With less than two weeks to presidential primaries ahead of the 2023 elections, electioneering is said to be pulling the plug on the $1.3bn planned deal between Seplat Energy Plc, a major energy company in Nigeria, and US-based ExxonMobil.
Considering Nigeria’s reliance on its oil and gas business, experts are bewildered that the federal government is yet to grant the ministerial consent necessary to seal a deal that could deliver higher taxes, increased production, and generate more oil revenue.
BusinessDay learnt that Seplat Energy and ExxonMobil submitted their application three months ago.
“The period of electioneering is causing a major obstacle to the Seplat/ExxonMobil deal which could make or mar foreign direct investments in Nigeria’s upstream sector, an industry under stiff competition from other climes,” Ayodele Oni, energy lawyer and partner at Bloomfield law firm, said.
Last week, some cabinet ministers, including Timipre Sylva, minister of state for petroleum resources, pulled out from the presidential race in the All Progressives Congress (APC), after the federal government asked all ministers, ambassadors, agency heads and other political appointees to resign on or before May 16 if they decide to join the 2023 election race.
Sylvia withdrew his presidential ambition, citing “enormous work at the ministry.”
Business experts say the minister’s decision to wander into politics is not among a million and one respectable ways a government can allow its active oil and gas sector to draw investments.
“Running a regulatory ministry with affiliations to a political party will ruin oil business,” a business leader close to Nigeria’s petroleum industry said while reacting to the latest development.
Other experts say pre-election intrigues are obstructing Africa’s biggest oil-producing country from leveraging the current over $100 oil price to raise quick cash to fund the country’s budgets and attract investments.
“Beyond the pre-election distractions, the delayed implementation of the Petroleum Industry Act (PIA) is also another major obstacle facing ministerial consent, the sanctity of contracts and ease of doing business,” Oni said.
According to section 95 (2) of the PIA, the Nigeria Upstream Regulatory Commission shall within 60 days, after receiving the application for ministerial consent, make recommendations to Nigeria’s minister of petroleum. President Muhammadu Buhari doubles as the petroleum minister.
“Within 60 days of the receipt of the recommendation of the commission under, the minister shall consider it for approval, such approval not to be unreasonably withheld,” section 95 (7) of the PIA said.
Ola Alokolaro, senior partner and head of energy and infrastructure group at Advocaats Law practice, wondered why the ministerial consent is dragging despite the PIA making provision for a 120 days window.
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“We need to stop playing politics in the oil and gas business because more Nigerians are sinking into poverty,” Alokolaro said.
BusinessDay’s findings showed Seplat Energy made a deposit of $128.3 million to ExxonMobil Corporation as part of the consideration to acquire the entire share capital of Mobil Producing Nigeria Unlimited.
“The addition of MPNU will nearly triple our production and double our reserves on a pro forma 2020 basis. The acquisition will reinforce our leadership of Nigeria’s indigenous energy sector and enable us to generate strong future cash flows that will underpin our investment in Nigeria’s energy transition and improve our overall stakeholder returns,” Roger Brown, chief executive officer of Seplat Energy, said in the company’s latest financial statement.
BusinessDay analysis shows Seplat Energy’s bid to buy ExxonMobil’s Nigeria shallow-water and onshore assets present massive benefits for Africa’s biggest economy.
Since 2010, Seplat has paid nearly $1.5 billion in royalties, taxes, and levies to the Niger Delta Development Commission and various community development initiatives, excluding its contribution to the government’s joint venture representatives’ revenue.
The company has also spent over $4 billion in supporting local contractors who also pay taxes and fees to the government. It spends $919 million as wages and benefits to its Nigerian staff, who also pay taxes to the government apart from supporting the local economy.
Seplat’s portfolio includes a massive 1.3 billion barrels of oil equivalent of contingent resources, 75 percent of which is gas. Nigeria has introduced what it called ‘Decade of Gas’ initiative to push gas development and the development of these fields could become pivotal.
“Seplat is the leading supplier of natural gas to the domestic market and is helping to address a major obstacle facing the Nigerian economy today – access to reliable, affordable power,” Brown said in a recent interview with BusinessDay.
