Italy’s Eni has reached an agreement to sell its Nigerian onshore subsidiary, Agip Oil Company Ltd (NAOC), to local firm Oando. This move is part of Eni’s broader strategy to reduce its exposure to oil in favor of natural gas, following the sale of its oil activities in the Congo Republic in June. However, Eni will retain its offshore activities in Nigeria.

For Oando, the acquisition of NAOC Ltd will significantly boost its reserves, nearly doubling them to 996 million barrels of oil equivalent. The purchase is expected to increase production for Oando and highlights the growing role of indigenous companies in Nigeria’s upstream sector.

The exact financial details of the deal were not disclosed, but investment bank Jefferies estimated the transaction to be valued at over $500 million. This sale follows a trend of international oil majors divesting their onshore assets in Nigeria due to challenges such as oil theft, spills, community conflicts, and a shift toward more focused exploration budgets.

Most major oil companies have retained stakes in offshore assets in Nigeria despite divesting from onshore operations. Nigeria, Africa’s largest oil exporter, faces challenges in maintaining and expanding its oil production due to theft and underinvestment. However, some energy majors are hesitant to invest further in developing these offshore assets as they intend to sell them.

The sale of NAOC Ltd is subject to local and regulatory approvals. After the transaction, Eni will maintain a 5% stake in the Shell Production Development Company (SPDC) joint venture operated by Shell. The Nigerian government has been keen to attract investment in its oil sector, which is vital for its foreign exchange earnings, but other proposed deals have faced legal and regulatory challenges.

This sale reflects the evolving dynamics in Nigeria’s oil and gas sector and highlights the increasing importance of indigenous companies in its development.