There are strong indications that investment inflow to the upstream sub-sector of the Nigerian oil industry has started dwindling as foreign investors now choose Angola and Ghana as preferred destinations over Nigeria.

This, by implication, of course, would threaten Nigeria’s capacity to grow its crude oil reserves as planned and there might also be job cuts in the industry. Nigeria is targeting 40 billion barrels proven reserves by 2010. Analysts have identified insecurity in the Niger Delta and unstable fiscal policy as key reasons while investors are gradually leaving Nigeria for more stable business climes.

BusinessDay gathered that international oil companies are beginning to see insecurity in the Niger Delta as a key threat to investments, especially with the experience that a major oil company like Shell has had,with its production dropping from one million barrels per day to about 380,000 barrels per day. The concern, “essentially, is about militancy in the Niger Delta, and the failure of the government to even begin to resolve the Niger Delta crisis,” a senior executive in a big oil firm told BusinessDay.

“For two years now, this government has told us it wants to resolve the Niger Delta crisis, but as it is today, not a single shovel of sand has been moved to the area, and so far, its been merely promises,” the source lamented. Oil companies, consequently, are becoming stricter with their investments as low crude oil prices persist, even as they keep moving strategically from high risk centers to low risk environments.

Furthermore, revocation of licenses earlier awarded is also said to be creating an impression of an unstable fiscal climate in the minds of foreign investors. Analysts cited the revocation of oil bloc licenses earlier awarded to Korean National Oil Company (KNOC) and ONGC of India, OPLs 321 and 323, after Production Sharing Contracts (PSCs) had been signed, as key indicators of an unstable fiscal environment.

Also, the Liquefied Natural Gas projects like Brass, NLNG 7, and Olokola, sources added, are being slowly implemented, as investors continue to weigh their investment options in the face of fast thinning purses resulting from low crude prices.

Oladiran Fawibe, chairman, International Energy Services Limited, said government’s recent policy as regards some international companies whose oil blocs were revoked would naturally give a wrong signal to the international community.

“They may be forced to think twice before bringing in their money. Investors who are daily bombarded about the security problem in the Niger Delta, the issue of crude oil theft and other criminal activities would not want to make any investment in Nigeria, as these things do not give confidence to foreign investors. The situation in the Niger Delta is no longer political, but criminal.”

In the same vein, Austin Avuru, managing director of Platform Energy, said insecurity of investments remain one of the major factors foreign investors are now looking towards Ghana and Angola.

He warned that “with the way things are going now, Nigeria may not be able to meet its OPEC production quota as a good number of companies are pulling out.” Already, Angola has begun to attract more investments from oil companies as IOCs are making long term expenditure commitments in the southern African nation.

Total, for instance, said last week that it would go ahead with a $9 billion investment to raise production in Angola, despite a $100 fall in oil prices since July last year, occasioned by the global economic slowdown. Total plans to stick to its major investments in Angola, even as it expects crude prices to recover, the company’s top official in Angola said.

“We are living through a crisis that has pushed oil prices to very low levels. Therefore, we are being extremely strict with all our investments,” Olivier Langavant, its director general in Angola, was quoted as saying in an interview with Reuters.

“But the big projects (in Angola) like the Pazflor, which is a $9 billion investment, will be maintained.”

Pazflor, Total’s third production hub in Angola’s offshore Bloc 17, is expected to begin pumping oil in 2011 from water depths of up to 1,200 metres, according to the company’s website. It is the firm’s biggest investment in Angola.

Total is the third biggest oil producer in Angola after Exxon Mobil Corp. and Chevron, pumping, on average of over 500,000 barrels per day.

Chevron, Total and Eni are currently developing a $4 to $5 billion liquefied natural gas plant in Soyo, Angola. On the contrary, Nigeria’s Olokola, Brass LNG and NLNG Train 7, are yet to take off.

Chevron is also spending on the Tombua –Landana offshore field in Angola, although, it is equally spending money on the Agbami field and Usan development, offshore Nigeria in 2009.

Because of the high spend of the oil majors in Angola, big oil service companies have begun to win big contracts. BP plc has awarded Halliburton more than $600 million in contracts for up to four projects in Angola.

The Houston-based company will provide well completion equipment and drilling and completion fluids for about 50 wells across for developments. The first is scheduled to begin drilling in 2010.

Also, China and Angola would soon seal a $1 billon deal and it had already received $5 billion oil backed loans from China since 2002.