Concerns Mount as Nigerian Oil Sector Divestment Deals Face Prolonged Delay

International Oil Companies (IOCs) and their indigenous counterparts have expressed worry over the delay in the conclusion of the several divestment deals in the Nigerian oil sector.

Speaking at the just-concluded Nigeria International Energy Summit (NIES) in Abuja, a number of those who spoke maintained that the reluctance of the authorities to quickly expedite action on the cases was bad for the sector and, by extension, the Nigerian economy.

Among the pending divestment processes are the ones involving Exxon Mobil Corporation, which agreed to sell its shallow-water oil assets to Seplat Energy Plc almost two years ago.

The Nigerian National Petroleum Company Limited (NNPC) had raised objection to the deal, stressing that it has the right of first refusal.

Similarly stuck are Eni’s plan to sell some of its assets to Oando, and Equinor ASA’s deal with Chappal Energies.  Shell Plc, which in January agreed to sell its Nigerian onshore oil business to a group of local companies for more than $1.3 billion is also awaiting regulatory approval.

Minister of State, Petroleum Resources (Oil), Senator Heineken Lokpobiri, has stressed at several forums that resolution of the cases had reached advanced stages and the federal would not hesitate to make the necessary approvals, yet none of the deals has sailed through.

But at the event in Abuja, Chairman of Independent Petroleum Producers Group (IPPG), who also leads Waltersmith Petroman Oil Limited, AbdulRazaq Isa, made a passionate plea for the processes to be completed as soon as possible.

Isa stated, “It is on this very important note that the IPPG passionately prays for the expedited conclusion and closure of the divestment processes. The current status where the sellers have signalled full intention to leave, whereas the buyers are  yet to effectively take over the operation of the assets is very detrimental to the sector as well as the country.

“The industry would be most appreciative of the prompt intervention of the government to untangle all issues and diligently fast -track all relevant approvals.”

Managing Director of Shell Nigeria, Osagie Okunbor, was quoted by Bloomberg as stressing in one of the sessions that there was an “urgent need to conclude these transactions”.

On its part, Exxon said delays in approving the sale of its assets to London-listed Seplat were causing uncertainty for the communities and contractors that depended on those operations.

“It’s imperative that it’s concluded and that clarity is provided to everyone involved,” Exxon Nigeria Chief Executive Officer, Shane Harris, said at the same conference. “What’s really important is it helps resolve a significant amount of uncertainty that currently clouds thousands of people,” he added.

In a similar vein, Oando Plc’s acquisition of Eni’s Nigerian unit, which has interests in onshore oil and gas blocks and power generation, has been challenged by NNPC over the failure to obtain prior authorisation.

But Oando’s Executive Director, Alex Irune, said, “We do need the reviews, consent to come quickly.”

Irune added, “We do need to get on these assets and start working on them.”

The departure of international oil majors from onshore operations in Nigeria has coincided with years of declining investment in the industry.

But while accusing fingers obviously point at the regulator, Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and NNPCL both vehemently protested any insinuations that they were blocking the deals.

NUPRC’s Chief Executive, Gbenga Komolafe, in defence of the organisation he heads, insisted that he was only making sure that due process was followed.

Komolafe said, “Let me take time to respond to issues raised by the chairman of IPPG in respect of the issue of divestment, because it is critical for us as regulator to respond in that respect. We, acting on behalf of the government of Nigeria as the regulator of the upstream recognise that divestment is the right of licensees or operators.

“It’s a business decision, clearly, but in doing so, the position of the regulator is that the divestment must follow due process. 

And for that reason, we have put in place robust divestment processes, which we believe that if followed, will be in the interest of the government, the host communities, the seller, and the buyer.

“So, what we are doing as regulator is to ensure that both the buyer and seller and, of course, the government and the host communities are all on the same page.

“So, please, let the message be taken home that the regulator is in no way trying to be a showstopper in this respect. We are working collaboratively with the parties to the divestment to ensure that robust regulatory process that have been put in place is followed.”

Speaking against the backdrop of the perception that NNPCL was blocking IOCs intending to divest from Nigeria’s onshore, Group Chief Executive Officer, Mele Kyari, insisted that the role of NNPC was that of a facilitator, and not an obstacle.

Kyari explained that by virtue of its statutory mandate as the enabler of national energy security, its role was to ensure that at the end of the day, there was optimal and sustainable production from the divested assets to guarantee energy security for the benefit of Nigerians.

Meanwhile, some members of OPEC and allies, led by Russia, (OPEC+) yesterday agreed to extend voluntary first-quarter oil output cuts into the second quarter, sources said

OPEC+ in November agreed to voluntary cuts totalling about 2.2 million barrels per day (bpd) for the first quarter, led by Saudi Arabia rolling over its own voluntary cut.

OPEC+ has implemented a series of output cuts since late 2022 to support the market amid rising output from the United States and other non-member producers and worries over demand as major economies grapple with high interest rates.

Oil prices have found support from rising geopolitical tensions due to attacks by the Iran-aligned Houthi group on Red Sea shipping, although concern about economic growth and high interest rates has weighed. 

Brent futures for May settled $1.64 higher, or 2 per cent, at $83.55 a barrel on Friday.

OPEC+ member countries announced the cuts individually. Kuwait said it would cut its oil output by 135,000 barrels a day (bpd) through June, while Algeria will cut its output by 51,000 bpd.

Emmanuel Addeh