Nigeria’s many failings in positioning itself as an investment destination have been laid bare yet again. This time by oil major, Exxon Mobil’s, decision to sell down its Nigeria assets while going for fresh acquisitions in Egypt.
After unveiling plans to divest some of its assets in Nigeria last year, Exxon Mobil which has planned recently announced the acquisition of oil and gas resources, spreading across more than 1.7 million acres, located off the coast of Egypt.
Of the total acquired resources, 1.2 million acres are in the North Marakia offshore block, while 543,000 acres are situated in the North East El Amriya Offshore block.
In both the blocks, the leading integrated energy player will have operating interests of 100 percent. The company expects operations to commence in 2020. Notably, the takeover of seismic data is part of ExxonMobil’s operations.
For Nigeria, losing one of its FDIs to Egypt is a big blow given the amount of capital the former needs at a time of weak economic growth.
Nigeria lost out to Egypt in 2018 with the latter emerging the biggest destination of foreign direct investment according to data by UNCTAD.
With $7 billion in FDI, Egypt got more than double the $3 billion investment Nigeria attracted despite being smaller in terms of population and economic size.
ExxonMobil is leading downstream presence in the nation. Hence, with the award, the company has diversified its portfolio of energy business in Egypt. It has primarily been involved in marketing fuels, lubricants and specialities in Egypt since 1902, representing the company’s
Roughly 10 months back, the energy major had made world-class natural gas discoveries off the coast of Cyprus. Hence, with the purchase of upstream acres in Egypt, ExxonMobil has strengthened its presence in exploration operations in Eastern Mediterranean.
American multinational oil and gas corporation joined the league of multinational oil companies divesting from Nigeria assets
According to sources, ExxonMobil is weighing the possibility of selling its stakes in Oil Mining Leases (OML) 66, 68, 70 and 104 with a total production capacity of 120,000 bpd as at 2017 which might provide an opportunity for indigenous companies who have in the past purchase billion worth of assets from firms such as Eni, Shell, Chevron and Total in the past five years.
ExxonMobil is one of the largest oil and gas producers in Nigeria, with 106 operated platforms. Its oil output in the West African country reached 225,000 barrels per day (bpd) in 2017.
Exxon officials have held talks with several Nigerian companies to gauge their interest in the fields.
The IOCs account for more than 70 percent of the nation’s daily crude production.
Some of the indigenous players may acquire the assets and look for a foreign company able and willing to develop and produce oil assets. This is called rent-seeking,” industry source told BusinessDay.
Stakeholders believed that majority of the indigenous players will be preparing to feed fat on the purported story of the planned divestment of the oil majors, which once fed heavily on the rumour mill, has since become a glaring reality today.
“One of the key things we have targeted with our current capital structure and our balance sheet is to, at a very short notice, be able to participate in any acquisition opportunities,” Austin Avuru, CEO of Seplat said at the firm’s ‘Facts behind the Figures’ presentation at the Nigerian Stock Exchange last year.
Ademola Henry Team leader at the Facility for Oil Sector Transformation (FOSTER) said beyond the questions of who is buying the assets we need to take a critical look at what we are not doing right that is scaring away investors and reducing FDI.
“We need to ensure we send the right signals out,” Henry told BusinessDay.
However, the IOCs’ attempts to sell their assets to local companies have not always been smooth, particularly where bureaucracy, difficult operating or security conditions feature prominently.
Government’s recent directive regarding the transfer of operatorship of OML 11 from Shell to Nigerian Petroleum Development Company (NPDC) Ltd generated a lot of ripples in the industry because NPDC was seen as unfit to develop and produce the oil fields. Besides, NPDC already has 32 prolific oil fields in the Niger Delta.
Buoyed by the high oil price and the need to boost local content in the nation’s oil industry many banks doled out loans to indigenous players for the acquisition of assets being divested by international oil companies such as Royal Dutch Shell, Chevron and Total.
Between 2010 and 2018 a number of indigenous companies including Starcrest Energy, Aiteo, Oando, Seplat, Eroton, First E&P, Neconde, Midwestern, Notore Lekoil, PanOcean, Newcross and Shoreline threw in billion-dollar cheques in their scramble for assets divested by major multinational oil firms which have recorded mixed performance.
Seplat Petroleum Development Company PLC successful bought assets such as OML 4, 38 and 41 which were producing 15,000 barrels per day (bpd) but today are now producing 80,000 bpd as Seplat invested probably an excess of $5billion to $6 billion from those assets.
The involvement of NNPC and NPDC and the exercise of pre-emption rights have also periodically posed a challenge to previous divestment attempts. NPDC has often encountered difficulty in attracting acquisition finance from foreign backers, due to perceived operator risk, though, arguably this has provided local banks with an opportunity.
In a bid to remedy some of these challenges, NNPC has explored the possibility of seeking technical partnerships for the NPDC to put forward joint bid for future divestments.
