ExxonMobil, Shell others to divest 26 oil blocks in Nigeria

….NUPRC proposes divestment conditions

….aims to conclude divestment process in June

Not less than 26 oil blocks with a current average production capacity of 346,290 barrels per day, have been proposed to be divested from the Nigerian oil and gas sector, by Nigerian Agip Oil Company, ExxonMobil (Mobil Producing Nigeria Unlimited), Equinor and Shell (Shell Petroleum Development Company of Nigeria Limited).

Gbenga Komolafe, the Commission chief executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) disclosed this during an industry dialogue on divestment, held in Abuja on Friday.

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According to Komolafe, the blocks have an estimated total reserve of 8.211million barrels of oil, 2,699 million barrels of condensate, 44,110 billion cubic feet of associated gas and 46,604 billion cubic feet of non-associated gas.

He noted that these assets forms a significant contribution to the nation’s hydrocarbon resources.

“These blocks contain P3 reserves estimated at 5,557 million barrels of oil, 1,221 million barrels of condensate, 14,296 billion cubic feet of associated gas and 13,518 billion cubic feet of Non-Associated Gas. It is worth noting that a substantial part of the P3 reserves is located in or near producing assets. This means that a competent successor could easily mature them to 2P reserves.

“The current average production from these blocks is 346,290 barrels per day (bpd). Nigerian Agip Oil Company-28,018 bpd, Mobil Producing Nigeria Unlimited -159,378 bpd, EQUINOR-36,155 bopd and SPDC-122,739 bopd).

“But the technical production potential is much higher – standing at 643,054 barrels (NAOC-147,481 bopd, (Mobil Producing Nigeria Unlimited (MPNU)-244,268 bopd, EQUINOR-39,203 and SPDC-212,102 bopd). These blocks have the potential to significantly boost our national production, which would benefit all stakeholders,” he explained.

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Speaking further, the CCE noted that in line with the Presidential directive, the Commission has developed a divestment framework consisting of seven cardinal pillars in addition to the extant petroleum laws, to guide the assessment of applications for Ministerial consent by the divesting entities.

These pillars include; technical capacity, financial capacity, legal, host community trust / environmental remediation fund, industrial relations and labour issues, data repatriation and decommissioning & abandonment.

He stressed that the successor entity must demonstrate proven and verifiable capacity to operate the asset vigorously and in a business-like manner. He also said that the Commission shall assess the prospective successor entity’s balance sheet and financial viability and verify readiness to undertake a defined work program and fulfill required obligations on the assets.

“The acquiring entity must in line with the interest of the nation be ‘fit and proper’ persons in the eyes of the law. Clear evidence of the resolutions of legacy debts and legal encumbrances must be established and appropriate mechanisms to manage residuals agreed upon. Decommissioning & Abandonment (D&A) Applicable D&A costs must be diligently assessed and ensure settlement of outstanding obligations. Commission to ensure that potential exposure of the Nigerian government to decommissioning liabilities is averted.

“The Commission shall assess the status of host community trust fund obligations and ensure the robustness of the successor entity’s adherence to decarbonisation plans and sound Environmental Social & Governance (ESG) principles.”

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Komolafe speaking further, said that the divestment framework is aimed at ascertaining compliance with extant petroleum laws and the assignees’ capacity to assume the responsibility of developing the assets acquired.

He added that efforts were ongoing to ensure that all divestment processes are concluded by June 2024.

“Our regulatory goal is to ensure that parties in the divestment process conform to the approved divestment guidelines. We aim to ensure that the companies that take over these blocks have the necessary financial resources and possess the technical expertise required to responsibly manage the blocks throughout their lifecycle in accordance with good asset stewardship practices.

“I want to make it unequivocally clear that the NUPRC is dedicated to ensuring that investment processes are smooth, transparent, and efficient. The requirement to sign an undertaking or waiver is solely aimed at preventing any unwarranted financial obligations from falling back on the Federal Government of Nigeria. I assure you that the Commission is eager to close the divestments within the shortest timeline upon the receipt of any of the required instruments,” he said.

In her remarks, Oluyemi Anyanechi, the commission’s Secretary &legal adviser stressed that one of the objectives of the workshop is to ensure that the environmental, host communities, and end-of-life liabilities associated with these assets do not become the financial responsibility of the Federal Government of Nigeria.

To achieve this, she said the Commission is proposing that the divesting entities should either agree to the grant of Ministerial consent to the divestments, on the condition that they will retain the Liabilities until the Commission’s investigation is concluded and the liabilities are allocated to the proper party.

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In this case, the divesting companies will be required to issue an undertaking to retain the liabilities until confirmation of the release by the Commission of all or part of the retained liabilities.

Alternatively, the divesting entities can agree that Ministerial consent will not be granted until the Commission has identified and assigned all liabilities to the capable party. In this situation, the divesting entities will also be required to issue a waiver, waiving their rights to deemed consent as provided in Section 95 (7) (b) of the PIA.

In his remarks, Enorense Amadasun, the executive Commissioner for development & production, NUPRC stated that the divestment dialogue seeks to establish a standard protocol for oil and gas asset divestments in nigeria, protect the interest of the country in the outcome of divestment, ensure successor possess the requisite technical expertise and financial capacity, safe guard the benefits enjoyed by host communities among others.