NUPRC Moves to Speed Up Approvals for Divesting IOCs, Raise Oil Production by 700,000bpd

•Gives affected multinationals option to conclude process or wait for audit report

Emmanuel Addeh in Abuja

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is moving to speed up the conclusion of regulatory oversight on the ongoing oil assets divestment by International Oil Companies (IOCs), THISDAY learnt yesterday.

With the process now fully expedited, it was gathered that when concluded, Nigeria would add at least 700,000 barrels per day to its current daily  production volume, to hit about 2 million bpd before the end of the year.

Many of the new investors, mostly indigenous businessmen, that are taking over the multi-billion dollar facilities, are already waiting in the wings, but had been delayed, in a bid to ensure strict adherence to the rules as provided by the Petroleum Industry Act (PIA).

 The NUPRC also insists that all interested parties to the Joint Ventures (JV) must amicably resolve their differences before it can perform its regulatory function as provided by the new law.

Besides, THISDAY was informed that the investors are ready to pump the needed funding into some of the assets that had been left without adequate investment in the last few years as the IOCs plan to exit onshore oil as well as align with the international pressure to reduce the funding for fossil fuels.

“The NUPRC, under Mr Gbenga Komolafe is speeding up approvals and plans to increase oil production by divesting IOCs and increase oil production by as much as 700,000 bpd when these processes are concluded,” a source in the know of the goings-on within the oil and gas industry told THISDAY.

In February 2022, Seplat Energy announced its acquisition of oil and gas assets belonging to Mobil Oil Producing Nigeria Unlimited (MPNU), in a deal seen as the first since the signing of the PIA  by then President Muhammadu Buhari in August 2021.

Seplat Energy Plc had entered into a Sale and Purchase Agreement to acquire the entire share capital of MPNU for a purchase price of $1.283 billion plus up to $300 million contingent consideration.

The transaction encompassed the acquisition of the entire offshore shallow water business of ExxonMobil in Nigeria to create one of the largest independent energy companies in the country.

However, since then, the deal which is awaiting ministerial consent and other required regulatory approvals had been stalled.

“The divestments include the Mobil-Seplat deal, which is expected to ramp up output by between 300,000 bpd to 400,000 bpd when the new owners begin the expected investment,” the source said.

On Monday, during a ‘due diligence’ meeting with one of the divesting parties, Shell/Renaissance, Komolafe reiterated that the regulatory agency was not averse to divestments in the oil and gas sector, emphasising that the NUPRC was committed to free entry, free exit business principle aimed at encouraging investors in the sector.

Unlike in the past, the commission announced that it has now developed a divestment framework consisting of seven cardinal pillars to guide the assessment of applications for ministerial consent to the SPDC divestment and other similar cases.

He listed them as technical capacity, which highlights the need for the successor entity to demonstrate proven and verifiable capacity to operate the asset vigorously and in a business-like manner as well as adequate financial muscle, with the NUPRC saying it shall assess the prospective successor entity’s balance sheet and financial viability.

In addition, the NUPRC chief stated that the acquiring entity must in line with the interest of the nation be ‘fit and proper’ persons in the eyes of the law and have clear evidence of the resolutions of legacy debts and legal encumbrances.

Besides, he maintained that the decommissioning & abandonment (D&A) costs must be diligently assessed and parties must ensure settlement of outstanding obligations.

Relating to host community trust/environmental remediation fund, Komolafe pointed out that the commission shall assess the status of Host Community Trust Fund (HCDF) obligations and ensure the robustness of the successor entity’s adherence to decarbonisation plans and sound Environmental Social & Governance (ESG) principles.

Added to the aforementioned, he stated that there must be a robust assessment mechanism to avert undesirable labour union issues and disharmony arising from the divestment process.

Komolafe stressed that the commission shall ensure that all data mined during the operating life of the asset are repatriated to the National Data Repository (NDR) in line with extant regulations.

Aside the Seplat -Mobil deal, a second pending transaction is the Eni-Oando September 2023 agreement for the sale of Nigerian Agip Oil Company Ltd (NAOC).

NAOC Ltd is present with interests in Nigeria across 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 the Okpai 1 and 2 power plants (with a total nameplate capacity of 960MW), and in two onshore exploration leases (OPL 282 and OPL 135, respectively 90 per cent and 48 per cent) for which it also holds operatorship.

At the time, the company announced that the closing of the transaction was subject to, inter alia, the authorisation of all relevant local and regulatory authorities. It remains pending. Besides, another transaction yet to be consummated is the November 2023 deal by Equinor to sell its Nigerian business, including the company’s shares in the Agbami oil field, to Nigerian-owned Chappal Energies.

The Norwegian group said it will sell Equinor Nigeria Energy Company (ENEC), which holds a 53.85 per cent ownership in oil and gas lease OML 128, including a 20.21 per cent stake in the Agbami field, operated by Chevron.

Like the other transactions, it stated that : “Closing of the transaction is subject to certain conditions, including all regulatory and contractual approvals.”

In January 2024, oil giant, Shell, agreed to sell its Nigerian onshore oil assets to Renaissance, a consortium of four Nigerian firms and one foreign company, for $2.4 billion.

Shell stated that with the deal, its onshore subsidiary, the Shell Petroleum Development Company of Nigeria (SPDC), will now be operated by ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin, a Swiss firm.

However, Shell stated that the completion of the deal was still subject to approval by the federal government. During the week, the NUPRC commenced an assessment of the deal by both parties by holding a workshop on the matter in Abuja.

Shell disclosed that it was divesting SPDC for $1.3 billion and expected to receive additional payments of as much as $1.1 billion. This would total N2.4 billion.

Aside the aforementioned multinationals, French energy giant TotalEnergies is also seeking to sell its minority share in major Nigerian onshore oil joint ventures,  its chief executive,  Patrick Pouyanne, announced this year.

“Fundamentally it’s because producing this oil in the Niger delta is not in line with our (Health, Safety and Environmental) policies, it’s a real difficulty,” he added.

The French group, checks showed, produced a total of 219,000 barrels of oil equivalent per day in 2023 in Nigeria and remains a major operator of offshore fields in the West African country.

But despite the speculations about Chevron’s planned divestment, the IOC has increased the Usan and Agbami oilfield leases till 2042. It has also increased its investment emphasis on short-cycle projects.

Chevron operates the Agbami Field, which lies 70 miles (113 km) off the coast of the central Niger Delta region and spans 45,000 acres (182 sq. km).

According to the reliable source, to accelerate the process, the NUPRC has also given the participating companies, two options to either hold on until the ongoing audits are concluded before the consummation of the process or move ahead pending when the review is completed.

However, the IOCs and the buying parties would have to accept the outcome of the ongoing audit wholesale if they decide to proceed without the final report being published.

“Each of those companies will be given an option to have a fast-track process and get immediate approval or await the audits. And if there’s an audit, they are going to  play according to the audits.

“The audits have certain pillars of regulation and the pillars of regulation include host communities, include statutory taxes, include remediation, and recovery, among others.

“But host communities are key, because they will want host companies to be happy. So if they want immediately, they will sign up to accept whatever the audit results are or or they will wait for the audit findings.

“The commission is pushing our production beyond 2 million barrels a day before the end of December with this new move,” the official who declined to be named told THISDAY.