West Africa One of the Most Expensive Places to Drill Oil – Deloitte Report
West Africa remains one of the most expensive regions in the world for oil drilling, making it increasingly difficult for African producers, particularly in Nigeria, to compete globally, according to Deloitte’s latest West African Oil Market Report.
The report attributes the region’s high operating costs to elevated cost premiums faced by African independent oil producers. In Nigeria, Deloitte estimates that operating costs are 40–50% higher than in comparable oil-producing jurisdictions.
The consultancy cites a confluence of factors driving these premiums, including insecurity in production regions, complex procurement procedures, stringent local content requirements, and high insurance costs for foreign contractors.
“While international oil companies (IOCs) continue to operate with deep financial buffers and diversified global portfolios, African independents face tightening margins and growing investor hesitation,” Deloitte observed in the report.
It added that ESG pressures, divestment from fossil fuels, weak corporate governance, and perceived regulatory and political risks have rendered capital both scarce and expensive for African independent oil producers.
This has therefore led to an emerging trend of African independent producers struggling to secure funding for new acquisitions and project development.
To address these financing constraints, the establishment of the Africa Energy Bank (AEB), headquartered in Nigeria, is expected to provide relief.
The pan-African financial institution, created under the auspices of the African Petroleum Producers Organisation (APPO) in partnership with the African Export-Import Bank (Afreximbank), is designed as a $5 billion fund to support Africa’s energy sector amid growing transition pressures.
