Nigeria’s third-largest oil producer Chevron is in advance talks with potentials buyers in the sale of its stakes in two major two Nigerian offshore oil and gas blocks which produce around 6,200 barrels of oil equivalent per day.
The US energy giant is offering its 40 per cent stake in the shallow-water Oil Mining Lease (OML) 86 and OML 88. Both fields contain OML 86 and 88 contain 55 million barrels of yet-to-be exploited (2P) oil barrels and 2.8 trillion cubic feet of undeveloped gas reserves.
Africa Oil & Gas Report, an energy intelligence publication by the analyst, Toyin Akinosho reported discussion is in “top gear as companies who have shown interest in acquiring the asset are expected to make full disclosure of their financial and operating capacities by the end of April 2020.”
Another international publication, Africa Intelligence said the US firm has asked interested companies to prove that they had a capitalisation of at least $200 million.
To run the sale process, Chevron has hired one of Canada’s big five banks and third-largest Canadian bank by deposits and market capitalisation Scotiabank.
Chevron spokesman, Ray Fohr while confirming the sale decision said: “Chevron Nigeria Limited, operator of the joint venture between the Nigerian National Petroleum Corporation, confirms that it is offering interested parties the opportunity to acquire its 40 per cent interest in Oil Mining Lease 86 and Oil Mining Lease 88 in Nigeria.”
This is not the first time Chevron will try to sell some of its Nigerian oil blocks. In 2015, it had attempted to sell these same blocks to local company First Exploration & Petroleum Development Company Limited, which was however unsuccessful.
Chevron’s Nigerian subsidiary operates and holds a 40 per cent interest in 8 blocks in the onshore and near-onshore regions of the Niger Delta under a joint venture with Nigeria’s National Petroleum Company (NNPC), according to its website.
Technically, selling the blocks will put further strain on the turbulent 116-year-old relationship between the company and Nigeria, a partnership older than the British amalgamation of Nigeria itself.
The sale is part of a broader retreat by international oil companies from Nigerian oil and gas fields that have been plagued by pipeline theft as well as uncertainty over tax regime.
Last year, Total announced that it would be selling its 12.5 per cent stake in OML 118 to interested buyers. In 2014, the Royal Dutch Shell company announced that it was selling all of its Nigerian oil assets. In 2018, it announced once again that it was close to selling 4 of its onshore blocks to local oil producers.
“Nigeria’s business environment is uncertain, political environment unstable, and governance is amorphous. So what basically are we expecting?” asked Wummi Iledare, a professor of economics and former president of the Nigerian Association for Energy Economics (NAEE).
Iledare said investing in the oil and gas sector is stochastic in itself, either geologically, technically and economically so adding political uncertainties is a killer.
The government’s many failings with attracting foreign direct investment most especially in the oil and gas sector have meant Nigerians have grown poorer as economic growth is slower than population growth.
Slow reforms in the power sector, absence of full deregulation in the petroleum sector value-chain, the multiplicity of exchange rates, among other factors are key downside risks that constrain investments and long-term growth, according to a global consulting firm, PricewaterhouseCoopers (PwC).
Nigeria’s offshore domain is one of the most fertile hydrocarbon provinces in the world. Current oil reserves in the country are estimated at 36 billion barrels and over 202 trillion cubic feet of natural gas reserves.
Active oil exploration brings about a billion investments in the country’s economy as well as the development of related sectors of the economy and infrastructure. It also supplies new jobs for Nigerian citizens and improvement of social and living standards in general while the absence of oil exploration implies the reverse of increased economic growth.
In Africa, a host of new fields from Equatorial Guinea, Mozambique, Senegal, Mauritania, Tanzania, and Uganda, are looking very attractive for foreign direct investors who are willing to explore new frontiers in the oil business