48 Hours After Shell’s Planned Divestment, NNPC Develops Fresh Guidelines For New Partners

Barely 48 hours hours after Shell launched divestment of its 30 per cent stake in Shell Petroleum Development Company of Nigeria Limited subsidiary, the Group Managing Director of the Nigerian National Petroluem Corporation, Mele Kyari has highlighted key guidelines that would guide evaluation of would-be replacement of divesting partner in the SPDC Joint Venture

Kyari also said, learning from previous experiences the Corporation developed requisite Divestment Policy that will provide clear guidelines and criteria for divestment of partners’ interest in all its Joint venture and production sharing contracts arrangements.

He said these on Monday in Lagos at the opening ceremony of the Nigeria Annual International Conference and Exhibition with theme, “The Future of Energy – a Trilogy of Determinants; Climate Change, Public Health, and the Global Oil Market.

Royal Dutch Shell had on Friday launched a major divestment of its Nigerian assets, especially those in the shallow water and onshore, several sources familiar with the matter said yesterday.

Media reports had disclosed that the oil giant had already hired Standard Chartered Bank to sell its Shell Petroleum Development Company of Nigeria Limited subsidiary, in deal which could be one of the biggest in the oil and gas industry in Africa ever.

The Company had said that although consultations were ongoing about the planned sale, it were still at the early stages.

“Discussions with the Nigerian government are ongoing on the next steps for our onshore business in Nigeria. We are in the early stages of reviewing the commercial options,” a shell official stated.

But in his paper delivered at the event titled, “The future of energy: A trilogy of determinants-Climate Change, Public Health, Global Health Market,” the GMD said while the NNPC is beginning to witness a wave of divestment by Oil Majors operating Nigeria, the Corporation cannot stop partners from divesting their interests.

He said while these divestments create challenges for the NNPC in ensuring that it gets right and competent investors to take position and add value to the assets, going forward, the NNPC will make clear distinctions between Divestment of shares and Operatorship Agreements under various Joint Operating Agreements.

He told participants at the event that this will be done by leveraging its rights of pre-emption as well as evaluating the operational competency and track records of new partners.

In order to ensure that the NNPC sustains a prosperous business environment for Nigeria, he said the Corporation will pay particular attention to abandonment and relinquishment costs; severance of operator staff; third party contract liabilities; and competency of the buyer.

Others areas of focus going forward according to him are post purchased technical, operational, and financial capabilities especially in the era of Activist investor’s sentiment against funding of fossil fuel projects; and alignment with Nigeria National strategic interest.

He said, “NNPC as National Oil company is leading multiple initiatives to address this and other issues.

“As we celebrate the passage of the PIB, we have moved our focus to improving security architecture through collaboration with major stakeholders.

“NUCOP is working with Operators and Service Contractors to challenge cost of operations and increase profitability and growth in the Nigerian oil and gas sector.

“On the other side, we are seeing a wave of divestment by Oil Majors operating Nigeria. NNPC as a National Oil Company cannot stop partners from divesting their interest, even though it creates challenge for us in ensuring that we get right and competent investors to take position and add value to the assets.

“NNPC will ensure that Nigeria’s National strategic interest is safeguarded, by developing a Comprehensive Divestment Policy that will provide clear guidelines and criteria for divestment of partner’s interest.

“Going forward, NNPC will make clear distinctions between Divestment of shares and Operatorship Agreements under various Joint Operating Agreements, while leverage its rights of pre-emption as well as evaluating the operational competency and track records of new partners.”

As a National Oil Company and a global player, Kyari said that the NNPC is set to play key role in global transition to low-carbon energy in the near future.

“Our tremendous natural gas reserve has become our greatest enabler to smooth transition to low-carbon energy.

“We are deepening natural gas utilization under the National Gas Expansion Programme (NGEP) to earn more carbon credit and create a net zero carbon environment in line with our drive of becoming energy company of global excellence,” he added.

He explained further that the NNPC is currently extending natural gas infrastructure backbone through the OB3 and AKK gas pipelines to deepen domestic gas utilization, support industrial growth and job creation.

He said, “Our goal is to take the right quantities of gas to every part of Nigeria at the right quality and the right price.

“NNPC is leveraging technology to achieve better systems and processes optimization to support performance, accountability and value creation that exceeds the simple fulfilment of our business mandates.”

As a National Oil Company, the NNPC GMD stated that the Corporation remained committed to working with stakeholders to maintain firm position in today’s and future energy industry.

He said the theme of this year’s event has captured the realities the players have found themselves as business leaders in the energy industry.

He added, “Human activities have significantly interfered with natural systems throughout history.

“Today’s world, as we all know, is faced with Global warming & extreme whether events due to human activities associated with carbon emissions; triggering an accelerated transition to cleaner energy in order to limit global temperature rise to 1.5 °C by 2050.

“Although the world is yet to reach consensus on the focus of Energy Transition, we are seeing new investment patterns toward low-carbon energy. sources and technologies, such as wind, solar, hydrogen, Natural gas and bio-fuels, with obvious wider business implication on the oil and gas industry.

“The global oil industry has experienced many challenges in the past, the most recent of which is COVID-19 Pandemic, which locked down the whole world, suppressed global economic growth and brought the oil industry to its knees.

“Today countries are gradually overcoming the pandemic shocks, economies are being re-open again, oil demand is rising and prices have gone up to pre-pandemic levels, averaging $74/bbl. we are seeing an increase in rig counts across major oil production territories.”

Kyari told the gathering that industry conversations are dominated by the shift to renewable energy as a source of cleaner and climate friendly fuel.

As an oil dependent economy, he said the global transition to non-fossil sources of energy will mean declining revenue, foreign exchange and funding of projects particularly in the context of Green Finance and Activist Investor’s action on the Boards of Major Oil Companies and Global Financial Institutions.

However, he said looking at both climate and population change dynamics, anticipated economic growth and rising global population especially in Asia and Africa will obviously increase energy consumption beyond what renewable energy sources can meet by 2050.

Building on this convergence, the GMD said that Nigeria as a key player in global energy security is addressing its challenges mainly fiscal, security and cost competitiveness to stimulate investments in the oil and gas industry.