• Tuesday, May 28, 2024
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BusinessDay

IOCs divest $7bn oil assets from Nigeria in 4 yrs

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In the past four years, International Oil Companies (IOCs) have divested much of their oil assets in Nigeria, deriving earnings of over $7 billion from the sales.

In what may have been the latest of the asset disposition by oil majors, Brazilian oil company, Petrobras, which began operations in Nigeria in 1998 in the deep waters off the coast of the Niger Delta, was recently reported to have commenced moves to sell off its stakes in Nigerian oil fields, to raise cash for domestic projects, a deal that may fetch the company up to $5 billion. But the company later said it had yet to make a decision on the potential sale of the assets.

The company, it was gathered, would sell its eight per cent stake in the offshore Agbami blocks, which are operated by United States energy major, Chevron, and a 20 per cent share of the offshore Akpo project, operated by French oil firm, Total.

Analysts believe that the divestments by some of the IOCs are linked to the uncertainties surrounding the Petroleum Industry Bill (PIB), which has also made oil majors hold back on investments.

Shell Nigeria recently disclosed that it was holding back its planned investment of about $30 billion in two offshore deep water projects.

In 2012, Shell, Total, ConocoPhillips and Agip divested part of their stakes in the oil and gas industry.

“The reason for the divestments

is probably because of unfavourable investment environment, maybe because of vandalism and damage of their facilities, and probably because of very tense host community issues , said Ademola Oshodi, project manager, Nigerian Natural Resource Charter, adding that “Maybe, it is because of the PIB, which has not been passed.”

Last year, Shell, Chevron, ExxonMobil, Total SA and Eni, who pump about 90 percent of Nigeria’s oil through ventures with the NNPC, had said in a joint presentation to the legislature, that the proposed higher taxes in the PIB would make exploration of oil and gas uneconomical.

Total, the French giant, sold its 20 percent stake and operating mandate of its Nigerian offshore project to a local unit of China’s Sinopec for $2.5 billion last year.

ConocoPhillips, US-based oil group, sold its onshore assets after 46 years of operation in Nigeria, to affiliates of Oando Plc., realising over $1.7 billion from the sale. This includes two offshore properties consisting of a 95 percent operated interest in Oil Mining Lease (OML) 131 and 20 percent interest in OPL 214, as well as a 20 percent interest in onshore OMLs 60-63, a 20 percent interest in the Kwale-Okpai Independent Power Plant and a 17 percent interest in the Brass LNG project.

Royal Dutch Shell Plc, the Anglo-Dutch oil giant, was said to have received cash proceeds of over $2 billion from the sale of eight OMLs, which it operated in the Niger Delta. These include OML 30, OML 34, OML 40, OMLs 26, 42, 4, 38 and 41. The divestments started since 2010.

Last year, it sold its 30 percent interest in OML30 in the Niger Delta to Shoreline Natural Resources Limited for a total cash proceeds of $567 million.

The divested infrastructure includes most of the Trans Forcados major crude oil pipeline from OML 30 to the Forcados River manifold.

Total E&P Nigeria Limited (10 percent) and Nigerian Agip Oil Company Limited (5 percent) also sold their interests in the lease, ultimately giving Shoreline a 45 percent interest.

British Gas (BG) Exploration and Production, which invested over $500 million in its exploration activities on the offshore blocks Oil Prospecting Licences (OPLs) 332, 286, 284 and Olokola Liquefied Natural Gas (OK LNG), pulled out of Nigeria in May 2010.

Claire Lawrie, head, oil and gas advisory for Africa, Ernst & Young, said it was not uncommon for IOCs to divest assets, adding that they had done it in other countries. “They focus on large assets, and get rid of them when they become marginal,” she said.

“This is a good thing for the Nigerian oil and gas industry because it then means that companies such as Addax and Oando can now take over the assets and work with them. There is no cause for alarm. I don’t think it has a negative implication for the industry,” she reckoned.

The Federal Government recently said there was no cause for alarm over the ongoing divestment of petroleum assets by multi-national oil companies, maintaining that all divestments by IOCs would be taken up by local companies.

 

FEMI ASU