Nigeria’s declining hydrocarbon production output and inability to reach its desired three(3)million barrels per day are directly related to the Nigerian National Petroleum Company’s (NNPC) repeated failure to fulfil its obligations, which resulted in debts, unfunded obligations, and stalled projects. These failures have strained relationships with joint venture (JV) partners over the years.
The most recent dispute over ExxonMobil’s transfer of 40 percent ownership in four assets to Seplat has once again highlighted the need for the national oil firm to tread carefully with its claims in the sake of the faltering national economy.
It is not in doubt that the Nigerian National Petroleum Company Limited(NNPC Ltd) was entitled to exercise the right of “first refusal” in the transaction involving its partner, ExxonMobil, concerning the joint venture ownership of a large tract of shallow offshore assets comprising OMLs 67, 68, 70,104 and associated infrastructure with NNPC holding a 60 per cent interest.
It is equally not in doubt that both ExxonMobil and Seplat Energy were both entitled to negotiate the sale and purchase of the assets under reference and, indeed, went ahead to consummate the transaction in such a manner that it was transparent and decent, except further scrutiny will reveal otherwise.
However, while Seplat Energy and ExxonMobil were awaiting regulatory approval, after the exchange of $1.6 billion, the NNPC Limited suddenly woke up and remembered that it had forgotten to exercise its right of First Refusal and, as a consequence, halted the transaction in circumstances that left a poor impression of it as a corporate institution that understands the value of being prompt without becoming overbearing.
Seplat Energy and ExxonMobil are both listed on the international stock exchange markets with an obligation to conduct their businesses responsibly.
EnergyDay holds the view and expectations that the NNPC Limited should aspire to imbibe corporate governance virtues that will shield it from frequent frosty relations with its business partners and the Nigerian public and position it as a strong candidate in the near future for the international stock exchange market.
In perspective, ExxonMobil had issued a statement to express its desire to divest operations from Nigeria on grounds that it would like to re-focus its operations and exit the Nigerian market while retaining deep offshore projects; the volatile state of affairs in the Niger Delta region and political exigencies were the underlying reasons that prompted ExxonMobil, together with other international oil companies (IOC’s) in the same direction to quit the Nigerian market.
The Nigerian Oil Companies took up the challenge to fill the gap and protect the country’s natural resources for economic gains by replacing the roles vacated by the IOCs.
Seplat Energy and several others are in this league, and they deserve national support without compromising standards.
“Recall that EnergyDay, in a recent publication, pointed out that this specific transaction marks one of the momentous experiences in Nigeria’s hydrocarbon development at a time when the country was a bad sell to the global oil investment public.”
The major highlight and sequence of the transaction in summary is further explained by Seplat Energy stating that it is the Nigerian subsidiary of Seplat Energy Plc and has entered into a Sale and Purchase Agreement to acquire the entire share capital of Mobil Upstream Nigeria for a purchase price of $1,283 million, plus up to $300 million in contingent consideration.
The transaction, according to Seplat Energy, encompasses the acquisition of the entire offshore shallow water business of ExxonMobil in Nigeria, which is an established, high-quality operation with a highly skilled local operating team and a track record of safe operations, producing substantial crude and gas volumes.
Nigeria is expected to increase crude production from the assets by 146,000bpd, while gas reserves will increase to 650MMbbl, leaving a potential recovery of nearly 3 billion SCF of gas.
More interestingly , the deal includes the Qua Iboe export terminal and a 51% interest in the Bonny River Terminal as well as natural gas liquids recovery plants at EAP and Oso, but excludes the deep offshore assets.
The transaction, which is seen as supporting Nigeria’s energy transition and the objectives of the Petroleum Industry Act (PIA). It is also the first transaction to be announced since the Nigerian government ratified the act one year ago.
EnergyDay wishes to counsel that parties to this transaction, including NNPC Limited, should return to the negotiating table and seek a win-win resolution that will boost Nigeria’s brand identity in the international business environment.
The intervention of the Presidency in trying to resolve a straightforward issue ended up creating a furore which undermines the ability of the government to remain coherent and consistent.
EnergyDay is optimistic that all stakeholders will endeavour to come together in co-operation for competition.
Fortunately for the NNPC Limited, the increasing uncertainty of the present global energy crisis, spurred mainly by the war between Russia and Ukraine, has inadvertently turned the table in its favour because of its role and stature as the country’s National Oil Company holding the largest share of the country’s oil and gas asset portfolio.
EnergyDay is aware that, up until now, Seplat Energy has also enjoyed a fairly stable relationship with the NNPC, and the same can be said of ExxonMobil.
In the overall economic interest of the country, a complete focus on the immediate gains envisioned by Seplat Energy as accruable to the country is sacrosanct, and EnergyDay is hopeful that the NNPC Limited and Seplat Energy will identify a common path to salvage the country’s national honour and economic interest.
The NNPC Limited must be commended for resolving issues around the country’s Production Sharing Contract arrangement in a fresh move to unlock 10 billion barrels of oil production with the potential for all the stakeholders to earn a cumulative sum of $500 billion and as much as $30 billion in FID.
Economic hardships sweeping across the country and the growing resentment of the public on issues of poor accountability, corruption, and inefficient management of national assets are sharp indications that the NNPC Limited must operate above board in order to earn public trust.
The Nigerian public are the primary shareholders of the NNPC Limited and bona fide owners of the country’s natural resources, including crude oil and gas, and other precious products of the soil.
They deserve a fair share of these resources through a better standard of living, accessible energy and the transparent, satisfactory presentation of the performance report of the NNPC Limited as well as other similar institutions to oversight authorities.
Beyond these, Nigeria’s reputation and the international public perception of the country is the direct responsibility of every institution representative of the country’s sovereign image, and EnergyDay encourages all concerned to keep this in view.