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ExxonMobil Targets African Deepwater, Chinese"Big Three" Reshapes Africa's Energy Geopolitical Landscape

2025-05-16

On May 7, ExxonMobil announced a $1.5 billion investment to develop Nigeria’s Usan, Owowo, and Erha deepwater oilfields. This decision not only signals the return of confidence from international oil giants in Nigeria’s upstream resources but also underscores the strategic value of the country’s deepwater oil and gas assets. This land, long plagued by piracy, oil theft, and bureaucracy, is emerging as an indispensable “black gold frontier” amid the global energy transition.

Notably, as early as 2024, ExxonMobil revealed plans to invest up to $10 billion in Nigeria’s deepwater (offshore) oil operations in the coming years. This ambitious blueprint was unveiled by Shane Harris, ExxonMobil’s Managing Director in Nigeria, who emphasized that this substantial investment reflects not only the company’s strong confidence in Nigeria’s upstream potential but also its resolute commitment to deepening its presence and contributing to the country’s development.

Whether it’s the earlier plan or the current “confirmed” investment, this marks a significant step in ExxonMobil’s strategic expansion and consolidation in Nigeria.

01. Nigeria’s Deepwater Potential: From “Risk Zone” to “Strategic High Ground”

Nigeria’s deepwater oil and gas resources are Africa’s “hidden ace.” Take the Owowo oilfield, for instance: discovered in 2016, it ranked among the world’s top ten oil and gas discoveries, boasting recoverable reserves of up to 750 million barrels of oil equivalent, with crude oil accounting for 73%. The Usan oilfield, located in the deepwater Gulf of Guinea at depths exceeding 800 meters, faces complex geological conditions but has become a focal point for international oil companies due to its high reserve density.

The economics of deepwater projects are also compelling. Despite the large upfront investment (e.g., Owowo’s $10 billion total investment), economies of scale and technological optimization keep per-barrel costs below $40, significantly lower than the $60 breakeven point for shale oil. This cost advantage provides deepwater projects with resilience against long-term oil price volatility.

As Africa’s largest oil producer, Nigeria holds proven oil reserves of 37 billion barrels and natural gas reserves of 206 trillion cubic feet, ranking 11th and 10th globally, respectively. However, onshore oilfields have long been constrained by oil theft, pipeline vandalism, and community conflicts. In 2024, Shell sold its onshore SPDC subsidiary for $1.3 billion to a local consortium due to environmental risks, shifting its focus to deepwater operations.

The “physical isolation” of deepwater projects is a game-changer. Offshore platforms, far from onshore conflict zones, avoid community disputes and enable rapid production through FPSOs (Floating Production Storage and Offloading units). Shell’s Bonga oilfield is a success story: since starting production in 2005, it has produced over 1 billion barrels, with a peak daily output of 225,000 barrels. ExxonMobil’s latest investment is driven by the relatively stable development environment and high-return potential of deepwater zones.

Policy support is also favorable. Nigeria’s government is aggressively pursuing its “Million Barrel Plan” to boost daily production from 1.75 million to 2.4 million barrels by the end of 2026. To achieve this, authorities have reduced pipeline vandalism by 37% in 2024 and, through the Petroleum Industry Act, optimized production-sharing mechanisms, lowering the government’s share in deepwater projects from 80% to 50%.

02. Giants’ Race: Alliances and Strategies in the Deepwater Arena

In Nigeria’s deepwater landscape, international oil companies have already begun their strategic positioning. ExxonMobil’s $1.5 billion investment is both a continuation of its strategy and a response to competitors’ moves.

As a pioneer in Nigeria’s deepwater development, Shell has solidified its leading position with the Bonga oilfield. In 2024, it launched the $5 billion Bonga North project, using subsea tie-back technology to connect new wells to existing FPSOs, unlocking 300 million barrels of recoverable reserves at minimal cost. This “existing facilities + new well clusters” model shortens development timelines and avoids the high costs of new platforms, setting a benchmark for marginal deepwater development.

TotalEnergies, accelerating its transition to an integrated energy company, has invested $750 million in Nigeria’s gas projects to meet Europe’s LNG demand spurred by the energy crisis. By targeting both onshore Ubeta gas fields and deepwater gas reservoirs, TotalEnergies aims to build a full value chain from upstream extraction to liquefaction exports, mitigating crude oil market volatility while aligning with global decarbonization trends.

To manage the high risks of deepwater projects, Chevron has partnered with local firms through joint ventures, exchanging technology transfers for community support. Notably, BP has minimal presence in Nigeria’s deepwater sector, due to its strategic focus on U.S. shale and North Sea assets, as well as the high barriers to entry in deepwater development—only players with technological expertise, financial strength, and government ties can survive this game.

03. China’s Role: From “Energy Buyer” to “Ecosystem Builder”

As Nigeria’s second-largest crude oil buyer (importing over 300,000 barrels daily), China’s “Big Three” oil companies—CNPC, CNOOC, and Sinopec—have moved beyond mere trade relationships, reshaping Africa’s energy geopolitics through a trifecta of capital, technology, and infrastructure.

Following its 2016 acquisition of Nexen, CNOOC gained an 18% stake in the Owowo oilfield, becoming a key partner of ExxonMobil. This “piggyback” approach mitigates political risks of independent operations while securing supply through equity oil. In 2024, CNOOC’s $1.8 billion investment in the project is expected to yield an annual net equity production of 40 million barrels.

In 2018, CNPC won an $840 million contract for the AKK gas pipeline project, a vital energy artery connecting Nigeria’s south and north. Beyond addressing domestic gas shortages, it secures long-term gas supply for China through transit fees. This “infrastructure-for-resources” model evolved in 2025 with a joint venture with NNPC, Unity Shipping, enhancing China’s bargaining power by controlling crude transport.

Leveraging its trading network under Sinopec’s United Petrochemical, Sinopec has integrated Chinese standards into the revamp of the Port Harcourt refinery, transforming Nigeria’s low-quality crude into high-value petrochemicals. This “technology-for-market” strategy boosts Africa’s refining capabilities while opening channels for China to access differentiated oil types.

China’s strategy in Nigeria reflects two security imperatives: supply chain resilience, achieved by locking in resources through equity stakes, long-term contracts, and infrastructure to reduce reliance on the Malacca Strait; and pricing power, where deepwater projects’ high-cost structures allow China to hedge against global oil price volatility with fixed-yield agreements. This “asymmetric advantage” was particularly evident during the 2024 Russia-Ukraine crisis, which reshaped global energy dynamics—while Europe paid a premium for gas, China maintained stable import costs through Nigeria’s equity oil.

ExxonMobil’s $1.5 billion investment is both a capital wager and a footnote of the times. What is certain is that Nigeria’s deepwater region, once overshadowed by low oil prices and explosions, is now a new battleground for reshaping global energy power dynamics.