Nigerias oil sector is a shadow of its bustling self as foreign direct investment (FDI) plummets from billions of dollars to mere trickles in millions.

DI in the sector fell to less than half a billion dollars in the first half of 2023, with the full-year figure unlikely to match a peak of $22.5 billion in 2019.

When an oil executive said Nigeria needed $25 billion per annum in investments to be able to achieve a production target of 2 million barrels daily, the task at hand for Nigeria came into better perspective.

The 2010s witnessed a period of significant FDI from international companies eager to tap into the countrys vast oil and gas reserves as the future for Nigerias nascent indigenous upstream oil and gas industry looked bright, almost dazzlingly so.

In 2014, Nigeria attracted the largest amount of FDI of any African country, with inflows exceeding $22.1 billion. This influx of capital fueled major projects, including deepwater exploration and development of new oil fields.

Oil was selling for more than $100 a barrel, as much as twice the production costs in Nigerias trickiest deepwater fields and several multiples of those in its shallow water and onshore fields.

Nigerias oil rigs, which depicts the level of oil fields averaged 35 rig counts in 2014, a development that translated to increased crude production as Nigerias output averaged 2.2 million barrels per day.

In August 2014 the perfect storm of collapsing oil prices arrived, said Carlos Hardenberg, lead portfolio manager of Templeton Emerging Markets Investment Trust. The naira fell, investors fled and Niger Delta militants who wanted a greater share of the countrys energy wealth struck.

Little has changed since then.

The countrys appeal had been tarnished by security problems that have only worsened since.

Compounding this internal rot is the exodus of oil majors such as Shell, ExxonMobil, Eni and TotalEnergies that once buzzed with the rhythm of the pumps, now echo with the silence of departure.

The pain of this large-scale theft and vandalism, as well as decades of under-investment in infrastructure, was so severe that in April 2023, the country produced less than one million barrels of oil daily, far below its 1.8m bpd Organisation of Petroleum Exporting Countries quota.

In March, Nigerias oil production stood at 1.23m bpd.

Nigeria currently needs $25 billion annually to stabilise its oil production at 2 million bpd, Austin Avuru, executive chairman of AA Holdings said at the Harvard Business School (Association of Nigeria) event in Nigerias commercial capital.

The Nigerian oil and gas industry was totally sidelined by foreign investors in the second quarter of 2023 for the first time on record with zero FDI, as the once lucrative sector attracted no capital inflow in the latest review quarter.

In the first quarter of 2023, oil FDI stood at a mere $750,000.

The countrys National Bureau of Statistics has not published its full-year 2023 FDI reports and its 2024 first-quarter FDI report, but it doesnt take a seer to understand that the oil sector is flailing.

Prioritising political interests over transparency and due process in asset sales has led to corruption, mismanagement, and ultimately, the underperformance of the sector, Avuru said.

He noted that those who should manage the process for a smooth transition from oil majors to local operators turned it into an Approval Power Play.

Political connections rather than capacity became the qualifying criteria, in the absence of guidelines and defined processes, Avuru explained.

He noted that a long-drawn process meant that neither the divesting nor the acquiring entity was investing in the assets.

Much worse, most of the evacuation infrastructure fell into ˜no mans land and the divesting IOCs stopped investing in their maintenance and surveillance, Avuru said.

A predictable noticeable and measurable decline in production set in but we chose to blame it all on Crude Oil theft, he added.

BusinessDays findings showed fields that once accounted for more than two-thirds of all Nigerian oil production no longer represent value for multinationals, whose access to financing is critical for their development.

Divestments by oil majors used to provide local operators an opportunity to prove their mettle, taking declining fields past production peaks, and improving host community relations to deliver higher royalties to the government; now local operators are scrambling to extract value from divested fields, Tunji Oyebanji, an energy lawyer at a Lagos-based oil firm said.

Last week, the federal government of Nigeria, through the Ministry of Petroleum, announced its expecting to achieve a minimum of $20 billion worth of investment in the coming months. (BusinessDay)

Oil rig