corruption.
- Policy continuity: Crucial for long-term CAPEX-heavy projects.
Return on Investment and Fiscal Terms
- Attractive tax and royalty regimes: We compare Production Sharing Contracts, royalties, and capital recovery terms across countries.
- Profit repatriation guarantees: Especially important for dollarized returns in FX-restricted markets.
- Stability clauses in contracts: To protect against sudden legal or tax changes.
Security and Operational Risk
- Geopolitical stability: Key in high-risk zones (e.g. Niger Delta).
- Infrastructure protection: Pipelines, LNG facilities, and rigs must be shielded from sabotage or insurgency.
- Insurance and risk mitigation: Availability of risk-sharing mechanisms and political risk insurance (e.g. from MIGA, AfDB).
Infrastructure and Market Access
- Proximity to ports, refineries, and pipelines: Lower capex and quicker route to market.
- Access to regional or export markets: Especially for landlocked countries.
- Gas and power infrastructure: Opportunities to link upstream gas to power generation and industrial use.
Partner Quality and Government Relations
- Strong NOC partners: Competent and commercially minded (e.g. Sonatrach, NNPC Ltd post-reform).
- Reputable join venture (JV) structures: Prefer international consortia with robust project governance.
- Engagement with host governments: Ability to negotiate, navigate bureaucracy, and maintain positive relations.
ESG Compliance and Energy Transition Positioning
- Climate risk mitigation: Preference for low-emission operations, gas over oil, and carbon capture readiness.
- ESG credentials: Critical for accessing global capital, especially from development finance institutions or green funds.
- Social license to operate: Alignment with community interests, local content, and transparency (e.g. EITI compliance).
Exit and Monetization Options
- Clear exit strategies: IPO potential, asset sales, or M&A with majors.
- Attractive farm-in/out opportunities: To bring in technical or financial partners.
- Government and community buy-in: Ensures smooth divestment or scale-up.
Currency and Repatriation Risk
- Stable foreign exchange regime: Vital for ROI calculation in high-volatility countries (e.g. Nigeria, Angola).
- Hedging instruments and protections: Mitigates devaluation or convertibility issues.
Strategic Timing and Market Entry
- Early-mover advantage in frontier markets (e.g. Namibia, Sierra Leone).
- Post-reform investment windows (e.g. Nigeria’s post-PIA landscape).
- Clarity on when a project is shovel-ready.
Key Market Players in Nigeria and Ghana
Nigeria
TotalEnergies
Presence: A major upstream player with both offshore and onshore assets.
Key Assets:
- Operates the Egina FPSO, a deepwater oil field, which is the largest single investment in Nigeria to date.
- A key stakeholder (15% share) in Nigeria LNG (NLNG).
Highlights:
- Leading deepwater operator.
- Strong focus on gas development, aligning with Nigeria’s “Decade of Gas” strategy.
- Actively involved in corporate social responsibility and local capacity development.
Shell
Presence: Operating in Nigeria for over 80 years; active in upstream (Shell Petroleum Development Company [SPDC], SNEPCo), midstream (NLNG), and power sectors.
Key Assets:
- SPDC: Operates onshore oil and gas assets, and is currently divesting those interests.
- Bonga field (deepwater): Operated by Shell Nigeria Exploration and Production Company (SNEPCo).
- Stakeholder in NLNG.
Highlights:
- Played a significant role in Nigeria’s upstream development history.
- Currently divesting onshore interests to focus on offshore and gas activities.
- Advocating for energy transition and environmental remediation.
ExxonMobil
Presence: Active in shallow and deep offshore oil and gas production through Mobil Producing Nigeria Unlimited.
Key Assets:
- JV with NNPC Ltd in offshore Oil Mining Licenses (OMLs) 67, 68, and 70.
- Operates the Qua Iboe Terminal, which is an export point for crude oil.
- Shareholder in NLNG.
Highlights:
- One of the largest oil producers in Nigeria.
- Attempted divestment of shallow water assets to Seplat Energy; as of 2024, this is still pending regulatory approval.
- Focused on deepwater and LNG potential.
Chevron
Presence: A major operator in both onshore and offshore oil and gas through Chevron Nigeria Limited (CNL).
Key Assets:
- JV with NNPC in onshore/swamp OMLs 49, 90, and 95.
- Agbami deepwater field, one of the largest deepwater fields in Nigeria.
- Key participant in the Escravos Gas-to-Liquids project and the Escravos Terminal.
Highlights:
- Strong player in gas and condensate.
- Prioritizes community engagement and social investments.
- Supports Nigeria’s gas-to-power strategy.
Equinor
Presence: Minority partner in deep offshore assets.
Key Assets:
- Partner in the Agbami field (with Chevron as operator).
- Previously held stakes in unproduced assets.
Highlights:
- Smaller footprint compared to larger peers.
- Focused on deepwater and carbon-efficient assets.
- Advocates for ESG-aligned strategies and selective investments in Africa.
Ghana
TotalEnergies:
Presence: Re-entered Ghana’s upstream sector in 2021.
Key Assets:
- Holds stakes in the Deepwater Tano Cape Three Points block.
Highlights:
- Exploring expansion opportunities in offshore Ghana.
- Currently does not have assets at the development stage but sees Ghana as a growth market.
Shell:
Presence: No direct upstream operations in Ghana.
Involvement:
- Supplies LNG to Ghana through Shell’s trading arm.
- Supports gas import and regasification through partnerships.
Highlights:
- Focused on LNG-to-power solutions and energy trading.
- Shell’s strategy aligns with Ghana’s increasing gas demand.
Opportunities and Strategic Trends
Despite the global transition to alternative energy sources, oil and gas will continue to play a crucial role in Africa’s energy and economic landscape in the coming decades.
Africa possesses over 500 Tcf of proven natural gas reserves. Growing global demand for LNG in markets such as Europe and Asia provides Africa with strategic leverage. Key projects include the Mozambique LNG, the expansion of Nigeria LNG, the Senegal-Mauritania Grand Tortue Ahmeyim project, and the Tanzania LNG initiative.
Countries like Namibia, Côte d’Ivoire, Senegal, and Uganda are attracting significant interest due to new, substantial oil and gas discoveries. These developments could significantly reshape Africa’s oil landscape by the 2030s.
The African Continental Free Trade Area and initiatives such as the Nigeria-Morocco Gas Pipeline and the East African Crude Oil Pipeline are expected to enhance intra-African trade and collaboration. Pan-African gas corridors and power pooling are currently being developed to further facilitate these efforts.
There is a strong push to refine more crude oil domestically, exemplified by initiatives like the Dangote Refinery in Nigeria. Efforts are also underway to strengthen the petrochemicals, liquefied petroleum gas, and fertilizer industries to create additional value.
Advancements in AI, remote operations, and data analytics are improving exploration efficiency and reducing costs. Emerging digital regulatory platforms, such as Ghana’s Petroleum Register, are also being introduced.
Risks
There is an increasing challenge in accessing funding due to ESG mandates. Institutions are pushing to shift away from fossil fuels, even though Africa contributes only about 3% of global emissions.
Frequent changes in fiscal regimes discourage long-term investment. Additionally, there are implementation gaps in newly reformed laws, such as the PIA in Nigeria.
Threats in key production areas, such as Mozambique, Nigeria, and Libya, disrupt investment and operational activities.
The lack of sufficient pipelines, power grids, LNG terminals, and storage facilities limits the monetization of resources.
The industry in Nigeria faces several challenges, including oil theft and pipeline vandalism, particularly in onshore regions. Other issues include underinvestment leading to project delays, foreign exchange instability and concerns regarding repatriation, and regulatory uncertainty during the implementation of the PIA.
On the other hand, the oil sector in Ghana faces challenges such as plateauing production from mature fields and the necessity for successful exploration efforts to replace depleted reserves. Additionally, issues like gas flaring and limited midstream infrastructure need to be addressed.