ENI-Oando ‘speedy’ approval questions lingering divestments
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has come under scrutiny following the approval of Oando Plc acquisition of Eni’s 100 percent stake in the Nigerian Agip Oil Company Limited (NAOC Ltd) within 18 months while other transactions like the Shell/Renaissance and the Mobil/Seplat deals continue to suffer delays.
Eni first announced the deal with Oando on September 4, 2023, but it stalled after the state-owned Nigerian National Petroleum Company (NNPC), which holds the remaining 60 percent stake in the projects, suggested it could exercise its pre-emption rights.
Within 12 months, NNPC retracted its position, and the deal was approved by NUPRC on July 24, 2024, and completed on August 22, 2024.
This swift approval process for Oando, run by the nephew of Nigerian president Bola Tinubu, has raised question marks on slow approvals facing other indigenous players such as Seplat and Renaissance, which also agreed to buy onshore and shallow water assets of oil majors such as ExxonMobil, TotalEnergies, and Shell.
Read also: NUPRC rejects Shell’s $1.3bn onshore asset sale to Renaissance
“Oando gets express approval for its asset purchase within 12 months and others don’t. For long, there was no public explanation on why the deal got priority and Seplat/ExxonMobil still dragged,” a senior oil executive told BusinessDay.
He added, “The deal between Renaissance and Shell continues to stall. The only deal that has fully scaled through so far is the one involving Oando. No clarity on why it got accelerated approval.”
The persistently delayed divestments are happening three years after the Petroleum Industry Act (PIA), which was publicised as the tonic to rewrite Nigeria’s decades-old relationship with its foreign oil partners and alter everything from fiscal terms to the structure of the state oil firm, came into law.
Section 95 Subsection 10 of the Petroleum Industry Act states that, “Where the application for an assignment or a transfer of a petroleum prospecting licence or petroleum mining lease is refused, the commission shall inform the applicant of the reasons for the refusal and may give reasonable time within which further representations may be made by the applicant or by third parties in respect of the application.”
Clementine Wallop, senior advisor at Horizon Engage, told S& P Global it is “very encouraging to see one of these divestment deals cross the line,” but said the link between the presidency and the company would “doubtless draw some comment.”
“The current status where the sellers have signalled a full intention to leave, whereas the buyers are yet to effectively take over the operations of the assets is very detrimental to the sector and the country,” Abdulrazaq Isa, chairman of Independent Petroleum Producers Group, said at this year’s Nigerian International Energy Summit in Abuja.
BusinessDay’s findings showed Shell’s $1.3bn deal to offload Nigerian onshore assets to Renaissance hit a roadblock, with the NUPRC alleging that the buyer’s technical and financial capacities do not meet new standards.
The complexities surrounding abandonment, decommissioning and the surge in environmental issues, legal crises, labour conflicts, vandalism, capital and technical challenges for Nigerian companies are upsetting stakeholders.
“The industry continues to suffer from a lack of transparency concerning divestments,” said Preye Orodu, lead engineer at KEOT Synergy.
Orodu said the industry remains heavily politicised, citing recent incidents such as the Dangote Refinery saga, ExxonMobil’s divestment to Seplat Energy, and Shell’s sale to Renaissance.
Read also: We facilitated 29m barrels of crude to Dangote in six months NUPRC
“These developments do not project a favourable image for a country seeking foreign direct investment (FDI),” he added.
BusinessDay findings showed the prolonged negotiation around the sale of ExxonMobil assets to Seplat has cost the country about 480,000 barrels per day (bpd) valued at about $38.4 million daily.
“Seplat has proven to be a strong indigenous player and would help to boost Nigeria’s oil and gas production from the ExxonMobil assets when the deal pulls through,” said Etulan Adu, an energy analyst.
Adu further said that Nigeria is no longer a darling for major International Oil Companies (IOCs) to invest billions of dollars in onshore projects or shallow water because of the difficult operating environment and reputational cost from legal battles.
“As a nation, we can’t even put forward capital for major oil and gas projects for any IOC to try and bargain for shares. Recently, Indonesia pulled a deal of more than $10 billion for the development of an offshore gas asset with Eni,” Adu said. “So the IOCs are focusing on serious regions.”
Aisha Mohammed, an energy analyst at the Lagos-based Center for Development Studies, argued that it is in Nigeria’s interest to have a thriving energy sector, particularly at a time when investors prefer other destinations.
“For example, Nigeria is the only major oil producer where the IOCs are leaving despite the threat of energy transition. Globally, underinvestment into oil projects is challenging, but it is worse in Nigeria,” Mohammed said.
NUPRC’s position
In a detailed response to criticisms on Monday, Olaide Shonola, senior manager, corporate communications at NUPRC, emphasised that all divestment approvals, particularly those involving Oando and Seplat, were conducted with full compliance to the PIA and established regulatory frameworks.
“The Commission has been thorough in adhering to the legal and procedural requirements set by the PIA, ensuring transparency and accountability at every step,” Shonola stated.
She said the divestment by Exxonmobil to Seplat Energy Offshore Limited is currently undergoing the same consent approval process and is expected to be completed within the 120-day timeline provided by the Act.
She said that ExxonMobil, through a letter dated February 24, 2022, notified the commission of its intention to assign 100 percent of its issued shares to Seplat Offshore Energy Limited.
Read also: Oando eyes 1.2 billion barrels after Nigerian acquisition
She further said the commission did not consent to this assignment because Exxonmobil failed to obtain a waiver of pre-emption rights as well as the consent of NNPC, its partner, on the blocks to the divestment.
“It is worth pointing out that NNPC’s right to pre-emption and consent under the NNPCL/MPNU Joint Venture Joint Operating Agreement was the subject of Suit No: FCT/HC/BW/173/2022 Nigerian National Petroleum Company Limited versus Mobil Producing Nigeria Unlimited, Mobil Development Nigeria Inc., Mobil Exploration Nigeria Inc. and NUPRC,” she noted.
NUPRC said NNPC and ExxonMobil (MPUN) resolved their dispute in June 2024, through a letter dated June 26, 2024, informing the commission of the resolution of the dispute.
“Upon resolution of this dispute, the commission communicated its no-objection decision to the assignment via a letter dated July 4, 2024 and requested MPNU to provide information and documentation required under the commission’s due diligence checklist to enable the commission conduct its due diligence as required under the PIA.
“MPNU by letter dated July 18, 2024, provided the information requested by the commission. Accordingly, MPNU’s application to the commission for consent is currently undergoing due diligence review, under the same divestment framework applied to the NAOC-Oando and Equinor-Chappal divestment.
“The commission’s due diligence process is ongoing and within the 120-day timeline required by the PIA,” she added.
