“FG’S Indecisiveness in ExxonMobil-Seplat Deal Could Hurt Nigeria’s Oil Reform”

Oluchi Chibuzor with agency reports

Bloomberg has knocked the federal government over what it termed a “flip-flop” in the ExxonMobil-Seplat Energy shares deal, warning that indecisiveness on the part of the President Muhammadu Buhari administration could hurt Nigeria’s oil reform.

ExxonMobil, Delaware, USA, had in February announced a $1.28 billion transaction, being the sale of its entire shares in Mobil Producing Nigeria Unlimited (MPNU) to Seplat Offshore Ltd., a subsidiary of Seplat Energy Nigeria, pending ministerial approval.

However, the Nigerian National Petroleum Corporation, (NNPC), in a letter to ExxonMobil, insisted it wanted to exercise a right of first refusal, a move which many industry experts believe is not applicable to divestment of participating interest in the Joint Operating Agreement. NNPC equally dragged ExxonMobil to a Federal High Court in Abuja to block the deal’s consummation.

President Buhari had however recently overruled both the NNPC and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) by consenting to the sale in his capacity as the Minister of Petroleum Resources, but only to reverse himself a few days following a countermand of his consent by NUPRC.

But analysing the situation, Bloomberg recalled that Buhari’s administration was trying to reverse dwindling production and attract major investment into the sector that generates more than 90% of export earnings”, warning that the inconsistency in ExxonMobil-Seplat deal “could discourage investment in Africa’s largest oil producer in the wake of industry reform meant to grow the sector.”

While acknowledging that “the deal would have been the first major transaction to be announced since Nigeria passed sweeping legislation aimed at bolstering oil and gas investments after two decades of uncertainty”, the New York-based media conglomerate said experts were of the view that the latest development holds gloomy future for the oil reform.

It reported Mariam Olabode, oil and gas analyst at Lagos-based Afrivest West Africa as worrying that investors that have acquired Seplat’s shares following the approval of the deal by Buhari would now be concerned about how this ends following the immediate reversal and conflicting signals from the same government.

“The issue of oil theft, vandalism and insecurity along the pipelines is still there and they remain a concern to investors. Now, we have this acquisition dispute”, it quoted Olabode as stating.

Bloomberg said Gail Anderson, a research director at Wood Mackenzie, a UK-based business research consultancy, had in the same vein expressed concern that, “Potentially worse is the public contradiction between Nigeria’s president and its oil regulator having ‘a knock-on effect’ on other deals that are waiting on the outcome here.”

But it said it was not the first time the Buhari administration was displaying indecisiveness over such critical matters in the oil and gas industry.

“Early last year, petroleum licenses belonging to Chinese-owned Addax Petroleum Corporation were revoked, restored, and revoked again this year.  Rampant crude theft and insecurity in the Niger River Delta, where most of the oil is produced, has cut production to an all-time low, with the country unable to meet its set OPEC quotas. Meanwhile, oil majors are planning to exit part of their investments in Africa’s most populous country”, Bloomberg stated.

It also quoted Ayodele Oni, partner at Bloomfield Law Practice in Lagos, as warning that, “The optics are not very good for the country, as oil majors will now look at their exit strategies before investing and possibly negotiate it from the outset.”