May 26, 2024

Oredola Adeola

 

The Nigerian National Petroleum Company Limited (NNPCL) has faulted ENI’s planned onshore asset divestment deal with Oando PLC, in an attempt to exercise its right of first refusal as contained in the Joint Operating Agreement (JOA), in the same way it stalled the assets sales agreement between SEPLAT’s $1.583 billion deals for the purchase of entire share capital plus contingent consideration of ExxonMobil in Mobil Producing Nigeria Unlimited (MPNU).

 

This was disclosed in a letter signed by Ali Muhammed Zarah, Managing Director of NNPC Exploration & Production Limited (NEPL) the NNPCL’s subsidiary that handles upstream operations, dated September 4, and addressed to the Managing Director of Nigerian Agip Oil Company Ltd.

 

According to the NNPCL, if the deal goes through, it will have far-reaching contractual/legal implications in relation to the joint Operating Agreement dated July 1991 governing the operations of the NAOC/NEPL/OOL Joint venture.

 

ENI had in a recent statement seen by EnergyDay announced that it had signed an agreement with Oando PLC, an energy solutions provider listed on both the Nigerian and Johannesburg Stock Exchange, for the sale of all its stake in Nigerian Agip Oil Company Ltd (NAOC Ltd), a wholly owned subsidiary focusing on onshore oil & gas exploration and production in Nigeria, as well as power generation.

 

The statement was also corroborated by – Oando PLC announcing that it has reached an agreement with Eni (“ENI”) for the acquisition of 100% of the shares of Nigerian Agip Oil Company Limited (NAOC Ltd).

 

EnergyDay recall that in a similar move, the NNPC through its subsidiary NNPC E&P in March 2022, cancelled the sales agreement between SEPLAT and ExxonMobil on the ground of exercising the right of pre-emption over any planned sale or takeover of assets in the JVs if either party chooses to trade them off.

 

The assets sale deal between SEPLAT and ExxonMobil has since then hit the rock, while NNPC has stated that it is obligated by the terms of the Joint Operating Agreement (JOA) to match the winning bid in full.

 

Recall that the Femi Adesina, spokesperson to former President Muhammadu Buhari, on behalf of the President who doubled as the Minister of Petroleum Resources purportedly granted ministerial consent for Seplat Energy to proceed with its acquisition plan in respect of the share capital of MPNU, as stipulated in the provisions of the Petroleum Industry Act (PIA), but the NNPC objected the deal completely.

 

Giving reasons for the argument over the OANDO/ENI deal, the NNPCL said the transfer of the assets was against contract rules governing the joint venture operation, arguing that by virtue of the agreement, a party seeking to transfer part or the whole of its participating interest in the Joint Venture is obligated to seek the prior written consent of the other parties, especially since it controls 60 percent of the stake.

 

Ali Muhammed Zarah, Managing Director of NNPC E&P Limited in the letter said, “Clause 19.11 of the JOA provides that “No party may assign or transfer its interest or any part thereof without the prior written consent of the other parties, which consent shall not be unreasonably withheld.

 

“We have highlighted the above provisions of the JOA to underscore the point that the purported assignment, even if valid, should by no means translate to transfer of operatorship to OOL. if NAOC’s divestment turns out to be valid, it will be incumbent on NEPL and OOL to decide on a successor operator,” the NNPCL letter stated.

 

The NNPC Ltd in the letter, further  emphasised  that the failure to obtain the written consent of its NEPL, constituted a “grave breach of the terms of the JOA, and NEPL reserves its rights in relation to the said breach.

 

Before this report was published, EnergyDay sent a letter to Ayotola Jagun, the Company Secretary of OANDO, requesting clarification and a response regarding NNPCL’s claim to written consent. However, EnergyDay has not yet received a response.

 

EnergyDay gathered that like the stalled SEPLAT/ExxonMobil deal, the NNPCL is also triggering a legal dispute in the Oando acquisition of ENI’s 100% stake in NAOC, because the assets in Nigeria were among its prime targets in its planned takeovers and acquisition following divestment plans by the IOCs from Nigeria.

 

This legal tussle is also sending a negative signal against the sanctity of the PIA,  effectively regulate the country’s petroleum industry without undue interference from strong agencies and individuals who would seek to contest the emergence of strong institutions.

 

Recall that the PIA give the power to the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), as an independent regulator of the petroleum industry, to serve as the sole regulatory authority mandated to issue consent in such transactions in consultation with the Minister of Petroleum Resources.

 

Experts have argued that the right being claimed by the NNPC may not stand under the legal test, as the OANDO in its official statement announcing the transaction said that the deal involved only the acquisition of the shares of NAOC owned by ENI.

 

According to them this therefore means that the sale agreement with OANDO is not an outright purchase of the entire assets under the NAOC/NEPL/OOL Joint venture.

 

The NNPC was therefore accused of prioritizing its corporate ego over the benefits of transactions that could increase Nigeria’s crude oil output level, accelerate the development and monetize gas resources in the assets for the Nigerian economy.

 

The experts suggested that the NNPC should focus on enhancing the petroleum industry efficiency and commencing other undertakings that are beneficial in actualizing its portfolios.

 

 

 

Transaction highlights of OANDO acquisition of 100% of ENI’s shares in NAOC Ltd

  • The transaction increases Oando’s current participating interests in OMLs 60, 61, 62, and 63 from 20% to 40%.
  • It increases Oando’s ownership stake in all NEPL/NAOC/OOL Joint Venture assets and infrastructure which include forty discovered oil and gas fields, of which twenty-four are currently producing, approximately forty identified prospects and leads, twelve production stations, approximately 1,490 km of pipelines, three gas processing plants, the Brass River Oil Terminal, the Kwale-Okpai phases 1 & 2 power plants (with a total nameplate capacity of 960MW), and associated infrastructure.
  • Based on 2021 reserves estimates, Oando’s total reserves stand at 503.3MMboe and the transaction will deliver a 98% increase.
  • The transaction also grows Oando’s exploration asset portfolio through the acquisition of a 90% interest in OPL 282 and 48% interest in OPL 135.
  • NAOC Ltd’s participating interest in SPDC JV (Shell Production Development Company Joint Venture – operator Shell 30%, TotalEnergies 10%, NAOC 5%, NNPC 55%) is not included in the perimeter of the transaction and will be retained in Eni’s portfolio.