Although production has flared on for years, the energy sector in Nigeria remains widely untapped. While a huge domestic and regional market exist, servicing it optimally has been difficult due to the lack of adequate funding the sector has received. According to professional projections, the energy sector in Nigeria needs approximately $1 trillion to perform optimally. These projections were calculated against a 30 year period.
However, while a current $20 billion present funding level signals good opportunities for investment, it’s important to know these operations involved so as to project for maximum ROI. Since the discovery of oil around the start of the 20th century in the Niger Delta region, oil exploration and exportation has impacted the country tremendously. By the start of the 21st century, oil and gas exports accounted for over 95% of Nigeria’s export earnings, while boosting federal government revenue by over 80%. Budgetary revenues increased by over 60% and foreign exchange earnings climbed to 95%.
The oil and gas industry has enabled the country to gain credible affluence in Africa as well as the rest of the world. Investing in oil and gas exploration provides another opportunity for individuals and organizations to take advantage of a major national resource.
Unlike other investments, investing in the oil and gas industry requires following certain procedures as well as having enough information about the various types of operations and what the investment plan should look like.
We’ve compiled a list of 5 lucrative investment opportunities which investors can take advantage of in the oil and gas industry.
1. Open Acreage Licensing
Licensing rounds are usually held by the government on a periodic basis to award operators control over the open acreages. There are about 215 open acreages onshore, shallow offshore and deepwater. Participation in the licensing rounds usually requires registration under the Corporate Affairs Division. If done right, the ROI could be astronomical.
2. Marginal Fields
Although 18 marginal fields were awarded to indigenous companies by the federal government, only half of that number has steadily managed to produce oil through the last 12 years. This is usually due to the high level of difficulty indigenous companies face in order to secure investments. Investing in these companies is a good way to maximise investment returns, even if you have little knowledge of the upstream operations.
3. Mergers and Acquisitions
M&A’s In the upstream sector are also very lucrative investment opportunities. It usually involves the investor having to agree to very substantial amount of risk/reward sharing. While bearing more financial responsibility can be strenuous, the rewards are usually worth it. Investors team up with an operator who has a track record of excellent upstream asset management. Because these operators usually find it difficult to keep up with price fluctuations, it presents an opportunity for investors looking to finance upstream assets.
4. Modular Refineries
This opportunity is more midstream and has become the best solution for catering to domestic fuel demands. Building effective modular plants has risen to the top of the energy agenda and is gradually being embraced by other West African countries. As plans are made to construct more refineries, it presents a huge opportunity for investment.
5. Local Gas Distribution Companies (LDC)
With pipeline distribution proving to be the most efficient means of natural gas distribution, ahead of tankers and bottling, the government has been strengthening efforts to secure existing pipelines as they look to construct more. The high cost of pipeline construction and maintenance presents a huge opportunity for interested investors to get involved by funding the various pipeline projects.