Oando: A Nigerian success story

Nigeria

Ainojie “Alex” Irune, executive director of Oando and managing director of Oando Energy Resources Nigeria, talks to The Energy Year about how the IOC divestments in Nigeria’s upstream oil and gas sector are transforming the industry. Oando is an African indigenous energy solutions provider, operating across different sectors of the oil and gas industry in Nigeria, Africa and the Caribbean.

How do you assess the ongoing divestment trend in the upstream sector and the implications that local companies taking charge of producing assets have on forex?
We see this trend as a significant opportunity for indigenous companies to step up and compete in the global market. Approximately 60% of Nigeria’s oil output will soon be produced by local independent players, which points to the fact that we are well on our way there.
For too long, our resources have been primarily managed by foreign entities. With local companies at the helm, we have a greater ability to determine the future of our resources and ensure they are developed in a way that best serves Nigeria’s interests. This includes optimising our operations, significantly increasing production and fostering local content.
From a foreign exchange perspective, the implications are equally positive. The upstream oil and gas sector is inherently a dollar-earning business. When local companies increase their stake and take over operatorship, a larger portion of the revenue generated from these assets are directly accrued by Nigerian entities. This gives us the opportunity to increase our foreign exchange earnings, bolster our foreign exchange reserves and improve the naira’s stability.
Ultimately, these divestments present a golden opportunity for indigenous companies to take a leading role in maximising the value of our oil and gas resources and contribute to a stronger and more resilient economy.

Can you share your thoughts on the momentum that the domestic oil and gas industry is experiencing and what you think are some of its main enabling factors?
The sense of urgency and optimism within the industry is being driven by industry and government alignment, a more supportive policy environment, the growing capabilities of local players and a renewed focus on addressing the key challenges that have historically hindered our progress.
Industry players and regulators are all united in their commitment to achieving the NUPRC [Nigerian Upstream Petroleum Regulatory Commission] target of producing 2.5 million bopd by 2027, a part of the regulator’s 1MMBOPD initiative. NUPRC’s ambitious target highlights the government’s commitment to enhancing production.
Additionally, NNPC and its JV partners, of which Oando is one, are dedicated to implementing strategies that improve production monitoring, remove bottlenecks and tackle the challenges that hinder operators from increasing output. This plan has been in effect for an extended period and led to an output increase of over 40%, particularly among NNPC-held assets.
Historically, our nation has struggled to build a long-lasting synergy between private and public-sector stakeholders. That’s changing, and we can see it in how NNPC, its partners and NUPRC are operating today. The approval of Oando’s acquisition of the Nigerian Agip Oil Company (NAOC) is a good example. When regulatory support aligns with private-sector objectives that are in sync with national goals, it results in value creation that benefits all stakeholders and the country.
Our ambition is to be the largest African-owned IOC, competing with global giants such as Aramco, Shell, TotalEnergies, etc. To achieve this, we need a conducive environment fostered by government policies that ensure the right operational conditions.
While challenges persist, particularly regarding security and oil theft, we are witnessing improvements. The key takeaway is that alignment fosters action, which in turn generates value. We believe there has never been a more opportune time to be in the industry, and we must seize the opportunity.

What is your assessment of the reforms promoted by the Tinubu administration aimed at ensuring that Nigeria can capitalise on its hydrocarbon resources?
The Tinubu administration has certainly demonstrated a keen awareness of the critical role that our hydrocarbon resources play in Nigeria’s economic development, and we are seeing the corresponding reforms to unlock our full potential. From Oando’s perspective, having operated in this space for decades, we recognise that consistent and effective reforms are vital.
I believe that the implementation of the current executive orders represents a significant step forward. However, we must first ask ourselves, “What have we done with what we have?” It is crucial to utilise our existing resources effectively in order to achieve our desired results.
One of the executive orders aims to enhance fiscal incentives for gas investments, particularly non-associated gas. Nigeria has over 209 tcf [5.9 tcm] of gas reserves, and there is no better time than now to invest, especially with several tax incentives available. In terms of the supply chain and procurement process, the maximum contract value for JV contracts with local companies has been increased from USD 500,000 to USD 10 million.
Additionally, the reforms have streamlined the contracting process from years to a few months, reducing the timelines for contract execution, which in turn lowers industry costs. While the technical complexities of drilling and extraction cannot be overlooked, subsurface operations are comparatively less challenging. The primary obstacles occur above ground, and these executive orders are intended to tackle the bottlenecks that hinder the transition from resource extraction to sale point.
I believe that the only way to cultivate a prosperous and vibrant industry is through continuous stimulation of activity. This attracts resources, experts, equipment and all the other elements that create value. With these components in place, we can avoid the scarcity that drives up prices and development costs.
The success of the reforms we’ve seen will be judged by their impact on metrics such as production volumes, investment inflows and the overall ease of doing business. The initial signals are certainly positive, but sustained effort and collaboration between the government and industry stakeholders remains essential.

Following the successful acquisition of NAOC’s assets, can you provide us with insights and details about where Oando stands as of today and its growth plans for the next five years?
We intend to build on our strengthened position by significantly increasing oil and gas production, participating in Nigeria’s gas development, and strategically investing in renewable energy through Oando Clean Energy. We intend to demonstrate that Nigerian companies have the capability to drive value creation.
We have successfully doubled the company’s proven and probable (2P) reserves, increasing them from approximately 500 million barrels to nearly 1 billion barrels. In terms of oil production, we aim for significant growth, targeting over 100,000 barrels within the next three to four years. We also plan to contribute to the country’s crude oil requirements, both as feedstock for refineries and for generating foreign exchange.
Regarding natural gas, we intend to produce 1.5 bcf [42.5 mcm] by 2029, which will have a positive impact on the gas-to-value (petrochemicals feedstock and power) segment. This is particularly important given the challenges we face with domestic power generation. We believe we can play a proactive role in enhancing gas offtake, increasing available feedstock and thus driving the country’s industrialisation.
Regarding our target of 100,000 bopd, approximately 90% of this output will come from an aggressive drilling campaign between 2025 and 2029 across OMLs 60, 61, 62 and 63. At the peak of this programme, we plan to deploy seven to eight drilling rigs across the four OMLs. These blocks show great potential, as they are rich in oil with huge untapped gas prospects.
Block 62 is particularly intriguing, as it is the least explored of the four OMLs. It contains proven reserves from which we expect to derive a significant portion of the increase in production.
With rich reserves still available for future drilling from our marginal fields, we have ambitions to achieve 100,000-bopd production over the next four years. In OML 56, we drilled two exploratory wells in 2023; we are optimistic about their success and plan to drill two additional wells. In OML 13, we aim to drill two new wells. Overall, this is an exciting time for us. Our asset portfolio is diversified, including producing fields where we can enhance output, promising development opportunities and exploration assets.

What does the Oando-NAOC transaction mean for the Nigerian upstream and business environment as a whole, and what does it say about Oando’s capabilities and local indigenous companies’ capabilities?
Oando is at the forefront of the industry, and our acquisition of NAOC underscores this achievement. We are the only Nigerian company to have acquired two IOCs, the first being the acquisition of ConocoPhillips’ Nigerian business for USD 1.5 billion in 2014. This positions us as the sole indigenous IOC in Nigeria.
More broadly, what this says about the capabilities of local indigenous companies is that we are increasingly capable of taking on larger, more complex assets and able to contribute significantly to the nation’s energy security and economic growth. We’re not just passive participants; we are becoming key drivers in the upstream sector.
Several years ago, it was hard to imagine that indigenous companies could possess the capability to manage and operate assets of this size and scale. Currently, Oando owns OMLs 60, 61, 62 and 63, which span four states: Bayelsa, Imo, Rivers and Delta. Our operations cover 12 flow stations, two gas plants, over 1,500 kilometres of pipelines (flowlines and trunk lines) and the Brass Terminal, which has a storage capacity of over 3 million barrels of oil.
This progress sends a clear message to the world that Nigeria is open for business. Our homegrown companies are not only capable, but they are also actively executing the entire business process, including raising funds globally, investing and deploying that capital, inspiring young people, hiring locally and building capacity. The results speak for themselves.

What is the strategy that Oando is implementing to make its barrels greener and its growth more sustainable in the long run, and what initiatives does the Group have to reduce its carbon footprint?
The alignment with the energy transition is evident in Oando’s organisational development, which reflects a long-standing commitment to sustainability. We have evolved from being a solely oil and gas company into an upstream company with a clean energy subsidiary, Oando Clean Energy.
We are committed to strategically integrating renewable technologies and green initiatives into our operations to ensure sustainability and future competitiveness. However, we recognise that the economic realities in Africa pose significant barriers to the widespread adoption of high-cost solutions required for comprehensive power and energy provision.
Therefore, we believe it is essential to responsibly utilise our hydrocarbons, producing oil with the lowest possible carbon footprint while ensuring that the gas we generate promotes industrialisation and strengthens our economy. This approach will create a robust balance sheet that can be used to fund renewable energy initiatives.
To succeed as a company and as a nation, we must actively participate in the broader sustainability conversation, which encompasses environmental, social and economic factors. We need to embrace research developments and processes that will allow us to localise this expertise. By leveraging this knowledge, we can drive long-term growth without depending solely on external sources for the resources necessary to implement a fair and balanced energy transition.
Regarding our sustainability efforts, we are currently investing significantly in alternative fuels to operate heavy-duty vehicles and power systems. Within the Group’s Clean Energy Division, we have initiated a geothermal programme aimed at utilising our existing abandoned wells, which possess the necessary geological characteristics to extract geothermal energy.
This energy will power steam turbines and provide energy to our fields. We have successfully reached the proof-of-concept stage, demonstrating the feasibility of this innovative approach.
In addition, we are transitioning our entire vehicle fleet from petrol engines to electric vehicles (EVs). These initiatives are not new for Oando; we have been collaborating with the Lagos State government to transition public transportation from internal combustion engines to EVs for mass transit.
Beyond reducing our carbon footprint, these efforts will also significantly cut costs and decrease our reliance on externally produced refined fuel. The gas we use to operate our generators will come from our own assets, complemented by solar energy. In this way, we can create a combined energy source to power our vehicles, while most of our power systems across our joint venture assets can benefit from gas and solar power.

Can you walk us through the key drivers behind the growth Oando experienced in 2024 compared to 2023?
In 2024, the Group achieved remarkable growth, reporting a profit after tax of NGN 65.5 billion [USD 42.4 million], a 9% increase from NGN 60.3 billion [USD 39 million] in 2023. Additionally, the Group recorded a 45% increase in revenue, reaching NGN 4.1 trillion [USD 2.65 billion] compared to NGN 2.9 trillion [USD 1.88 billion] in the previous year.
This growth was primarily driven by our trading segment, Oando Trading, along with the successful acquisition and integration of NAOC, which significantly boosted our production capacity. We achieved a peak operated production level of 103,206 boepd, with net entitlements of 45,000 boepd.
Oando Trading has consistently grown over the past five years, successfully offsetting the challenges faced by our upstream subsidiary, such as pipeline vandalisation and production interruptions. Our strong and integrated portfolio allowed us to hedge our performance and adapt to market fluctuations.
Meanwhile, the downstream sector in Nigeria is improving. The completion of the Dangote Refinery marks a significant milestone for the country. With a refining capacity of 650,000 bopd, it stands as the largest single-train refinery in the world, enhancing Nigeria’s position in the petroleum products market, where we have traditionally been reliant on imports.
With a state-of-the-art refinery, Nigeria can begin to explore export opportunities seriously. While we anticipate that the Dangote Refinery may reduce the number of cargos available in the market, this will not hinder our trading ambitions. Across Africa, there is a demand for petroleum products, and as traders, our focus remains global.
This means that, in addition to satisfying domestic demand, any surplus products from Dangote that are not consumed in Nigeria will need to find a market elsewhere, which also creates new opportunities for indigenous traders such as Oando.

What are the company’s key focuses at the moment, both within and outside Nigeria?
We are currently focused on integrating the substantial acquisition of NAOC we recently completed. However, we remain active and are continually seeking new opportunities, as evidenced by our recent announcement regarding our award of Block KON 13 in the onshore Kwanza Basin in Angola.
Our operations outside of Nigeria, particularly around São Tomé and Príncipe, have established us as an indigenous IOC. We hold interests in two exploration assets, Block 5 and Block 12. In recent years, activities in the exclusive economic zone have increased, attracting the attention of major IOCs such as BP and TotalEnergies.
We are optimistic about the potential of these blocks and are collaborating with our JV partners, Kosmos (for Block 5) and Galp Energia (for Block 12) to progress their development. Their development will take time; however, we are committed to taking the necessary steps to convert these resources into actual reserves for future value.
This approach demonstrates our commitment to building a long-term pipeline essential for sustainable business growth. We balance our growth ambitions by investing in mature assets such as NAOC and future-producing assets such as those in São Tomé and Angola. In summary, while we seek global expansion opportunities, our primary focus remains on meeting our domestic targets for the time being.

What have been the key highlights of Oando’s success story, how did you manage to lead such a transformation, and what are your ambitions for the future?
Our success has been built on a foundation of ambition, tempered with strategic foresight and a deep belief in the potential of Nigeria and its people. In terms of how we have managed to lead such a transformation, it comes down to several factors: a clear strategic vision from the outset, a willingness to take calculated risks and consistent investment in building our technical expertise and operational capabilities.
Any success we have today has been decades in the making, with a story that began in 1956 with a company called Esso Africa, a marketer of downstream petroleum. In 2002, Ocean and Oil acquired a 60% stake in Agip Nigeria. The following year, the merged company was named Oando, establishing itself as the largest downstream petroleum marketing firm in the country.
Over time, we built a midstream division, supplying gas to key industrial consumers across the country before divesting both the downstream and upstream businesses to focus more on the upstream sector. These efforts culminated in our recent acquisition of Eni’s interest in the NAOC JV, which reflects years of dedication and effort.
When we embarked on this journey, many did not believe we could achieve the goals we set out. Our vision was to become operators, starting with a USD-1.5 billion investment in the acquisition of ConocoPhillips’ Nigerian upstream assets. This choice showcased the risks we were willing to embrace to fulfil our vision.
For 10 years, we were shadow operators, during which we learned and built local capacity. We conducted well planning, drilling operations and facilities maintenance while effectively managing our corporate finances to ensure these activities were properly funded.
We also made strategic management decisions regarding infrastructure improvements and production optimisation. All of this was done in anticipation of the day we would finally take the lead, which is where we are today. It took strong organisation to reach this point, and now the sky is the limit. I believe that the boundaries you set for yourself become the cage in which you live.
Looking ahead, our ambitions for the future are bold and focus on creating even greater impact across the sector and country. We plan to reach 100,000 bopd by 2029, contributing significantly to the country’s target of 4 million bopd by 2030 and improving our foreign exchange position.
Beyond production targets, we are deeply committed to driving local capacity and industrialisation through our domestic gas initiatives, while building a world-class organisation focused on developing local talent. Our strategy includes effectively reducing Scope 1 and 2 emissions, thereby reducing our carbon footprint to drive a truly sustainable future.

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