Challenges Militating against Indigenous Oil Companies Operating in Nigeria’s Upstream Petroleum Industry: Strategies and Panaceas for their Sustainability

Abstract

This article examines the challenges faced by indigenous oil companies operating in Nigeria's upstream oil and gas sector. It provides a comprehensive analysis of the historical background, conceptual clarifications, and the legal framework applicable to these companies and offers recommendations for mitigating these challenges. The historical background highlights the introduction of marginal oil fields and local content policies as initiatives to encourage indigenous participation in the oil and gas industry. However, despite these efforts, indigenous oil companies continue to encounter significant hurdles such as paucity of funds, security risks, shortage of skilled personnel among others. This article adopts the doctrinal legal research methodology with consideration of both the primary and secondary sources of law. The legal framework analysis focuses on relevant statutes such as the Nigerian Oil and Gas Industry Content Development Act, 2010, the Petroleum Industry Act, 2021, the Companies and Allied Matters Act, 2020, the Companies Income Tax Act, 2007 and the Finance Act, 2023. The study examined some of the challenges faced by indigenous oil companies including limited access to financing, technological and technical expertise constraints, infrastructure deficiencies, and a lack of patronage from multinational oil corporations. The study found that these challenges hinder the ability of indigenous companies operating in Nigeria’s upstream oil and gas sector to invest in exploration and production activities. These challenges further reduce operational efficiency, and impede healthy competitiveness. In conclusion, as a contribution to knowledge, the study designs a hybrid strategy or panacea for promoting the sustainability of indigenous oil companies in Nigeria. The study recommends strengthening the implementation of existing legal frameworks, enhancing access to financing, investing in infrastructure development, encouraging collaboration and strategic partnerships between indigenous and multinational oil companies, and implementing market support and protection policies. Addressing these recommendations can help mitigate the challenges faced by indigenous oil companies, allowing them to contribute more effectively to Nigeria's economy, upstream sector and the overall growth of the oil and gas industry sustainability.