Regulatory policy

Stakeholders denounce government policy on IOC divestment and local content

Seplat, Mobile

BY EMEKA EJERE

The increasing rate of divestment by international oil companies (IOCs) from the Nigerian oil and gas sector poses a threat that has prompted the federal government to strategize on how to save the sector from collapse, the findings showed.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said over the weekend that collaboration, strategic alliances, mergers and acquisitions could provide leeway for the Independent Petroleum Producers Group (IPPG) to enable them to compete with multinationals.

The IPPG, an umbrella body for indigenous oil exploration and production (E&P) companies in Nigeria, is made up of 25 member indigenous oil and gas companies with global reach and capacity in the sector.

Five IOCs operate in Nigeria, including Shell Producing Development Company, TotalEnergies, Chevron, ExxonMobil and Eni. According to reports, most of the assets targeted for divestment by IOCs were land properties located primarily in shallow waters on land.

A report published in Africa Report, a journal on African politics and affairs, said that over the past 11 years, the IOCs had handed over a total of 26 oil exploitation licenses in the Niger Delta Basin and that others were to be sold.

However, the federal government in May withheld its consent to the proposed acquisition of oil and gas assets belonging to Mobil Oil Producing Nigeria Unlimited (MPNU) by Seplat Energy, citing among other reasons of overriding national interest.

Seplat Energy Plc., a leading indigenous energy company listed on the Nigerian Stock Exchange and the London Stock Exchange, announced in February this year that it had acquired the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) for 1 .28 billion from Exxon Mobil Corporation. , Delaware, USA (ExxonMobil subject, however, to ministerial consent and other required regulatory approvals.

ExxonMobil Upstream Oil and Gas Chairman Liam Mallon said the company has sold its stake in its shallow water business, MPNU, to Seplat Energy through Seplat Offshore, which is 100% owned by Seplat.

Presenting the highlights of the operation, which is the first of its kind since the entry into force of the Petroleum Industry Act (PIA), Seplat, for its part, set the purchase price at 1,283 million dollars plus a contingent consideration of up to $300 million.

The transaction, he said, would create one of the largest independent energy companies on both the Nigerian Stock Exchange and the London Stock Exchange, and strengthen Seplat Energy’s ability to drive growth, profitability and overall stakeholder prosperity, delivering a 186% increase in production from 51,000 bpd to 146,000 bpd or a 170% increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl.

In addition, it was expected to generate a 14% increase in 2P gas reserves from 1,501 Bscf to 1,712 Bscf, as well as significant undeveloped gas potential of 2,910 Bscf (JV: 7,275 Bscf).

No wonder Nigerians were excited as they awaited final ministerial consent to fully integrate these strategically important national assets into Nigerian ownership alongside the Nigerian National Petroleum Corporation (NNPC), the outgoing partner. of the joint venture. This is in line with the government’s objective to achieve a pragmatic, gradual and just energy transition for Nigeria.

Wood Mackenzie (WoodMac), a reputable global intelligence provider that gives decision makers unique insights into the world’s natural resources, hailed the deal saying it was a win-win for Seplat, ExxonMobil and the Nigerian government, offering a huge advantage for oil and gas.

Mackenzie added: “Because this is a business acquisition, NNPC has no right to anticipate an agreement under the Joint Operating Agreement (JOA), which governs the joint venture. This means that ministerial consent would be the only remaining hurdle, although nothing can be taken for granted.”

However, a few weeks later, it was reported that the Nigerian National Petroleum Company (NNPC) Limited had elected to exercise its right of first refusal (RFR) on the sale of the assets, which subsequently suspended the transaction.
Threat to the economy

Speaking at an event organized by IPPG on the eve of the Nigerian Oil and Gas (NOG) Conference and Exhibition in Abuja this weekend, NUPRC Chief Executive Officer, Gbenga Komolafe , said that while the threat posed to the development of the Nigerian hydrocarbons industry by CIO divestments remained serious concerns, the impetus for divestment by the majors should boost IPPG and other potential indigenous players.

“The impetus for divestment by IOCs is primarily attributable to the hostile upstream oil environment resulting from the threat of crude oil theft and the energy transition as a global response to advocacy for lower carbon emissions,” Komolafe said.

“Our view as a commission is that the IPPG and other potential indigenous players should view IOC divestments in some of the upstream assets as an opportunity rather than a threat to the development of the Nigerian upstream petroleum sector. .”

Komolafe argued that there was a need to strengthen IPPG through collaborations, strategic alliances, mergers and acquisitions aimed at producing synergies and large independents capable of competing with multinationals.

“It is indeed the right time to look inward to prove the ability of local content to add value and optimize the development of the country’s hydrocarbon resources,

“Therefore, we encourage you as local value chain actors to deploy your skills and ingenuity to promote dynamism and capacity utilization in the industry,” he noted.

IPPG Chairman Abdulrasaq Isa said local businesses need to understand the changing dynamics of the oil and gas industry, especially the energy transition and divestment by IOCs, to ensure the country’s energy security.

He urged operators to see opportunities in the current situation, noting the need to guard against the effects these events pose to the country’s energy security.

Recently, the Petroleum and Natural Gas Senior Executives Association of Nigeria, PENGASSAN, expressed concern over the growing divestments of CIOs from Nigeria, pleading with the federal government to provide more incentives for CIOs to stay in the business. Nigeria.

In a statement by its Chairman and Secretary General, Festus Osifo and Lumumba Okugbawa, respectively, PENGASSAN noted that the trend which started in 2012, has spread rapidly in the industry and reduced the fortunes of oilfield developments. and gas.

The statement read in part: “While we are not opposed to indigenous participation in the Nigerian oil and gas industry, we will not sit back and allow the mediocre to seize our national assets and ruin the fortune of future generations for immediate gains.
“It has been common knowledge that since IOC began to divest in 2012; most of the companies that have purchased these assets have not and cannot attract the necessary funds for capital expenditure in these areas or have made reasonable efforts to provide the required human and technical developments of Nigerians within their establishment .

Similarly, the Nigerian Content Development and Monitoring Board (NCDMB) lamented that IOC divestment and reluctance to make new investments in the country’s oil and gas industry has worsened the incidence of capital flight out of Nigeria. .

According to the NCDMB, the development is stifling the national economy of much-needed foreign exchange, with the funds being used as loans to acquire oil and gas assets leaving the country instead of being used to develop new production facilities in the country. country.

Presentation of a convening lecture at Federal University of Petroleum Resources (FUPRE) Effurun, Delta State titled “Defining the Value of Local Content in Petroleum Education” at Federal University of Petroleum Resources (FUPRE) Effurun , Delta State, Recently, Executive Secretary, NCDMB, Mr. Simbi Wabote, asserted that the divestment of IOCs has resulted in the emergence of local companies playing a major role in exploration and production activities.

This, he said, has seen companies like AITEO, FIRST E&P, EROTON and others acquire assets and are now responsible for producing around 15% of Nigeria’s oil and over 60% of gas. domestic.

Meanwhile, a former board member of the Nigerian Extractive Industries Transparency Initiative (NEITI) and managing partner at ENR Advisory, Mr. Gbite Adeniji, has blamed the refusal of ministerial agreement to the bid. of Seplat Energy to acquire the oil assets of MPNU, this decision implied that genuine players and investors were never sought or desired in Nigeria.

Adeniji also questioned why the federal government was unable to subject the massive oil losses and the resulting negative impact on the national economy to an independent judicial inquiry to determine the cause and deal with them. the threat.

“The message seems to be that real players are never wanted or wanted in Nigeria. We have to be concerned,” he said.