Financing Nigeria's Upstream Oil and Gas: Why Technical and Financial Diligence Must Meet

Nigeria's upstream sector has changed shape. International oil companies have divested large onshore and shallow-water assets, the Petroleum Industry Act has reset the regulatory framework, and indigenous companies now hold a growing share of production. The opportunity is real. So is the financing gap. As Managing Director and CEO of Haricot Energies, I spend most of my time on the question that decides whether a field gets developed: can it be financed?

Two languages, one deal

Engineers speak in reserves, well performance, facilities and decline curves. Financiers speak in cash flow, debt service cover, security and exit. Deals stall when the two are prepared separately: a technically sound development plan with an unbankable structure, or an elegant financing model built on optimistic production. I began my career as a field engineer and later trained as an accountant at PwC, and the most valuable thing I can do on a deal is make those two languages describe the same asset.

What lenders and investors test

• Reserves and resources: independent certification, and how much is proved and producing versus undeveloped.
• Evacuation: how crude or gas actually reaches market, at what cost and with what downtime risk.
• Title and approvals: licence status, consents and compliance with the regulator.
• Development plan and cost: realistic timelines and contingencies.
• Cash flow under stress: low price, delayed first oil and higher costs, modelled together.
• Governance: who controls the special purpose vehicle, how cash is ring-fenced and how disputes are resolved.

Structures that work

Reserve-based lending, crude-backed facilities, farm-ins, joint ventures and special purpose vehicles each fit different stages of an asset. The right choice depends on what the asset can carry today and what it can prove tomorrow. Over-leveraging an early-stage field is one of the most common ways good assets fail.

Local content and capacity

Nigerian content obligations are not just compliance. Building local engineering, services and financial capacity lowers costs over time and strengthens the sector's resilience.

A simple financing stack

Consider a field development needing 120 million dollars. A realistic structure might combine 30 to 40 percent equity from the sponsor and partners, a reserve-based lending facility secured on certified reserves, and an offtake prepayment from a crude buyer in exchange for future cargoes. Each layer has different requirements. Equity investors want returns and governance rights. Banks want certified reserves, hedging and covenants. Offtakers want reliable delivery and security over cargoes.

The art is aligning them so that the project can survive a period of lower prices or delayed production without breaching covenants.

What a bankable development plan contains

• Independent reserve certification with clear categories (proved, probable, possible).
• A phased drilling and facilities plan with realistic timelines and costs.
• A firm evacuation route, with tariffs, losses and a backup option.
• A financial model linking production, prices, costs, fiscal terms and debt service.
• Sensitivities: lower prices, higher costs, delays and lower production.
• Environmental, social and community plans that meet the Petroleum Industry Act and lender standards.

The role of governance

Lenders and investors increasingly judge upstream companies on governance: audited accounts, a credible board, clear related-party policies and transparent reporting to regulators. Indigenous operators that invest in governance early reduce their cost of capital, because investors price uncertainty. Good governance is not paperwork; it is a financing advantage.

The bottom line

Capital is available for Nigerian upstream assets that are prepared properly. That means honest technical work, disciplined financial modelling and documentation that holds up to scrutiny. That is the standard Haricot works to, drawing on a team with more than 130 years of combined experience across exploration, drilling, geoscience, regulatory compliance and corporate finance.

Common questions

What is reserve-based lending?

Reserve-based lending is a loan secured on the value of an oil and gas company's certified reserves, with the borrowing limit recalculated regularly as prices and production change.

What do lenders look for in Nigerian upstream projects?

Certified reserves, a credible development plan, reliable evacuation, a valid licence, an experienced operator, strong governance and a model that survives low-price scenarios.