Take Advantage Of IOC Divestments To Increase Upstream Investments, Komolafe Tells Independent Petroleum Producers

The Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission, Engr Gbenga Komolafe has advised the Independent Petroleum Producers Group to see the perceived divestments of International Oil Companies as an opportunity to increase their investments in upstream assets.

He said this in Abuja at a dinner organised by the IPPG during the Nigerian Oil and Gas Conference.

Komolafe spoke on the theme, “IOC divestments-Nigeria’s energy security and the role of the IPPG on this new mix.”

In recent times, there had been concerns about the divestments of oil and gas assets by some International Oil Companies.

For instance, in August last year, Shell launched divestment of its 30 per cent stake in Shell Petroleum Development Company of Nigeria Limited subsidiary.

Also, Seplat Energy Plc announced an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited from Exxon Mobil Corporation, Delaware for $1.28bn.

Speaking on the divestments by some of these companies, Komolafe said that as a regulator, the Commission is not oblivious of the threat posed to the development of the Nigerian hydrocarbon industry by divestments of the IOCs.

He attributed the divestments of the IOCs on the hostile upstream petroleum environment arising from crude oil theft and energy transition as a global response to the advocacy for reduction in carbon emissions.

He said, “Our view as a Commission is that IPPG and other prospective indigenous player should perceive the IOC divestment in some of the upstream assets as an opportunity rather than a threat to the development of the Nigerian upstream petroleum sector.

“It is indeed the right time to look inwards in the sector to proof the capability of the local content in value addition and optimizing development of the Nation’s hydrocarbon resources.

“Therefore, we encourage you as indigenous players across the value chain to deploy your competency and ingenuity in promoting vibrancy and capacity utilization in the industry.”

He expressed optimism that indigenous companies have the capacity to meet up with the demand in the industry, adding that currently, they contribute about 30 per cent of crude oil and 20 per cent of the gas production, as well as 40 per cent and 32 per cent of oil and gas reserves, respectively.

Furthermore, the NUPRC Boss told the gathering that seven indigenous companies are among the top 20 companies with the highest oil reserves in Nigeria.

He added, “It is estimated that the energy demand across Africa in 2040 would increase by about 30 percent compared to the current level.

“Consequently, the divestment of the IOC away from our onshore and shallow water terrains present a massive opportunity for new operators of those assets, in which the IPPG is better positioned to take advantage of in order to meet the increasing energy demand.”

He urged the IPPG to stay competitive, optimise future energy security and be resilient in the oil and gas extractive industry.

“The IPPG should adopt an innovative and pragmatic approach towards operational excellence to include decarbonisation and improvement in cost efficiency; creation of enabling environment with their host communities and utilization of appropriate skills and capabilities.

“In this new mix, the IPPG is expected to have an increased focus on natural gas exploitation and utilization.

“As you position to take the opportunity being presented by the divestments, the need to be prepared to make the necessary investments for gas pipeline infrastructure, gas processing facilities, meeting domestic gas delivery obligations to strategic sectors of the economy, and global gas export requirements should be in focus,” Komolafe added.

He pledged the committment of the Commission in providing the requisite regulatory support in line with the provisions of the Petroleum Industry Act 2021.

“It is encouraging that Section 52 in the PIA provides for the establishment of the Midstream and Downstream Gas Infrastructure Fund,” he added

He also urged members of the IPPG to strengthen their capacity through collaboration, strategic alliances, mergers and acquisitions targeted at producing synergies and large independents that can compete with multinationals.