Iran war oil disruption prompts Nigeria producers to lift output

Nigerian oil companies are plowing windfall gains from the Iran-war crude rally into near-term extraction projects, boosting the drive by Africa’s top producer to double output within four years.

Dozens of small and mid-sized firms that produce less than 50 000 barrels per day have spent years snapping up assets shed by international oil companies. Now they’re capitalising on supply constraints caused by the effective closure of the Strait of Hormuz — a conduit for a fifth of the world’s crude and gas supplies — by lifting output.

“It’s good planning meeting opportunity,” said Wisdom Enang, a former manager at Exxon Mobil Corp in Nigeria. Production volumes from the small producers could add 200 000 to 300 000 barrels per day before the end of the year, he said.

Nigeria’s production is already on an upward path, rising to 1.6 million barrels a day in April — the biggest monthly increase in almost three years, according to data compiled by Bloomberg.

Production is increasing after Nigerian President Bola Tinubu took steps to attract investment into an industry long hobbled by aging infrastructure, theft and vandalism. The measures include a policy revamp that added tax incentives and streamlined contract approvals, along with an overhaul of the leadership at the state-owned oil company.

Still, oil prices at $100 a barrel and higher are the biggest factor driving domestic producers including Oando Energy Resources, which bought assets from Italian major Eni SpA in 2024.

After a surge in revenue, the company plans to drill new wells to boost output 30% to 42 500 barrels a day by the end of the year, Chief Executive Officer Wale Tinubu said in an interview. It’s also bringing forward a five-year plan to double production in order to “capture the demand shortfall that has been created by this conflict,” he said.

Local producers have a strong investment case to increase output at current prices, said Ahonsi Unuigbe, CEO of Petralon Energy. Along with Oando’s Tinubu, he’s seeing increased interest from Middle East investors.

The conflict started two weeks after Petralon drilled a second well. With oil prices shattering its base case projection of $65 per barrel, the company brought forward plans to drill a third. That will increase its output 56% to 7 500 barrels a day before year end, according to Unuigbe.

Pan Ocean Oil Corp and the Newcross Companies, which form an entity that produces 48 000 barrels per day, has resuscitated two wells since the war started and plans to inject the cash into growth projects and paying down debt.

The war’s impact “has been materially positive,” said Oluseyi Oladapo, finance director at the company.

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