Can a new board reform Nigeria’s national oil company?

Hello and welcome back to Energy Source, coming to you from New York and Lagos.

An arbitration court in London on Monday began hearing a bitter dispute between ExxonMobil and Chevron over ownership of a gigantic oil project with up to $1tn in reserves.

The US supermajors are battling over the right to acquire a 30 per cent stake in Guyana’s Stabroek oilfield, which is owned by Hess, a US energy company that agreed to a $53bn takeover by Chevron in September 2023.

Exxon, which owns 45 per cent of Stabroek, claims it has “right of first refusal” to buy Hess’s stake in the oilfield under the terms of a joint operating agreement with Hess and another partner, Cnooc, the Chinese oil and gas company.

Stabroek is one of the most lucrative oil discoveries in recent decades and has transformed Exxon’s fortunes, enabling it to reclaim its position as the most valuable US oil company after briefly losing it to Chevron. The outcome of the case has major implications for both companies and the wider industry, my colleague Jamie Smyth reports.

For today’s newsletter our west Africa correspondent Aanu Adeoye reports on the recent upheaval at Nigeria’s national oil company. The country’s president replaced the entire board last month as Africa’s largest crude producer tries to revive output and attract investment.

Thanks for reading — Benjamin

Nigeria’s national oil company hits refresh

When it came, it arrived in the dead of night. In April, Nigeria’s president fired the 11-person board of the state-owned Nigerian National Petroleum Company, including its longest-serving leader, in a statement released at about 3am.

The curiously timed sacking aside, it was a move industry watchers had expected since Bola Tinubu, Nigeria’s president, took power in 2023. 

Being the NNPC chief executive is one of the most important government roles in Nigeria, perhaps dwarfed in importance only by the presidency, and it was widely expected that Tinubu would bring his own man upon taking the mantle of the country’s leadership. When he not only kept Mele Kyari, NNPC’s leader since 2019, in the job but rewarded him with a second term four years later, observers of Nigeria’s oil industry were simply astounded. But Kyari’s long-expected sacking came after all, putting an end to an underwhelming tenure when oil production and investment fell.

NNPC has an enormous role in the functioning of Nigeria’s oil and gas industry. All oil exploration and production companies, both foreign and domestic, are mandated by law to operate their assets in a joint venture with the group, which manages Nigeria’s interests. And so whoever leads NNPC matters both for their ability to work closely with the energy companies drilling in Nigeria and for shepherding the state’s financial interests.

Reforming the NNPC has been a topic of discussion for successive governments and a national pastime. The company has long been dogged by accusations of mismanagement and embezzlement; a national scandal briefly erupted a decade ago when the then central bank governor alleged NNPC had failed to remit $20bn to the state’s coffers over a two-year period. More recently, the World Bank said this month that the NNPC had been remitting only about half of the savings from Tinubu’s elimination of fuel subsidies.

The man now tasked with setting NNPC on the right path is Bashir Ojulari, an experienced player in Nigeria’s oil industry. Ojulari previously served as managing director of Shell’s Nigeria deepwater exploration and production unit and was most recently chief operating officer of Renaissance Africa Energy, the consortium that acquired Shell’s Nigeria onshore division.

Clementine Wallop, director for sub-Saharan Africa at Horizon Engage, a consultancy, said she was heartened by the appointments of Ojulari and other board members, including chair Musa Kida, a former Total executive.

“It is absolutely relevant that the new crew are drawn from international energy companies and are the best of Nigeria exploration and production talent,” said Wallop. “The point is having people in place who understand and are prepared to address the concerns and needs of Nigeria’s biggest foreign investors.”

Nigeria’s oil industry is in the middle of a historic shift in ownership of onshore assets as international oil majors retreat and domestic companies step in to replace them. Ian Thom, upstream research director at Wood Mackenzie, said NNPC had a “big role to play” as a partner to the local companies acquiring these assets to ensure their success.

Ensuring Nigeria became a top destination for large-scale deepwater projects would also be a critical priority for NNPC’s new leadership, said Thom. Shell’s planned $5bn investment in the Bonga North project, a deepwater field 130km off the west African coast, announced last year, was Nigeria’s first such project in more than a decade.

“There needs to be a recognition it’s really competitive in the market for major capital projects and only the best projects are going to win investment particularly with the weakness in the oil price over the past month,” Thom said. “It’s about pulling on every lever to make projects competitive . . . with that you give investors more reasons to commit to these projects.”

Sorting out NNPC’s messy finances is also on the in tray. NNPC has a number of loans with trading houses that get thousands of barrels a day in exchange for their money. It has a $3.3bn crude-for-cash loan with the Cairo-based African Export-Import Bank and last year was reportedly seeking another $2bn loan. NNPC acknowledged last year that it owed $6bn to its petrol suppliers. Although the country’s finance minister has said NNPC has begun paying down this debt, it’s unclear how much has been paid off considering the dire state of the company’s books.

There is also the matter of NNPC’s listing as a public company, a process that was kick-started four years ago but has yet to meaningfully progress. Other attempts to revitalise NNPC have yet to bear fruit. For example, although it was restructured as a commercial entity three years ago, the company remains under presidential control and with the government as its only shareholder.

Kida, the new chair, told reporters last week that the task before the board was “huge”. “But we are deeply honoured to be part of the very select few, called upon by the president to reform the oil sector.”

Nigeria needs NNPC to succeed. Despite attempts to diversify Nigeria’s exports, crude oil sales made up 70 per cent of the country’s export revenues and funds more than half of government spending.

“What the board refresh does is to say that for Nigeria upstream to succeed NNPC needs to be performing really well, at the top of its game,” Wood Mackenzie’s Thom said. “This is a fresh mandate and a new team to bring new ideas and energy to that objective. This cuts across investment, production and through to the downstream.” (Aanu Adeoye)

Power Points

The UK is likely to fall significantly short of its five-year target for offshore wind power, according to a new analysis.

US oil executives are warning that a decade-long shale boom is ending as President Donald Trump’s tariffs push up costs and falling crude prices squeeze profits.

Thermal coal prices could fall further from around their four-year low, said analysts, as surging production in China leads to a glut across global markets

Energy Source is written and edited by Jamie Smyth, Martha Muir, Alexandra White, Tom Wilson and Malcolm Moore, with support from the FT’s global team of reporters. Reach us at energy.source@ft.com and follow us on X at @FTEnergy. Catch up on past editions of the newsletter here.