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Tuesday, May 28, 2024

Shell, ExxonMobil, and additional companies to divest from oil blocks in Nigeria

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The Nigerian government on Friday said four International Oil Companies (IOCs) will divest from a total of 26 oil blocks in the country.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) Chief Executive, Gbenga Komolafe, said the proposed oil blocks belong to Nigerian Agip Oil Company, ExxonMobil (Mobil Producing Nigeria Unlimited), EQUINOR and Shell (Shell Petroleum Development Company of Nigeria Limited).

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Mr Komolafe disclosed this during the industry dialogue on divestment in Abuja on Friday.

He said Oando is seeking to acquire NAOC assets from Eni while Seplat is bidding to take over Mobil assets.

The Equinor divestment to Chappal includes a stake in the prolific Agbami oil field and Renaissance to acquire the onshore assets of Shell.

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He explained that these blocks have an estimated total reserve of 8.211 million barrels of oil, 2,699 million barrels of condensate, 44,110 billion cubic feet of associated gas and 46,604 billion cubic feet of non-associated gas.

This, he said, is a significant contribution to the nation’s hydrocarbon resources.

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Additionally, Mr Komolafe said these blocks contain P3 reserves estimated at 5,557 million barrels of oil, 1,221 million barrels of condensate, 14,296 billion cubic feet of associated gas and 13,518 billion cubic feet of non-associated gas.

“It is worth noting that a substantial part of the P3 reserves is located in or near producing assets. This means that a competent successor could easily mature them to 2P reserves.

“Additionally, the current average production from these blocks is 346,290 barrels per day (bpd) (NAOC-28,018 bpd, MPNU-159,378 bpd, EQUINOR-36,155 bpd and SPDC-122,739 bpd).

“But the technical production potential is much higher – standing at 643,054 barrels (NAOC-147,481 bpd, MPNU-244,268 bpd, EQUINOR-39,203 and SPDC-212,102 bpd),” he said.

He added that these blocks have the potential to significantly boost national production, which would benefit all stakeholders.

“Our regulatory goal is to ensure that parties in the divestment process conform to the approved divestment guidelines. We aim to ensure that the companies that take over these blocks have the necessary financial resources and possess the technical expertise required to responsibly manage the blocks throughout their lifecycle in accordance with good asset stewardship practices.

“Furthermore, we must ensure that the inherent environmental, host communities and end-of-life liabilities, i.e. decommissioning liabilities, are accurately identified and assigned to the party best equipped to bear the associated risks.

“This necessitates a comprehensive understanding of regulatory requirements, industry best practices, and the unique challenges associated with oil and gas operations,” he said.

He added that President Bola Tinubu is committed to creating a favourable investment environment in the upstream petroleum industry.

As part of this initiative, he said the president has directed the commission to ensure a smooth entry and exit framework for the ongoing divestments by IOCs.

“To this end, we have implemented robust measures to streamline regulatory procedures and eliminate unnecessary barriers to investment.

“In line with the presidential directive, the commission has developed a divestment framework consisting of seven cardinal pillars in addition to the extant petroleum laws, to guide the assessment of applications for Ministerial consent by the divesting entities,” he added.

Additionally, he noted that the divestment framework is aimed at ascertaining compliance with extant petroleum laws and the assignees’ capacity to assume the responsibility of developing the assets acquired.

To achieve the divestment framework objectives, he said the commission has engaged two leading global oil and gas decommissioning consultants, S&P Global Commodity Insights (SPGCI) and Boston Consulting Group (BCG) to carry out due diligence on the assets to be divested.

“One of the objectives we hope to achieve in this workshop is to ensure that the environmental, host communities, and end-of-life liabilities associated with these assets do not become the financial responsibility of the Federal Government of Nigeria.”

To achieve this, he noted that the commission is proposing that the divesting entities should either agree to the grant of ministerial consent to the divestments, on the condition that they will retain the liabilities until the commission’s investigation is concluded and the liabilities are allocated to the proper party.

In this case, he said the divesting companies will be required to issue an undertaking to retain the liabilities until confirmation of the release by the commission of all or part of the retained liabilities.

READ ALSO: Shell: Nigerian govt develops divestment framework

Alternatively, he said the divesting entities can agree that ministerial consent will not be granted until the commission has identified and assigned all liabilities to the capable party.

“In this situation, the divesting entities will also be required to issue a waiver, waiving their rights to deemed consent as provided in Section 95 (7) (b) of the PIA.

“Please note that the commission expects the divesting parties to indicate their preferred option and issue the applicable instrument within two weeks of the date of this workshop. I want to make it unequivocally clear that the NUPRC is dedicated to ensuring that investment processes are smooth, transparent, and efficient.

“The requirement to sign an undertaking or waiver is solely aimed at preventing any unwarranted financial obligations from falling back on the Federal Government of Nigeria. I assure you that the commission is eager to close the divestments within the shortest timeline upon the receipt of any of the required instruments,” he said.

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