Guiding Nigeria’s energy transition and divestments

Nigeria

Josephine Udonsak, partner at Dentons ACAS-Law, Charles Mafua, the firm’s senior associate for energy and project finance, and Oluwaseun Lawal, the firm’s associate counsel for energy and project finance, talk to The Energy Year about the current outlook on Nigeria’s energy market. Dentons ACAS-Law is a full-service commercial law firm and part of the global law firm Dentons.

What is your outlook on the current market today?
Josephine UDONSAK: Currently, we are observing the market from two distinct but interconnected perspectives. On the one hand, there is the global energy transition, and on the other hand, a wave of asset divestments by international oil companies to indigenous oil companies. These dynamics continue to drive significant legal and transactional activity, particularly in areas such as mergers and acquisitions, divestitures and related regulatory-compliance matters.
It is also interesting to note that as the market evolves, the regulatory agencies are evolving in tandem. This is critical, as legal and policy frameworks must keep pace with market developments to ensure meaningful progress. It is therefore reassuring to see a regulatory approach that is both strategic and pragmatic being adopted.
Regulators are increasingly playing an active role in shaping transactions by engaging directly with parties and providing clear, reasoned guidance and using that as the basis for the approval or disapproval of deals.
Additionally, the proactive engagement of the current administration has contributed to a more favourable investment climate. The administration’s responsiveness and demonstrated commitment to the sector are reinforcing regulatory efforts and fostering a legal environment conducive to growth which is, in turn, strengthening investor confidence and facilitating deal activity.
For legal practitioners who operate at the intersection of investor interests and regulatory expectations, these developments are particularly significant. They signal that the new administration is attentive to the concerns of investors and, through mechanisms such as the recent executive orders, is actively working to improve the ease of doing business in Nigeria.

What new opportunities do you see in the market in 2025?
Charles MAFUA: Dentons ACAS-Law had the pleasure of advising Chappal Energies on its respective asset acquisitions from TotalEnergies and Equinor in 2024, and we are optimistic that the momentum of divestments and acquisitions witnessed last year will continue in 2025.
Beyond traditional asset acquisition and divestment structures, I would say we may also expect to see alternative deal structures being explored more. For instance, there may be an upsurge in the reliance on financial and technical services agreements as entry routes to participating in the Nigerian upstream sector.
Investors and operators may no longer restrict themselves to outright acquisitions of upstream oil and gas assets. Instead, strategic partnerships, alliances and bespoke collaborative arrangements may be considered viable pathways for field development and monetisation. From our perspective as a law firm, this shift underscores the importance of providing clients with innovative legal and commercial structuring options that align with their company objectives.
Looking ahead, we are optimistic that the Nigerian market will continue to evolve, offering new avenues for participation, whether through divestments, partnerships or other forms of creative engagement, without necessarily requiring a transfer of title or equity.
Furthermore, with Nigeria’s substantial natural gas reserves, and with gas positioned as a viable transition fuel under the country’s Energy Transition Plan and ongoing developments in the power sector, we anticipate growing interest and momentum in gas development and infrastructure projects.

What is the importance today of the power sector in Nigeria compared to the traditional area of oil and gas?
Oluwaseun LAWAL: In recent times, the traditional boundaries between the oil and gas sector and the power sector have become increasingly indistinct. The surge of regulatory reforms in the power sector – particularly the decentralisation of the electricity market – can be expected to trigger the emergence of numerous power projects and thus significantly increase the demand for gas as a critical fuel source.
This is even more the case as subnational governments seek to establish their state electricity markets and attract investment in power infrastructure within their respective territories. They will inevitably need to ensure that any issues with gas availability and supply (which could thwart their efforts) are satisfactorily addressed.
A good example is the government of Oyo State, which recently entered into a strategic arrangement with Shell for the supply of gas to support its power initiatives. Such developments reflect a broader trend: As activity in the power sector accelerates, the gas sector is correspondingly impacted.
In recognition of this interdependence, industry operators are increasingly incorporating gas utilisation, processing and development plans into their operational programmes and budgets, often voluntarily and in advance of any regulatory requirement.
This evolving landscape underscores the need for an integrated and coordinated approach to developing both the oil and gas sector and the power sector, recognising that these sectors are inextricably linked and cannot effectively operate in isolation. A holistic framework is essential to drive market growth and innovation across both sectors.

What is your opinion on the drill-or-drop clauses to be enforced by the Petroleum Industry Act (PIA), which aim to make operators more accountable for their production?
CM: The renewed emphasis on the enforcement of the drill-or-drop provisions contained in the PIA represents a commendable and pragmatic step towards enhancing accountability, optimising asset utilisation and ultimately driving production growth in Nigeria’s oil and gas sector.
These provisions, which empower the regulator to revoke undeveloped oil and gas assets and reassign them to operators willing to invest in them, are critical in addressing long-standing inefficiencies and underutilisation across the industry.
It is professionally prudent and economically sound to require that operators demonstrate a clear and measurable commitment to developing the assets they hold. The reality that numerous oil blocks and marginal fields have remained dormant for decades undermines the country’s strategic interest in ensuring energy security, maximising revenue generation and fostering a robust investment climate.
The successful enforcement of the drill-or-drop regime, however, must be underpinned by clear regulatory guidance, fairness in implementation and institutional transparency. It is also imperative that any reallocation processes are conducted in a manner that reinforces investor confidence while aligning with Nigeria’s broader objectives of local content promotion and sustainable development.

What is your growth strategy, and what opportunities do you foresee internationally?
JU: One of our primary strategic objectives is to expand our market share, and a key avenue for achieving this objective lies in effectively leveraging the global strength and reach of Dentons. After more than four years of being a part of Dentons, the scale and depth of opportunities that this presents to us at local, regional and international levels continues to unfold.
We are increasingly involved in cross-border transactions in collaboration with colleagues across the world and are confident that this momentum will keep growing as we continue to deepen our integration within Dentons.
One of our most compelling value propositions is our ability to deliver seamless, cross-jurisdictional legal services to clients while being polycentric. This means that clients seeking support across multiple jurisdictions can rely on us to provide a unified legal solution without having to engage and coordinate with multiple law firms. This integrated service offering greatly enhances efficiency and client experience.
In the past year, Dentons has expanded its reach in Africa to cover four additional jurisdictions, namely Senegal, Ethiopia, Cameroon and the Democratic Republic of the Congo. Beyond Africa, we recently announced our intention to combine with firms in Turks and Caicos and Thailand, which will see us strengthen our presence in Latin America and the Caribbean while also expanding into one of the key economies in ASEAN.
We anticipate that our geographical footprint will keep expanding. We also remain committed to building on this trajectory by offering clients consistent, high-quality legal services across borders and by fully harnessing the collaborative strength of the Dentons platform.

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