Petroleum Industry Act cuts risk premium for African upstream investors – Oando

Nigeria’s landmark Petroleum Industry Act has significantly reduced the risk premium demanded by investors in African upstream oil and gas projects, according to Oando Energy Resources, as the continent’s energy sector experiences a resurgence in financing activity.

Speaking at the Nigeria International Energy Summit this week, senior executives from Oando, one of Africa’s largest indigenous energy companies, said regulatory clarity introduced by the 2021 legislation had fundamentally improved investor confidence in a sector once considered too uncertain for long-term capital commitments.

“With greater policy clarity, capital can see that risk has reduced,” said Akinbambo Ibidapo-Obe, General Manager of Commercial at Oando Energy Resources. “That clarity, combined with scale, integration, and governance, creates a much stronger foundation for attracting long-term investment.”

The comments underscore a broader shift in sentiment towards African upstream assets, which had faced headwinds from energy transition concerns, regulatory uncertainty, and limited access to international capital markets.

Industry executives now argue that a combination of policy reform, operational discipline, and growing energy demand has created fresh momentum.

Oando recently nearly doubled its reserve base to almost 1 billion barrels, a milestone that executives said strengthens its ability to attract competitive financing when paired with operational control and strategic flexibility.

“Scale and integration give you the right to go after capital, but they are not enough on their own,” Ibidapo-Obe told the summit. “What truly unlocks competitive capital is managing risk and reducing the risk premium.”

The company’s Managing Director, Ainojie ‘Alex’ Irune, emphasised that sustaining the sector’s revival would require more explicit conversations about capital costs alongside production targets. Nigeria has set ambitious output goals but industry participants have warned that achieving them depends on structuring patient, aligned capital.

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“We are often clear about production targets, but the conversation around cost and capital is less explicit,” Irune said. “To scale sustainably, we must rethink traditional financing pathways and pursue capital structures that provide patience, alignment, and long-term support.”

The Petroleum Industry Act, enacted after nearly two decades of legislative delays, introduced fiscal reforms aimed at improving transparency and investment terms in Nigeria’s oil and gas sector. While implementation challenges remain, investors have pointed to the legislation as a key factor in de-risking Nigerian upstream opportunities.

Heineken Lokpobiri, Minister of State for Petroleum Resources, reinforced the government’s commitment to regulatory reform and collaboration with industry stakeholders, describing these measures as essential to sustaining investor confidence and developing local capacity.

The summit discussions reflect broader questions facing African energy producers as they seek to balance energy security, economic development, and climate commitments. While international pressure to limit fossil fuel investment has constrained financing options, African governments and companies argue that natural gas and oil development remain critical to meeting the continent’s energy needs.

Oando executives stressed that operational excellence and governance would be central to maintaining access to capital markets. “Being an operator allows us to match projects to capital, retain agility, and structure investments in a way that lenders and investors understand and support,” Ibidapo-Obe said.

The company’s strategy centres on disciplined capital allocation, operational control, and partnerships structured to align interests across the value chain, an approach executives believe positions Oando for sustainable growth across African markets.

Dipo Oladehinde is a skilled energy analyst with experience across Nigeria's energy sector alongside relevant know-how about Nigeria’s macro economy.

He provides a blend of market intelligence, financial analysis, industry insight, micro and macro-level analysis of a wide range of local and international issues as well as informed technical rudiments for policy-making and private directions.

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