The Nigerian National Petroleum Corporation (NNPC) is seeking to scuttle Seplat Energy Plc’s deal for the purchase of ExxonMobil shallow water assets worth about $1.2bn on the basis that it has the right of first refusal, but the bigger question is, under which company’s management will Nigeria’s interests be most protected?
NNPC is preparing to meet the management of Exxon Mobil Corporation on March 17, 2022, after notifying the oil major of plans to exercise a Right of Pre-emption on ExxonMobil’s planned sale of its entire asset in Nigeria’s onshore and shallow waters.
Between Seplat Energy, Nigeria’s largest listed Oil & Gas firm by market value and NNPC through its subsidiary, the Nigerian Petroleum Development Company (NPDC), opinions are divided about who is best fit to get optimal value for Nigeria from Exxonmobil assets.
“Seplat is a trusted name in the oil and gas business because of its past antecedents and also it’s listed on the London Stock Exchange which makes it bankable unlike a state-owned oil firm whose ability to honour contractual agreements is based on political dealings,” Kelvin Atafiri who runs Cavazanni Human Capital Limited, an investment firm exposed to the oil and gas sector said.
In its defense, the state-owned oil firm says the move to exercise its right of first refusal is part of a new era that will focus solely on building the long-term profitability of the NNPC Ltd via its subsidiary Nigerian Petroleum Development Company Limited (NPDC).
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However, analysts say NPDC’s past may haunt its present campaign. Data culled from the NNPC shows NPDC’s production decreased by 17 per cent from 214,911 barrels per day (bpd) in 2019 to 182, 247 bpd in 2020.
In the same vein, the production also fell by 13 percent to 78.44 million barrels in 2018 to 246,000 bpd,
“Why is NPDC who is struggling to keep oil blocs active thinking of buying more when it’s not maximising the ones in its possession,”Atafiri asked.
Beyond declining oil production, a transparency watchdog, the Nigerian Extractive Industries Transparency Initiative (NEITI) in 2017 described the NDPC as inefficient.
NEITI also said NPDC has not paid $3.925 billion for the 12 oil blocks transferred to it by NNPC which accounts for NNPC’s 55 percent shares in the Shell joint venture and NAOC JV.
“The process for the transfer of federation’s assets to NPDC does not seem to pass the transparency test. One of the upsides of this is the undervaluation of these assets, thereby depriving the federation of optimal value for the assets,” NEITI said.
NEITI insists NPDC has refused to give accounts of its operations and refused to cooperate with audits ordered by the auditor-general of the federation in 2015 and only partially cooperated during the 2013 and 2014 audits.
While there are concerns for NDPC, analysts believe Seplat Energy’s bid to buy ExxonMobil’s Nigeria shallow water and onshore assets present massive benefits for Africa’s biggest economy.
For instance, Wood Mackenzie, a trusted intelligence provider that empowers decision-makers with unique insights on the world’s natural resources believe Seplat’s acquisition will “develop access into Nigeria’s domestic gas market in line with government policy, while there is also scope for LNG too.”
In a 25-page document that takes a stab at illustrating the financial details of the deal, Seplat said the deal will deliver 186 percent increase in production from 51000 bpd to 146000 bpd, 14 percent increase in 2P gas reserves from 1,501 Bscf to 1,712 Bscf, plus significant undeveloped gas potential of 2,910 Bscf (JV: 7,275 Bscf).
It added that it would increase production by 89 percent in total 2P reserves from 499 MMboe to 945 MMboe and include offshore fields with dedicated, MPNU-operated export routes offering enhanced security and reliability.
According to FBNQuest, Seplat’s shares are up 31 percent year to date (YTD), outperforming the Nigerian Exchange Group (NGX) All Share Index (ASI) which has gained 11 percent YTD.
