For Reinvestment in Mobil, Shell, Agip, Equinor Oil Blocks, NUPRC Gives Two-week Ultimatum

*Offers 10.9m barrels of oil, 90.7 Bcf of gas for sale

Emmanuel Addeh in Abuja

In a bid to quickly advance the close-out of the ongoing oil and gas reinvestment and divestment process in the country, totalling 26 blocks, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) yesterday issued a two-week deadline to all parties involved to choose from two options and revert within 14 days.

The companies involved in the process are: Nigerian Agip Oil Company (NAOC), which intends to sell its assets to Oando; Mobil Producing Nigeria Unlimited (MPNU) which has Seplat Energies as the buyer;  Equinor, which is selling to Chappal and Shell Petroleum Development Company (SPDC), which has the Renaissance Consortium as its prospective buyer.

Speaking at an industry dialogue in Abuja, organised by the NUPRC to trash out pending issues hobbling the completion of the process, some as far back as three years, the Chief Executive of the commission, Mr. Gbenga Komolafe, stated that the meeting was necessary to give insight and guidance to the process.

The commission listed the short term option which would see it sign off on the four ongoing deals by June or the long term option, which would see conclusion of the deals extend to August.

Specifically, the commission proposed that the divesting entities should either agree to the grant of ministerial consent to the divestments, on the condition that they would retain the liabilities until its investigation was concluded and the liabilities allocated to the proper party.

 In this case, it posited that the divesting companies would be required to issue an undertaking to retain the liabilities until confirmation of the release by the commission of all or part of the retained liabilities.

Alternatively, it stated that the entities could agree that ministerial consent would not be granted until it had identified and assigned all liabilities to the capable party.

In this situation, the divesting entities, it stated would also be required to issue a waiver, waiving their rights to deemed consent as provided in Section 95 (7) (b) of the Petroleum Industry Act (PIA).

He stated that it was also meant to consider due diligence and interrogation on compliance with the laws and processes that govern the proposed divestment of oil and gas assets by International Oil Companies (IOCs) to indigenous companies.

“Please note that the commission expects the divesting parties to indicate their preferred option and issue the applicable instrument within two weeks of the date of this workshop,” Komolafe stated.

A number of the deals which had been in the pipelines had been delayed, thereby hobbling the country’s efforts to meet its Organisation of Petroleum Exporting Countries (OPEC) production quota.

For the first time, the NUPRC has now laid a framework of requirements for divestment which must be met by the IOCs, a move that will remarkably see the expeditious completion of negotiations, minister’s consent as well as regulatory approval.

Komolafe added: “A total of 26 blocks are proposed to be divested. These blocks have an estimated total reserve of 8.211 million barrels of oil, 2,699 million barrels of condensate, 44,110 billion cubic feet of associated gas and 46,604 billion cubic feet of non-associated gas.

“This is a significant contribution to the nation’s hydrocarbon resources. Additionally, these blocks contain P3 (possible) reserves estimated at 5,557 million barrels of oil, 1,221 million barrels of condensate, 14,296 billion cubic feet of associated gas and 13,518 billion cubic feet of non-associated gas.

“It is worth noting that a substantial part of the P3 reserves is located in or near producing assets. This means that a competent successor could easily mature them to 2P reserves.”

Additionally, he stated that the current average production from the blocks is 346,290 bpd, with NAOC’s 28,018 bpd, MPNU’s 159,378 bpd, Equinor’s 36,155 bpd and SPDC’s 122,739 bpd.

However, he noted that the technical production potential was much higher,  standing at 643,054 barrels as NAOC will ramp up to 147,481 bpd; MPNU to 244,268 bpd, Equinor to 39,203 and SPDC is expected to increase output to 212,102 bpd.

According to Komolafe, the blocks have the potential to significantly boost the national oil production, which would benefit all stakeholders.

According to him, the regulatory goal, he said, is to ensure that parties in the divestment process conform to the approved divestment guidelines, with the  aim to ensure that the companies that take over the blocks have the necessary financial resources and possess the technical expertise required.

Furthermore, the NUPRC chief executive maintained that it will ensure the inherent environmental, host communities and end-of-life liabilities, including decommissioning liabilities, are accurately identified and assigned to the party best equipped to bear the associated risks.

He stressed that President Bola Tinubu had directed the commission to ensure a smooth entry and exit framework for the ongoing divestments by IOCs, explaining that measures were being implemented to streamline regulatory procedures and eliminate unnecessary barriers to investment.

He relisted the divestment framework consisting of seven cardinal pillars as technical capacity, financial strength, legality of the entity, which must be manned by ‘fit and proper’ persons and adherence to decommissioning and abandonment regulations.

Besides, the commission stated that there must be compliance with the Host Community Trust/Environmental Remediation Fund, resolution of all industrial relations and labour issues and data repatriation by the divesting companies.

As earlier reported by THISDAY, Komolafe stated that the commission has engaged two leading global oil and gas decommissioning consultants, S&P Global Commodity Insights (SPGCI) and Boston Consulting Group (BCG) to carry out due diligence on the assets to be divested.

“Their role is to work with the commission as independent consultants in defining all end-of-field life and abandonment legacy liabilities in compliance with divestment guidelines.

“They will also manage the operational risk across the entire asset portfolio, create a workflow for estimating total onshore decommissioning CAPEX liabilities, determine the host community’s obligations based on three per cent OPEX stipulated in the Petroleum Industry Act (PIA), benchmark best practices on asset sales, and provide case study reports that draw lessons based on best practices.

“One of the objectives we hope to achieve in this workshop is to ensure that the environmental, host communities, and end-of-life liabilities associated with these assets do not become the financial responsibility of the federal government,” he emphasised.

Besides, he explained that the NUPRC was dedicated to ensuring that investment processes are smooth, transparent, and efficient.

He stated that the requirement to sign an undertaking or waiver was solely aimed at preventing any unwarranted financial obligations from falling back on the federal government.

“I assure you that the commission is eager to close the divestments within the shortest timeline upon the receipt of any of the required instruments,”  he noted.

In his remarks, the Executive Commissioner, Development and Production, Enorense Amadasu, said that the commission was out to protect the interest of the country in the outcome of the divestment.

He expressed the hope that the dialogue will also help to reduce the risk of divesting companies evading legacy obligations and transferring them to new investors.

Amadasu, who gave a rundown of the process, said this will hasten getting regulatory approval and then ministerial consent, describing the process as clear, focused and well structured.

Also, the Secretary and Legal Adviser, NUPRC, Olayemi Anyanechi, said Nigeria was trying to avoid the Australian situation, wherein the government spent taxpayers’ money remedying what was created by the oil companies.

“Even when we want to finish that in the middle, we don’t plan to keep you waiting in limbo. We expect that by June 30, we should have finished everything.

“And we expect some more time to make our recommendations, to dialogue with you, make our recommendations, submit that to the minister, the minister approves and communicates his consent to you.

“So, we hope that no matter what, by August 31, everything should have been done and you have your consent. So, that’s the proposition we have for you today,” she stated.

The Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Dr. Ogbonnaya Orji, who spoke at the event, stressed that transparency was key in the process of divestment, noting that NEITI was following the matter closely.

In their separate speeches, the divesting companies and the intending buyers commended the NUPRC for publishing clear guidelines to getting through the divestment process.

Chairman of the Independent Petroleum Producers Group (IPPG), Abdulrasaq Isa, expressed excitement that finally there was progress in the divestment that had been unduly prolonged.

Also speaking, the Managing Director, SPDC and Chair of Shell Companies in Nigeria, Osagie Okunbor, said there was the need to ensure that parties get full regulatory approval and ministerial consent.

Also represented were officials of all the companies involved in the divestment process as well as prospective buyers.