The unstoppable rise of Africa’s upstream independents

As the oil and gas Majors scale back their mature non-core operations across Africa, an opportunity has arisen for smaller peers to step into the breach. A growing number of African firms have done just that, driving up indigenous companies’ share of overall African production to 8% — a sharp rise from just 1% in 2020.   

Our Africa Upstream experts have published an in-depth report based on Wood Mackenzie Lens Upstream data assessing the seemingly unstoppable rise of the continent’s upstream independents.  Fill out the form at the top of the page to download an abridged version of the report, or read on for a brief overview of the six key factors that are making Nigeria the epicentre of the indigenous African oil and gas industry. 

1. Nigeria has the right resource opportunities for independents 

Nigeria has more than 500 small and medium sized oil and gas fields located onshore and in shallow water, ranging in size from 10 to 250 million barrels of oil equivalent (mmboe). These assets are well-suited to the operational capacities of small companies. Over 100 indigenous independents participate in the country’s upstream sector, accounting for almost a quarter of Nigerian production. 

2. Local firms are better placed to deal with high country risk 

Nigeria’s oil and gas sector represents a complex regulatory and operational environment for foreign firms. High country risk has deterred foreign investment from international companies with lower risk tolerance. Small and mid-cap international E&Ps are absent from the Nigerian market  This has created more space for indigenous players who are better positioned to navigate Nigeria’s complexities. 

3. Nigerian government policies favour local companies 

Overseen by the Nigerian Content Development and Monitoring Board (NCDMB), local regulations including the Petroleum Industry Act (PIA) 2021 prioritise the participation of indigenous firms. Meanwhile, the competitive licensing framework, which typically issues smaller block sizes, supports this approach and is reinforced through periodic marginal field bid rounds.  

4. The country has a strong domestic skills base 

The withdrawal of the Majors has left behind a skilled local workforce with substantial upstream expertise and experience, often gained from working for leading international oil companies. At the same time, the NCDMB’s Oil and Gas Field Readiness Training Program aims to train over 10,000 graduates and technicians in skills identified as in high demand in the sector. 

5. Mature assets have been available as Majors withdraw

In the wake of the 2014 oil crash, international oil companies have increasingly withdrawn from high-risk regions like Nigeria and reallocated capital towards more profitable countries globally. This has enabled indigenous companies to increase their scale of operations by snapping up assets from departing Majors and non-African independents. What’s more, since these assets generate revenue, they make it easier for local independents to obtain financing. 

6. Indigenous companies were able to raise finance 

Prior to 2015, local Nigerian firms enjoyed good access to capital through a range of sources, including IPOs, the World Bank and local financial institutions. However, despite continuing strong potential, high local costs and security risks, along with the considerable debts of many indigenous firms and more global issues including volatile prices, mean that replicating these conditions going forward may prove more difficult. 

Don’t forget to fill out the form at the top of the page to access the report extract. This includes charts and data exploring indigenous producers’ share of production across African countries, indigenous M&A activity by deal type, Nigerian production by peer group and more.