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Nigeria’s oil industry plays critical roles in the nation’s economy as a major driver of foreign investment into the country, by far the largest contributor to foreign exchange earnings, and based on its contribution to GDP, which was 6.38% in Q1 2024. After maintaining the top position for decades, Nigeria is currently the second-largest oil producer in Africa, after Angola, and ranks 15th globally. The Nigerian economy and budgets have been largely supported by income and revenues generated from the petroleum industry since the 1960s.

But since 2008, the industry has suffered downturns. Nigeria has been unable to meet its export quota allocation by the international oil cartel, Organisation of Petroleum Exporting Countries (OPEC). This has been due to a lack of adequate investment in exploration for new oil fields and in the maintenance of existing infrastructures. Also, lack of investment in the maintenance of extant production and pipeline infrastructures has made them to be susceptible to vandalisation and oil leaks, with both wreaking environmental harm in the oil-producing communities.

The last commodity super-cycle, which was interrupted during the global financial crisis in 2008, ended in 2014 when oil prices traded above $110.00 per barrel before a precipitous fall. Since then, oil prices have collapsed twice, first in 2016 and second during the COVID-19 pandemic. The current price recovery has faced renewed downward risk from weak demand, and the threat of oversupply has newly become stronger with President Donald Trump wanting to ramp up oil production in the U.S. in his second term to bolster his country’s energy security.

This trend makes it difficult for oil companies to invest even in their existing assets, especially in jurisdictions including Nigeria facing significantly higher financial costs and where insecurity is a major threat to investments. Indeed, the country faces several challenges related to the maintenance and optimisation of its aging oil infrastructure. Nevertheless, the need for effective, cost-efficient solutions to reach and maintain targeted production levels and extend the life of existing wells has become increasingly important.

Hydraulic workover units (HWUs) offer a solution to the financial constraints of overhauling the countries aging oil installations. As mobile, self-contained rigs, the HWUs offer a dynamic solution that aligns with Nigeria’s evolving energy needs, particularly in the face of growing exploration activities and maturing oil fields.

The Nigerian oil and gas industry is marked by both offshore deep-water reserves in the Niger Delta region and a significant number of onshore and shallow water oil fields. Many of these fields have been in production for decades and now require more regular maintenance to ensure sustained output amid regular oil price shocks.

HWUs provide a flexible, cost-effective alternative to traditional drilling rigs, offering services that extend well life, enhance production, and reduce the financial burden on operators. Given Nigeria’s reliance on oil revenues, implementing HWU services at scale is crucial to maintaining production capacity, ensuring economic stability, and fulfilling global energy demands.

As exploration moves further offshore and into deeper water, more specialised and advanced equipment are required. This has added pressure on companies to innovate and adapt quickly to market demands. This presents both opportunities and challenges for policymakers and industry stakeholders alike.

HWUs primarily solve two major problems within the oil and gas sector: environmental concerns and financial constraints. HWUs address environmental challenges by allowing well interventions and maintenance activities to occur without the need for drilling new wells. This means fewer disturbances to the surrounding ecosystem, as well as a reduction in the potential overall environmental footprints of oil extraction activities. By helping to maintain existing wells, HWUs contribute to more sustainable practices in the industry, ensuring that the country’s reserves are utilised in a manner that balances production with environmental stewardship.

Financially, the use of HWUs provides significant cost savings compared to traditional drilling rigs. The capital expenditure required for drilling new wells is substantial, and the operational costs associated with running full-scale drilling rigs can be prohibitive, especially when dealing with older wells that require frequent maintenance. By employing HWUs, oil operators can reduce these costs, enabling them to extend the productive life of the wells and thus improve the financial sustainability of oil operations in Nigeria.

The primary advantages of hydraulic workover units are their ability to reduce operational downtime and minimise the need for expensive, complex operations. These mobile units are capable of performing a wide range of well intervention tasks, including maintenance, stimulation, tubing replacement, pressure testing, and well plugging or abandonment. For operators managing aging oil fields, these services are essential for prolonging the life of wells and ensuring that production targets are met.

HWUs also offer significant logistical advantages. Their mobile, self-contained nature means they can be deployed quickly and efficiently, especially in remote or offshore locations where traditional infrastructure may be lacking. This flexibility allows oil operators to react swiftly to emerging issues and reduce the amount of time a well is non-operational, which ultimately results in higher returns.

As technological advancements continue to improve the safety and efficiency of hydraulic workover operations, the demand for these services is likely to increase, particularly as offshore exploration intensifies in Nigeria. The ability of HWUs to perform complex interventions, such as acidising, hydraulic fracturing, and pressure testing, makes them indispensable tools for modern oilfield operations.

Several companies in Nigeria are already leveraging the benefits of HWUs. International operators like Shell, Chevron, and ExxonMobil, as well as local players such as Heirs Holdings Oil & Gas, LEKOIL Nigeria Limited, Frontier Oil, and Conoil have all recognised the value these units bring to their operations. Additionally, local service providers like Tecon Oil, Joeny Holdings, and ACES are also making significant strides in providing HWU services, often focusing on maintaining Nigeria’s extensive network of aging oil fields.

According to data from Nigerian Upstream Petroleum Regulatory Commission (NUPRC), there are 159 oil fields and 1,491 oil wells in Nigeria. This indicates that vendors of HWUs services have a large market to serve. The demand for the services is set to grow as more oil fields age and offshore operations increase. This presents an opportunity for both local and international companies to invest in HWUs to support the aspiration of the current administration of President Bola Tinubu to ramp up Nigeria’s oil production after the ebbs of the last few years.

The outlook for hydraulic workover unit services in Nigeria is promising. As the oil sector shifts toward more sustainable practices and focuses on maximising the potential of existing reserves, the demand for well intervention solutions such as HWUs will only increase. The current economic environment, coupled with the ongoing exploration in deep-water fields and the maturation of onshore reserves, underscores the need for efficient, cost-effective interventions to maintain production.

However, for the full potential of HWUs to be realised, there are challenges that must be addressed. Infrastructure improvements, regulatory clarity, and enhanced security measures will be necessary to support the widespread deployment of these units, especially in remote areas. Additionally, policymakers must continue to support local content initiatives to foster the development of domestic service providers who can meet the increasing demand for well intervention services.

In the long term, hydraulic workover units could play a pivotal role in securing Nigeria’s position as a leading global oil producer. By improving the efficiency of well maintenance and extending the lifespan of oilfields, HWUs contribute to both environmental sustainability and financial resilience in an increasingly volatile global energy market.

Anaekwe Everistus Nnamdi, Market Research Analyst and Founder at Foraminifera Market Research Limited, which provides bankable feasibility reports for projects. Email: forminiferaltd@gmail.com.