Equinor’s sale of its Nigerian assets, including its share in the Agbami oil field, to indigenous Chappal Energies has further put the capability of local oil producers to test.
The Norwegian state-owned multinational energy company and Chappal Energies agreed to the sale of Equinor Nigeria Energy Company (ENEC), which holds a 53.85 percent ownership in oil and gas lease OML 128, including the unitised 20.21 percent stake in the Agbami oil field, operated by Chevron.
This is not the first time a national oil company is buying the assets of international oil companies. For example, Oando took over all of the stakes of Italian oil major, Eni, in Nigerian Agip Oil Company Ltd (NAOC Ltd) two months ago.
Some analysts have said that this development, which involves local producers taking over, will improve the sector. In contrast, others do not believe that Nigerian NOCs can handle the mantle placed in front of them.
“This is an opportunity for indigenous companies to boost their production capacities and collaborate with other local entities interested in major oil and gas operations,” said Ayodele Oni, energy partner, Bloomfield Law Practice.
According to him, there is more focus on local content development in Nigeria. “Hence, the regulatory and political considerations may be more favourable to these indigenous companies.”
Oni said that investment in oil and gas, especially upstream activities, is capital-intensive and requires high-level technical expertise which the indigenous companies may not have access to at this time.
“While IOCs have strong financial and technical support from their offshore parent companies, the indigenous companies would have to consider exploring available financing options for their operations.
“In most cases, where the field is producing, lenders are more willing to provide funding since the project may be perceived to be bankable,” he said. “Also, this is an avenue for indigenous companies to form incorporated joint ventures with other interest entities for such operations.”
According to him, to some extent, these indigenous companies can still have service-based arrangements with some international companies with the requisite expertise.
“The issues surrounding the ExxonMobil and Seplat deal are largely from contractual obligations, regulatory requirements and political considerations (particularly as it relates to the interest of NNPCL),” Oni said when asked if the deal could go the ExxonMobil/Seplat route, he said: “In terms of the regulatory requirements, such divestment would still involve the process of ministerial consent.”
According to him, depending on the contractual arrangements in the agreements between the company and other parties, including provisions around pre-emptive rights and consent of NNPCL (and other parties), the steps required may be similar to that extent.
“However, the political issues surrounding the Exxon-Seplat deal may not be the same.”
Nigeria, one of the members of the Organisation of Petroleum Exporting Countries, has seen $21 billion worth of assets divested, according to Oilprice, putting its future in jeopardy.
Also, an analysis carried out by Wood Mackenzie, a British research and consulting firm, indicated that divestments in Nigeria have amounted to £871 million since 2020.
“Collectively, in terms of managing and operating assets, NOCs in Nigeria have not delivered,” said Toyin Akinosho, Publisher, Africa Oil+Gas Report. “But, a few of them are doing well.”
Akinosho said the inefficiencies of the NOCs to ramp production is another reason why the country is not meeting its OPEC quota.
“People focus on just pipeline breakage, oil theft and other vices. But, most of them are also not operating at full steam,” he said. “However, from the point of view of their own proper operatorship, if they could do a little bit more work than they do collectively, then Nigeria can produce over its current 1.35 million barrels per day while curbing theft and vandalism.”
Read also: Equinor sells Agbami oil field, others to Chappal Energies
Nigeria has five IOCs operating in the country, which include Shell Producing Development Company, TotalEnergies, Chevron, ExxonMobil and Eni.
According to reports, most of the assets targeted for divestment by the IOCs were the onshore properties located mostly in shallow waters on land. These are mainly the marginal fields which are mostly relatively low in the quantity of crude oil.
A journal on African politics and business by Africa Report, revealed that in the past 11 years, the IOCs had divested a total of 26 Oil Mining Licences in the Niger Delta Basin with more set to be sold.
However, Gbenga Komolafe, the chief executive of the Nigerian Upstream Petroleum Regulatory Commission, at a recent gala dinner of the Independent Petroleum Producers Group in Abuja, encouraged indigenous operators not to be deterred by the divestments, stressing that Nigerian firms operating the sector were currently producing a considerable amount of crude oil and gas.
