… Engages S&P Global, Boston Consulting Group To Carry Out Due Diligence On Assets
… Gives IOCs 2 Weeks To Sign Undertaken On Divesting Assets
The Nigerian Upstream Regulatory Commission (NUPRC) has ramped up efforts to ensure that only competent companies will take over the 26 oil blocks that are in the process of divestment by International Oil Companies (IOCs).
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The NUPRC said it is considering due diligence and interrogating compliance with the laws and processes that govern the proposed divestment of oil and gas assets by IOCs to indigenous companies.
The Commission’s Chief Executive (CCE), Gbenga Komolafe said at the industry dialogue on divestment which was held in Abuja that to speed up regulatory approval, the NUPRC is proposing that the divesting entities should either agree to the grant of ministerial consent to the divestments, on the condition that they will retain the liabilities until the commission’s investigation is concluded and the liabilities are allocated to the proper party.
Komolafe said, ” In this case, the divesting companies will be required to issue an undertaking to retain the liabilities until confirmation of the release by the commission of all or part of the retained liabilities. Alternatively, the divesting entities can agree that ministerial consent will not be granted until the commission has identified and assigned all liabilities to the capable party.
“In this situation, the divesting entities will also be required to issue a waiver, waiving their rights to deemed consent as provided in Section 95 (7) (b) of the Petroleum Industry Act. Please note that the Commission expects the divesting parties to indicate their preferred option and issue the applicable instrument within two weeks of the date of this workshop.”
IOCs are divesting from 26 oil blocks in Africa’s biggest economy. The blocks have an estimated total reserve of 8.211 million barrels of oil, 2,699 million barrels of condensate, 44,110 billion cubic feet of associated gas and 46,604 billion cubic feet of non-associated gas.
The NUPRC is, however, moving to speed up the process of the regulatory oversight of the divestment in order to allow the assets to perform optimally.
Komolafe said the current average production from the blocks is 346,290 barrels per day (bpod), a breakdown of which Agip Oil Company Ltd (NAOC) produces 28,018 bopd, Mobil Oil Producing Nigeria Unlimited (MPNU) is at 159,378 bopd, EQUINOR producing 36,155 bopd and SPDC producing 122,739 bopd.
The NUPRC boss lamented that technical production potential is much higher – standing at 643,054 barrels out of which NAOC has 147,481 bopd, MPNU is producing 244,268 bopd, EQUINOR producing at 39,203 and SPDC at 212,102 bopd).
“These blocks have the potential to significantly boost our national production, which would benefit all stakeholders,” Komolafe said.
According to him, the NUPRC has implemented robust measures to streamline regulatory procedures and eliminate unnecessary barriers to investment, on the directive of President Bola Ahmed Tinubu.
Companies like Mobil Oil Producing Nigeria Unlimited (MPNU) entered a $1.28bn deal for Seplat Energy to acquire its assets but the deal was stalled because the Nigerian National Petroleum Company Ltd was not allowed to exercise its first right of refusal.
Another pending transaction is the September 2023 Eni-Oando agreement for the sale of Agip Oil Company Ltd (NAOC). The blocks in question are the four onshore blocks (OML 60, 61, 62, 63), which it operates on behalf of NAOC JV (operator NAOC Ltd 20 per cent, Oando 20 per cent, NNPC E&P Limited 60 per cent).
In November 2023 Equinor reached a deal to sell its Nigerian business, including the company’s shares in the Agbami oil field, to Nigerian-owned Chappal Energies. However, the transaction is still pending.
In January 2024, Shell agreed to sell its onshore oil assets to Renaissance which is a consortium of four Nigerian firms and one foreign company, for $2.4bn but the deal is yet to receive regulatory approval.
But the NUPRC boss said, “Our regulatory goal is to ensure that parties in the divestment process conform to the approved divestment guidelines. We aim to ensure that the companies that take over these blocks have the necessary financial resources and possess the technical expertise required to responsibly manage the blocks throughout their lifecycle in accordance with good asset stewardship practices.
“We must ensure that the inherent environmental, host communities and end-of-life liabilities, i.e. decommissioning liabilities, are accurately identified and assigned to the party best equipped to bear the associated risks.”
The NUPRC has also developed a divestment framework consisting of seven cardinal pillars in addition to the extant petroleum laws, to guide the assessment of applications for Ministerial consent by the divesting entities.
The pillars are Technical Capacity; financial viability; Legal; Decommissioning and Abandonment; Industrial Relations, Labour Issues and Data Repatriation.
Komolafe said that to achieve the divestment framework objectives, the NUPRC has engaged two leading global oil and gas decommissioning consultants, S&P Global Commodity Insights (SPGCI) and Boston Consulting Group (BCG) to carry out due diligence on the assets to be divested.
He said, “Their role is to work with the Commission as independent consultants in defining all end-of-field life and abandonment legacy liabilities in compliance with divestment guidelines.
“They will also manage the operational risk across the entire asset portfolio, create a workflow for estimating total onshore decommissioning capital expenditure liabilities, determine the host community’s obligations based on 3 per cent operating expenses stipulated in the PIA, benchmark best practices on asset sales, and provide case study reports that draw lessons based on best practices.”