Divestments: Conoil Director Tackles NNPC, Kyari

Peter Uzoho

A Director at Conoil Plc, Dr. Ebi Omatsola, has tackled the Nigerian National Petroleum Company (NNPC) Limited and its Group Chief Executive Officer (GCEO), Mallam Mele Kyari, for allegedly doing illegal “stuffs” in the nation’s oil and gas industry in the last four years.

Omatsola launched the attack on NNPC and its GCEO while speaking in Lagos, at the Nigerian Association of Petroleum Explorationists’ (NAPE) divestments workshop with the theme: “The Big Sale: Opportunities in the Nigerian Oil and Gas Industry from Assets Divestments.”

Kyari was appointed the Group Managing Director of NNPC in June 2019, by President Muhammadu Buhari following the retirement of the then GMD, late Dr. Maikanti Baru.

Recounting how the national oil company, especially under Kyari had been allegedly doing illegal things in the oil sector around assets divestments and acquisitions, Omatsola accused the NNPC of denying Conoil Producing, the right to acquire Oil Mining Lease (OML) 86 and 88 from Chevron, after the company had emerged the preferred bidder and had done all the due diligence.

He also cited how NNPC allegedly acted illegally recently by blocking Seplat Energy from purchasing ExxonMobil Producing Nigeria Unlimited (MPNU)’s offshore shallow water assets in the country after the company had completed negotiations with the American oil major in a deal worth $1.28 billion.
“I was hoping he (Mele Kyari) would be here, I would challenge him. He’s been doing illegal stuffs for the last four years. You have no right like you have done for Seplat on ExxonMobil. You have no right like they did for us on OML 86 and 88 of Chevron,” Omatsola said.

The Seplat transaction involved the acquisition of the entire offshore shallow water business of ExxonMobil in Nigeria including OMLs 68, 69, 70 and Oil Prospecting License (OPL) 94, and was expected to deliver 186 per cent increase in production from 51,000 barrels per day (bpd) to 146,000 bpd among other attractive facilities.

Penultimate week, the NNPC had doubled down on its effort to block the ExxonMobil-Seplat deal, as it won a court decision temporarily blocking the parties from continuing with the transaction until all the contending issues were resolved.
The federal government had some months earlier, turned down the application for ministerial consent necessary to seal the agreement, citing overriding national interest as one of the reasons for rejecting it.

The NNPC and government’s action has elicited condemnation by industry players and analysts, who viewed the action as a wrong signal to investors and a de-marketing of the nation’s oil industry.

The Conoil director equally recalled how the NNPC allegedly forced the Mike Adenuga-owned oil firm to drop out of Shell’s OML 30 divestment transaction deal, when the state oil company insisted on taking over the operatorship of all the fields put on offer at the time.

Shell eventually divested the OML 30 to Shoreline Natural Resources, which is the current operator, while Chevron divested its OML 86 and 88 to MRS, a major downstream player.

Omatsola, who argued that Kyari and NNPC had no right to treat them the way they did, maintained that the now-turned limited liability oil firm had never indicated interest whenever assets were put on offer but would rather show up to claim pre-emptive right and right of first refusal, when deals had almost been completed.

He explained that divesting an asset demands that the seller would want to give it to a competent hand that can operate it and bring value out of it, adding that companies divest to bider of choice.

He recounted, “And one thing has happened. From my experience, I have been in the divestment business even earlier than Seplat. First block that came out, they went to acquire a deal with Shell. Nobody knew, nobody was aware. They got operatorship and after that, NNPC woke up and said what’s going on.

“They wanted to grab everything. I’m being blunt. I wished the NNPC MD was here because I had messages for him. What happened? After Seplat? When you go in, everything got tighter and tighter, which was discouraging investment.

“And the worst case, for two times that we went in, got into OML 30, what happened? You know what happened yesterday? Let’s talk about it today. When we got to the stage, the money was available, everything was available.  But what happened? NNPC said they wanted it. So, we dropped out.

“I’m glad, over two days ago now (last Tuesday) they became one of us, and let’s see how they will perform under the same tight situation, under the same regulators.”

Explaining further, Omatsola said, “Then, lately, another case happened, where we also won a bid, everything was nice and rosy. They (NNPC) showed up at the gate. They raised the issue of First Right of Refusal. What does that say? Venture partners have the first right to be offered the block or the asset you want to sell.

“If you are a member of the club and you want to go out of the club, no problem. Nobody is saying anything against it per say. You must give it to one of them first.”

The director noted that the most painful part of their ordeal in the hand of NNPC was that Conoil had made payments, with contracts and every necessary papers signed only for NNPC to come up and say they wanted right of first refusal.

“Article 20 of the Deal with IOCs is very clear: it says you have to offer one of us first. If none of us accepts to buy, then you go out. But you see, NNPC did something wrong. After doing all the due diligence you have to do, after you raised money from the bank, after you did studies on asset being sold, then they showed up at the gate and said, I want first right of refusal. It’s illegal,” he added.

However, commenting on why the IOCs are leaving Nigeria, the director explained that it was normal for IOCs globally to leave when fields are matured in a geography and when they want to leave, saying the concern now should be how to manage the divestments to benefit the country economically.

Omatsola added that Nigerian oil fields were getting matured and no longer attractive to the multinationals, pleading that the industry regulator should provide an enabling environment that will allow indigenous firms to regenerate the assets in order to close the gaps in the industry.

According to him, “We need incentives, otherwise, that gap of one million barrels, you cannot completely fill the gap without clear investments and clear incentives to encourage you to borrow money. I don’t know how it’s going to happen. But government, regulators and us, the operators, must do it together.”