Seplat Explains Acquisition of ExxonMobil Assets

Emmanuel Addeh in Abuja

Seplat Energy has defended its acquisition of oil assets belonging to Mobil Producing Nigeria Unlimited (MPNU), in the face of global resistance to fossil fuels, explaining that it would require returns from fossil fuel investments to push its plan for renewable energy.

THISDAY had exclusively reported that the oil company was set to buy off oil and gas assets belonging to the International Oil Company (IOC) in a deal that could cost up to $1.2 billion, seen as the first since the signing of the Petroleum Industry Act (PIA) by President Muhammadu Buhari last year.

In addition, the Sale and Purchase Agreement will see the company acquire the entire share capital of MPNU, plus up to $300 million contingent consideration, encompassing the acquisition of the entire offshore shallow water business of ExxonMobil in Nigeria.

Speaking during a virtual interaction with journalists, Chief Executive Officer of Seplat Energy, Mr Roger Brown, argued that given the pillars upon which the future of the company is hinged, it would require returns from fossil fuel investments to push its plan for renewable energy.

He added that Seplat already set up a subsidiary called Seplat Energy offshore limited that would be acquiring the business of MPNU.

He explained that employees of the selling company as well as all the existing contracts will be maintained, stating that the intention is to continue to run the assets profitably, since, according to him, they are already well managed.

But the Seplat CEO stated that the deal will still have to go through the statutory processes, including the competition commission and the Nigerian Upstream Petroleum Regulatory Agency (NURPC) as well as obtaining the consent of the minister of petroleum.

He noted that Seplat would continue the “excellent performance” of the Mobil business, adding that the new entity has a slightly different plan in terms of cost-efficiency.

“We do look for cost efficiencies. Our decision-making time, I think it’s faster. Normally as compared to oil majors, that’s what independents are there to do.

“And we are looking for operational efficiencies as well as cost reduction where we can touch on operating cost. We’ve been successful in doing that in other existing businesses. And again over the last 10 years, we’ve seen a reduction in costs and losses in Seplat.

“If you look at our strategy, which we laid in July last year, we set it out deliberately on three pillars. We have pillar one, which is our upstream oil and gas, business and pillar two business is the midstream gas business, going down into gas power.

“ We made a decision before to look at the power opportunities and then our new energy, the bridge into renewable energy. That strategy has not changed.

“But when we look at that strategy, if you look at the world today, the world today is going towards lower carbon, sort of wealthier countries in the world moving towards net-zero targets,” he posited.

Describing gas as a transition fuel, Roger explained that the federal government was right when it declared a decade of gas recently.

He explained that the upstream gas will supply the company’s midstream business in terms of oil, arguing that prices are likely to go into the much-expected supercycle given the lack of investment and the geopolitical tensions.

“ It’s important to efficiently get it (oil) out of the ground and then sell it and get these dollars to reinvest back into Nigeria to ensure that we’re addressing other businesses.

“So without the oil today, you don’t have money to ensure you have a transition. And therefore, this transaction, what it does do is a big production. Its production will double what Seplat has today. So this short cycle production allows us to monetise it, and reinvest in other businesses,” he noted.

He expressed confidence that contrary to the belief in certain quarters, fossil fuels will not go into extinction shortly, adding that stakeholders were beginning to realise that in the long run, any attempt to leave fossil fuels behind will lead to higher fuel prices.

Oil Prices Recede After Week’s Peak of $105 Per Barrel

Meanwhile, crude oil prices slipped yesterday, the last day of transaction for the week, after it went on overdrive a day earlier on the back of the Russia-Ukraine face-off.

The crude oil price had surged above $105 per barrel for the first time since 2014 after Russia attacked sites across Ukraine.

The situation signalled the worsening of an already tightening global supply market.

The Organisation of Petroleum Exporting Countries (OPEC), an international group of oil producers, was already struggling to meet its production target before the latest threat.

Russia is the world’s third-largest oil producer and second-largest oil exporter and any impact on its production could markedly affect the market.

It is also the largest provider of natural gas to Europe, providing over 35 per cent of its supply.

Brent was up about six per cent on the day, paring gains after surging as much as 9.2 per cent to $105.79 a barrel after President Vladimir Putin ordered Russian troops into Ukraine.

The United States benchmark, West Texas Intermediate (WTI) also briefly topped $100 a barrel before easing off of gains.

But on the last day of trading, the April Brent crude futures contract was down $1.06, or 1.1 per cent, at $98.02 per barrel in the afternoon after climbing as high as $101.99 per barrel. The active May contract shed 64 cents, or 0.7 per cent, to $94.78.

In addition, the West Texas Intermediate (WTI), United States crude, was down 31 cents, or 0.3 per cent, to $92.50 a barrel, after hitting a session high of $95.64.

Russia’s invasion of Ukraine had caused prices to surge, with the assault seen as the biggest attack on a European state since World War Two.