{"id":14455,"date":"2024-07-30T10:22:52","date_gmt":"2024-07-30T10:22:52","guid":{"rendered":"https:\/\/www.oilnewskenya.com\/?p=14455"},"modified":"2024-07-30T10:22:52","modified_gmt":"2024-07-30T10:22:52","slug":"acquisition-approval-delays-the-wrong-look-for-nigeria","status":"publish","type":"post","link":"https:\/\/www.oilnewskenya.com\/index.php\/acquisition-approval-delays-the-wrong-look-for-nigeria\/","title":{"rendered":"Acquisition Approval Delays: The Wrong Look for Nigeria\u00a0"},"content":{"rendered":"\n

By NJ Ayuk, Executive Chairman, African Energy Chamber <\/em><\/p>\n\n\n\n

The Nigerian government needs to step up its game regarding approvals for indigenous companies acquiring in-country foreign energy assets.<\/p>\n\n\n\n

The negative consequences of approval delays, ranging from many months to two-plus years, include forfeited revenue from lost royalties and taxes, production shortfalls, investor discouragement, and safety issues that arise while maintenance is put on hold.<\/p>\n\n\n\n

The government approval process has stymied several of these potential deals over the past couple of years. These puzzling delays raise questions about why<\/em> they are happening, as well as how serious<\/em> officials are about increasing energy production to help Nigeria\u2019s economy and its people.<\/p>\n\n\n\n

There is a crying need for a new level of efficiency, timeliness, and openness in the approval process to give a fair shake to domestic energy players. Without it, the country\u2019s economy and its citizens have the most to lose. The government can and must do better than this to keep its oil industry competitive, profitable, and safe.<\/p>\n\n\n\n

Chappal Energies: Unlocking Latent Resources<\/strong><\/p>\n\n\n\n

In July 2024 TotalEnergies EP Nigeria sold to Chappal Energies its 10% interest in the SPDC JV licenses in Nigeria for 860 million USD. These assets produce a lot of beautiful low carbon from gas from OML 23, OML 28 and OML 77.<\/p>\n\n\n\n

In late 2023, Norway\u2019s state-owned Equinor agreed to sell its Nigerian business, Nigeria Energy Company (ENEC), to Nigerian homegrown firm, Chappal Energies. The sale includes the unitized 20.21% interest Chevron operates in the country\u2019s deepwater Agbami oil field, which has produced over 1 billion barrels of oil for Equinor since 1992.<\/p>\n\n\n\n

Equinor has said it expects Chappal Energies will continue development of its long-held assets in Nigeria, to the betterment of the country\u2019s economy. Chappal is optimistic, too, with its managing director, Ufoma Immanuel, expecting positive effects on both the environment and the community.<\/p>\n\n\n\n

Chappal has just the sort of attitude and drive Nigeria needs in its indigenous petroleum businesses, having stated that it is intent on \u201cunlocking latent value in Nigeria\u2019s and Africa\u2019s oil and gas resources.\u201d<\/p>\n\n\n\n

The sale can only close after specified conditions and all regulatory and contractual approvals are finished. These are still pending.<\/p>\n\n\n\n

Oando: Doubling its State Partnership Stake<\/strong><\/p>\n\n\n\n

In the early fall of 2023, in line with the Eni 2023-2026 Plan, Italian supermajor Eni agreed to sell Nigerian Agip Oil Company Ltd (NAOC) to Oando, a Nigerian stock exchange-listed provider of energy solutions.<\/p>\n\n\n\n

Eni\u2019s plan includes an effort to divest itself of resources that offer value and opportunity to other owners.<\/p>\n\n\n\n

NAOC concentrates on producing onshore Nigerian oil and gas and on generating power. Its Nigerian holdings include interests in four onshore blocks, two power plants, and two onshore exploration leases. Besides these assets in the Niger River Delta, the deal includes an interest in the Brass River oil terminal.<\/p>\n\n\n\n

Overall, the agreement means that Oando can double its interest in NAOC JV, the partnership it has with the state, to 40%, and increase its reserves to over 1 billion barrels of oil equivalent (boe).<\/p>\n\n\n\n

Oando\u2019s CEO, Wale Tinubu, sees the purchase as being \u201cin alignment\u201d with his company\u2019s strategy of \u201cacquiring, enhancing, appraising, and efficiently developing reserves.\u201d<\/p>\n\n\n\n

Closing the sale depends on authorization of all the relevant local and regulatory authorities \u2014 a process that is still ongoing nearly a year after the agreement was reached. There has been some talk of a approvals set to happen soon.<\/p>\n\n\n\n

Renaissance: Making a Large Onshore Investment<\/strong><\/p>\n\n\n\n

In January 2024, Shell agreed to sell Shell Petroleum Development Co. of Nigeria Limited (SPDC), its Nigerian onshore subsidiary, to Renaissance, an association made up of five Nigerian exploration and production companies (ND Western Limited, Aradel Holdings Plc, FIRST Exploration and Petroleum Development Company Limited, and The Waltersmith Group) plus an international energy group (Petrolin Limited). The firms agreed to a sales price of USD 1.3 billion.<\/p>\n\n\n\n

All of SPDC\u2019s operating capabilities and staff are to be maintained in the transaction, including technical expertise, management systems, and processes.<\/p>\n\n\n\n

Describing Renaissance as \u201can experienced, ambitious Nigerian-led consortium,\u201d Shell says the sale is part of its plan to concentrate its own Nigerian investment in deepwater and integrated gas.<\/p>\n\n\n\n

With the bulk of Nigeria\u2019s liquefied natural gas (LNG) feed gas coming from SPDC, it is important that Shell has agreed to play a supportive role after the sale so that all goes smoothly.<\/p>\n\n\n\n

The sale cannot close until approvals from Nigeria\u2019s federal government and other conditions are met.<\/p>\n\n\n\n

Seplat: Securing a Long-Awaited Approval<\/strong><\/p>\n\n\n\n

There is, fortunately, one slow-moving approval story that has recently been resolved. On June 14, 2024, Arise News reported that NNPC has withdrawn its court case objecting to the ExxonMobil\/Seplat deal, clearing a path for ExxonMobil to sell its entire interest in Mobil Producing Nigeria Unlimited to Seplat Energy.<\/p>\n\n\n\n

Nigerian President Bola Tinubu had met with Liam Mallon, head of ExxonMobil, and members of the Ministers of Petroleum two months earlier, asking that officials remove barriers to approval.<\/p>\n\n\n\n

The USD 1.28 billion deal was first greenlighted over two years ago by the parties, but politics and legalities hindered the sale from closing. The deal will turn over the U.S. company\u2019s shallow-water OMLs 67, 68, 70, and 104 to Seplat and allow it to benefit from stakes in the Bonny River and Qua Iboe terminals and natural gas liquids recovery plants.<\/p>\n\n\n\n

All of ExxonMobil\u2019s offshore shallow-water operations are included in the agreement \u2014 the effect of which is to create a major independent Nigerian energy company. The upshot is that the sale is a very significant opportunity for the country to increase its daily crude production by 700,000 or more barrels.<\/p>\n\n\n\n

The approvals process became gridlocked just months after the agreement was made when the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) cited an \u201coverriding national interest,\u201d and state-owned NNPC sued ExxonMobil.<\/p>\n\n\n\n

Earlier this year, NUPRC tried to hasten regulatory approval for the sale, when NUPRC\u2019s chief executive, Gbenga Komolafe, revisited a list of conditions that must be met for divestment.<\/p>\n\n\n\n

Komolafe invited the parties involved to a May meeting and stated that, hinging on the results of the meeting, approval might be given within two weeks.<\/p>\n\n\n\n

A signed settlement agreement resulted, with Komolafe, emphasizing the issues of decommissioning, host community development, and environmental remediation.<\/p>\n\n\n\n

The terms of the agreement include increasing NNPC\u2019s interest in the four OMLs from 60% to 70%, decreasing Seplat’s interest from 40% to 30%, while Seplat will gain<\/em> a 10% interest in UTM Offshore\u2019s floating LNG project.<\/p>\n\n\n\n

Komalfe stated his unwillingness that Nigeria carry financial burdens resulting from divesting entities continuing to operate assets in the country.<\/p>\n\n\n\n

Other issues that have been raised are:  <\/p>\n\n\n\n