NNPC sets terms for supporting IOC’s divestment

Mele Kyari, the group managing director (GMD) of the Nigerian National Petroleum Company Limited (NNPC), has said International Oil Companies (IOCs) that divest from Nigeria’s upstream sector must address issues of abandonment and decommissioning of oil assets.

Kyari said this on Monday in Abuja, at the opening session of the fifth edition of the Nigerian International Energy Summit.

The NNPC had six months highlighted this as key guidelines for the evaluation of would-be replacement of divesting partner in the oil and gas industry

The GMD had in August last year while speaking at the Nigeria Annual International Conference and Exhibition said learning from previous experiences, the NNPC had developed a requisite divestment policy that will provide clear guidelines and criteria for divestment of partners’ interest in all its Joint venture and production sharing contracts arrangements.

To ensure that the NNPC sustains a prosperous business environment for Nigeria, he had said the national oil company would pay particular attention to abandonment and relinquishment costs; severance of operator staff; third party contract liabilities; and competency of the buyer.

This development could threaten the chances of the recent deal reached by ExxonMobil and Seplat wherein Seplat had agreed to buy all the shallow water assets of ExxonMobil for $1.2billion.

The deal requires the minister’s consent and NNPC’s views would be sought as Joint venture partner.

On the wave of divestment of IOCs from Nigeria’s upstream sector, the NNPC boss told participants at the conference that while the country understands the right of companies to freely divest, it was, however, critical to ensure that the right thing is done so as to avoid disruption.

He further said that issues and obligations related to abandonment and decommissioning must be fully addressed and discharged in line with global best practices, regulations, convention, and law.

He said, “Companies that are divesting, they are leaving our country literally and that’s the way to put it. But they are not leaving because opportunities are not here, these companies are shifting their portfolios where they can add value and not just that but where they can add to the journey of net carbon zero-emission.

“We understand this very perfectly. But also, we cannot afford to realize that this country must benefit from the realities of today.

“We will work with our partners, we understand the necessity for their investments, we do know that there are issues, we understand that this must take place, but also it must be done in such a way that we are able to deal with issues around abandonment and decommissioning.

“We will also make sure that whatever arrangement that is put in place, will show that we are also alive to the energy transition journey that we have embarked on.”

Findings revealed that many of the oil and gas assets sold to Nigerians, mostly by the International Oil Companies, are rarely decommissioned or properly abandoned, a development that clearly breaches existing laws regulating the industry

Industry operators say that many of the oil and gas assets sold to Nigerians, mostly by the IOCs, are rarely decommissioned or properly abandoned, a development that clearly breaches existing laws regulating the industry

The NNPC CEO acknowledged the need for cleaner energy globally but said that the African continent must shape its narrative to reflect on its realities, including the high level of energy poverty, deficiency of critical infrastructures for electricity and transportation. He confirmed that NNPC with partners were working together to ensure the attainment of Nigeria’s 2060 target for carbon neutrality.

Kyari said currently, the NNPC was adopting various strategies towards the attainment of a carbon-neutral economy while ensuring that the industry remains viable.

He gave some of the measures so far taken to include adoption of low carbon technology across operations, deepening natural gas utilisation to reduce energy poverty – via the National Gas Expansion Programme, and intensifying the use of petrochemicals.

He also stated that the NNPC was making concerted efforts in the gas sector through various projects – NLNG Train 7, AKK, OB3, ELPS and others.

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He added that the expansion and integration of domestic/regional power grids and growing the domestic gas markets via Autogas/Compressed Natural Gas/Liquified Petroleum Gas to power vehicles remain key to revitalizing the industry.

He noted that the passage of the PIA remained a key enabler and laudable reform in the Nigerian Energy sector clearly delineating various stakeholders’ roles to enhance value realization in the sector.

The NNPC GMD explained further that the government has also intensified policies to increase gas utilisation and eliminate flaring in recognition of the transition from carbon-intensive production towards cleaner alternatives.