PwC Encourages South African Investment in Nigeria's Upstream Oil Sector for Refinery Supply Security

PricewaterhouseCoopers (PwC) is advising South African investors, financial institutions, and policymakers to secure direct interests in Nigeria’s upstream oil sector. This strategy aims to guarantee a steady supply of crude oil for their domestic refineries, mirroring successful approaches by European and American energy giants in achieving energy security.

This recommendation comes as the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has encouraged members of the Crude Oil Refinery Owners Association of Nigeria (CORAN) to explore acquiring oil blocks in forthcoming licensing rounds as a sustainable measure to address crude supply challenges.

Pedro Omontuemhen, PwC's Partner and Africa Oil and Gas Leader, made this appeal in Lagos during the Fourth South Africa Week event, which focused on "Repositioning and Promoting Energy Investments between South Africa and Nigeria."

Omontuemhen highlighted that the economies of both nations possess complementary strengths in oil, gas, renewables, and critical infrastructure, presenting opportunities for scalable, cross-border energy investments.

He posed the question to South African stakeholders about potential investment avenues in Nigeria, particularly in light of the Dangote Refinery's ambition to supply petroleum products across the African continent.

Omontuemhen noted that South Africa has limited domestic oil production, despite ongoing exploration activities in the Orange Basin.

He pointed out that neighbouring Namibia, situated in the same sedimentary basin, has discovered oil, suggesting a similar potential for South Africa, though currently unrealized.

The PwC leader urged South African companies to emulate the model of international oil companies (IOCs) by investing in Nigeria's oil exploration and production sector, thereby securing crude for their national refineries.

"If I was South African, I would take the examples of the Americans or the British who came to Nigeria and invested in oil in Nigeria, and they took the oil back home to refine. Because South Africa at the moment is importing a lot of the oil they are refining," Omontuemhen explained.

He elaborated, "Why can’t the South African businessman or the South African bank, the DBSA, invest in oil in Nigeria and then take the oil? Because that’s your share of the crude, you take it back to South Africa, so that way, you’re also securing your supply, which is what the British and Americans did."

He referenced international players like ExxonMobil and Total, noting their investments in Nigerian oil and subsequent repatriation of crude for refining in their home countries.

Omontuemhen encouraged South African participation in Nigeria’s current oil block auction, which features 50 blocks across various terrains including onshore, swamp, shallow, and deep waters.

"Look for credible businessmen in the room here who you can invest in the oil. You take the crude oil and take it back to South Africa, that way, you’re actually securing your supply. And I think you should also do the same thing when you come to Namibia," he advised.

Discussing opportunities in both Nigerian and South African upstream oil and gas sectors, Omontuemhen mentioned potential in joint exploration, production sharing agreements, and technology transfer.

He specifically highlighted Nigeria’s deep-water assets as offering premium opportunities for South African technical partners.

Regarding gas, Omontuemhen sees significant value in monetizing Nigeria’s gas flares and supplying South Africa’s energy transition needs, noting that a combined liquefied natural gas (LNG) value chain could unlock multi-billion- dollar potential.

In the renewable energy space, he suggested that South Africa’s expertise in solar and wind power could be combined with Nigeria’s abundant solar irradiation for utility-scale projects and distributed energy solutions.

Omontuemhen strongly advocated for dual listings of companies on both Nigerian and South African stock exchanges to enhance access to capital markets, boost liquidity, increase visibility, and attract broader investor participation.

Citing Seplat's dual listing on Nigerian and London exchanges as an example, he questioned why Nigerian oil and gas companies were not also listed in South Africa and what steps could make such listings more appealing.

He recalled Oando's previous unsuccessful attempt at a Johannesburg listing, suggesting that other Nigerian firms could learn from such experiences and pursue dual listings successfully.

Omontuemhen also pointed out that South African technology remains underutilized in Nigeria.

He stated, "Sasol developed a technology that Chevron copied and it’s all over the world. Why are more companies in Nigeria not using the Sasol technology? To take your stranded gas and make it more valuable, so you can have your naphtha and your diesel."

He described South Africa’s financial sector as a source of affordable capital, noting that its banks possess well-established, long-standing capital reserves.

"So we can tap on that resource as Nigerians to produce here in Nigeria. Can you guys come and invest and participate in what we are doing?"

Omontuemhen added, "Nigeria has huge resources, huge population. South Africa, good technology, well-structured, and systems that work. So we can collaborate as two giants of Africa to make our country even much better and to make the continent much, much better."

He emphasized the critical role of private investors in mobilizing capital, accelerating project delivery, and improving operational performance across the energy value chain, working alongside governments to de-risk investments and foster growth.

Referring to Nigeria and South Africa as the two largest economies in Sub- Saharan Africa, with Nigeria contributing 40% and South Africa 19% to the continent's GDP respectively, Omontuemhen noted a stark difference in their power generation capacities.

He stated that South Africa has 55.4 gigawatts of installed power capacity, while Nigeria has only 14GW for a significantly larger population, indicating greater energy poverty per capita in Nigeria.

Omontuemhen highlighted recent merger and acquisition (M&A;) activities in Nigeria’s oil and gas sector, including deals involving Seplat-ExxonMobil, Renaissance and Shell Petroleum Development Company (SPDC), Oando and Eni, and Axxela-Blue Coal.

He observed, "So there are deals going on, so even in the midst of all of these issues we’re talking about, there are still huge opportunities to make money."

He further commented, "If you look at the acquisition that happened in the oil and gas field, for example, most of those monies have either come from locally or from other African countries. The rest of the world is not as interested in investing in us. So the need for what I call South-South collaboration, Africa collaboration is much stronger."

Omontuemhen acknowledged a growing interest from the private sector, supported by ongoing policy reforms aimed at achieving better outcomes.

He mentioned the Electricity Act and tariff adjustments as examples of policies that are unlocking potential.

He expressed optimism, stating, "The market potential is huge. I think that kind of gives me joy that, even though in the midst of darkness, in Nigeria, light will come."

He concluded, "So Nigeria and South Africa, if it’s going to be, it’s up to us. We have a role to play to ensure that our country gets better. Why, we’re not talking to each other, why, we’re not doing projects jointly, and then this will lead to local capacity development, job creation, and long-term sustainability."

Meanwhile, amidst reported crude supply shortages, the NUPRC has advised CORAN members to consider acquiring oil blocks in upcoming licensing rounds as a long-term strategy for securing crude supply.

Mrs. Oritsemeyiwa Eyesan, Chief Executive of NUPRC, conveyed this during a meeting with CORAN members in Abuja, where discussions focused on bolstering domestic refining capacity and ensuring consistent crude availability.

According to a statement by CORAN spokesperson, Eche Idoko, Eyesan emphasized that "Encouraging indigenous refiners to participate in upstream asset ownership would create more stable and commercially viable crude supply arrangements while also deepening local participation across the petroleum value chain."

She assured refiners that Nigeria possesses sufficient crude resources to meet domestic refining demands and reaffirmed the commission's commitment to policies that promote in-country value addition.

The NUPRC boss also recommended that refinery operators establish long-term crude supply contracts with producers to guarantee feedstock, improve operational planning, and achieve stable pricing.

However, she identified infrastructure deficits as a significant obstacle to efficient crude delivery, citing inadequate pipeline networks, evacuation bottlenecks, storage limitations, marine logistics issues, and other supply chain challenges that require urgent investment and collaborative efforts.

CORAN members commended the NUPRC's ongoing regulatory reforms and support for domestic refining, while stressing the necessity for effective implementation of frameworks that ensure a steady crude supply to local refineries.

Industry stakeholders have consistently underscored the importance of enhanced access to crude feedstock for reducing Nigeria's reliance on imported petroleum products, strengthening energy security, preserving foreign exchange, and generating employment through the expansion of local refining capacity.

Idoko stated that the meeting was part of continuous engagements between regulators and private refinery operators aimed at maximizing the potential of Nigeria's downstream petroleum sector.

Peter Uzoho contributed to this report.