By The Editorial Board of Africa Oil+Gas Report
In the week of January 24, 2022, speculations emerged that NNPC had exercised its right of pre-emption of the ongoing divestment of ExxonMobil’s Joint Venture assets, located in the south east shallow offshore Nigeria.
On the heels of those speculations came the news that the state hydrocarbon firm had received a $5Billion corporate finance commitment from the African Export Import (Afrexim) Bank to fund major investments in the country’s Upstream sector.
If NNPC’s plans for the money includes pre-empting the sale of ExxonMobil’s and /or Shell’s JV assets to other parties, then it would be deeply concerning.
Two sentences in the press release announcing the Afreximbank transaction give us pause. One allows that NNPC would be raising between $3.5Billion and $5Billion as corporate finance to fund major upstream investments. The other avers that the state hydrocarbon firm “plans to take over ownership from non-investing partner through acquisition of pre-emption rights in the sample Joint Venture”.
What ‘sample’ Joint Venture? Do these statements “confirm” the speculations that NNPC was exercising its right of pre-emption on the ongoing divestment of ExxonMobil JV assets? If they do, we should all be worried by this proclivity of NNPC to grab and grab. For one, the Nigerian state is in dire need of investors taking interest in any sector of its economy. The hydrocarbon opportunity is still one of the main drawing cards to the Nigerian concert party. In the ExxonMobil divestment process, the preferred bidder is the dual listed Seplat Energy, Africa’s largest homegrown independent, which ran with Trident Energy, a London based explorer, backed with funding from Warburg Pincus, a leading global growth investor. The reserved bidder is a consortium involving a new Nigerian independent and a London listed explorer Cairn Energy, who made the first commercial oil find in Senegal and has invested over $400Million in the last 12 months acquiring Shell’s brownfield assets in Egypt. What this means is that the divestment from majors attracts the cream of global investors.
NNPC just concluded pre-empting the sale of Chevron operated Oil Mining Leases (OMLs) 86 and 88 to Conoil Producing. If it swoops on ExxonMobil, it will draw a pattern. It would mean that it would do the same for Shell. And what does that mean? Nationalisation?
Soon, investors around the world will mark Nigeria as a no-go area. For how do you spend over $4Million in a bidding process only to get to a pre-emption sign at the end?
After the bungled Marginal Field Bid Round, an exercise that turned out to be the least transparent licence offering anywhere on the continent, the last thing Nigeria needs is to be seen as a jurisdiction in which a company, from anywhere, is not welcome to bid for asset.
What’s particularly noteworthy about its penchant for grabbing is that NNPC is not using them to build any capacity.
It would not manage the assets, so any excuse about “this being taken over in the interest of the state” is untrue. In the last three years, it has implemented Finance and Technical Service Agreements (FTSAs), with companies that it chooses to work the assets. Its choice of “partners” for the assets it grabs points more to cronyism than the quest to help build an industrial economy. So NNPC takes an asset that should have gone to Conoil, a proven operator of oilfields in the last 30 years, and turns around to “sell” the asset to MRS, a far downstream player. This time it plans to, if the speculations are confirmed, snatch victory from the jaws of Seplat, a 12 year old technically honed operator with 80,000BOPD operated production capacity and then “sell” it, through an FTSA arrangement, to a company that participated in the ExxonMobil bid but lost out?
And who says we shouldn’t challenge these pre-emptions?
Why are people so unwilling to challenge these matters in court?
One recurring argument in the statement on the Afreximbank funding commitment was that NNPC was seeking to take advantage of the opportunity provided by the new law: Petroleum Industry Act. Our question is: What more does it want? As we’ve noted here in an earlier piece, NNPC is in joint venture in acreages that produce 45% of the country’s crude, and will continue to be. It is also the Concessionaire in the Production Sharing Contract (PSC) arrangements, which deliver over 39% of the crude, according to the 2018 Oil and Gas Industry annual report by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).
And there is the matter of NPDC, the operating subsidiary of NNPC, which has been gifted joint venture participation in 10 Oil Mining Leases (OMLs), all of them producing.
In 2019 alone, the Nigerian Government added more to the cart: It approved the transfer of OMLs 11, 24 and 98, including the operatorship of OML 116, from Federation’s interest (NNPC) to NPDC.
NPDC is also the sole stakeholder in three producing OMLs and two non-producing OMLs (i.e. no Joint Venture with any company, no PSC relationship, just NPDC held).
So, what does it want: to take over the entire concession map?
Thank you for this piece sir. An institution like NNPC Ltd definitely needs perspectives like this for balanced disposition. They must see issues from other stakeholder eyes.
I beg to disagree with ur submission SIR.
Do u know NNOC? What about E&E Division of NNPC?. All d lucrative oil and gas/condensate concessions discovered by this 100% owned entities were grabbed by d IOC and pea nut were given to d FG. D terrible complex , multiplex concession OPL 91 was not grabbed bcos of it multiplexities.. See where we are today? Shortage of $ to d FG. Bcos d IOC operates at minimal cost and make huge profits compared to any where in d globe. But gives pea nut to FG.
Come c NLNG ?. Do u know d history of NLNG?. Who wanted to grab it?. Had it been it was grabbed, whould it had been as it is today?. See for ur self d direction of NLNG. Win-win -win direction for every parties.
Thus that grabbed our lucratives concessions from NNOC/ E&E NNPC/Nigeria were unfair. This is not in d spirit of Business.
Publisher,
Very nice. However, i have a divergent view. I believe it is about time NNPC Ltd becomes a full commercial entity just like ARAMCO etc.
If i am correct, the original MoU between NNOC/NNPC and JV partners in the early seventies indicated a fifty years terms for assets revert to the government.
I reserve my comments on the indigenous companies in partnership with foreign entities bidding for ExxonMobil and Shell’s assets.
The same NNPC that spends billion on Refinery rehabilitation yearly without producing a drop of crude, where worker lazy about doing nothing yet attending courses and getting promoted Nigeria and well meaning Nigerians need to show the world where this can survive.
Publisher,
Very nice. However, i have a divergent view. I believe it is about time NNPC Ltd becomes a full commercial entity just like ARAMCO etc.
If i am correct, the original MoU between NNOC/NNPC and JV partners in the early seventies indicated a fifty years terms for assets revert to the government.
I reserve my comments on the indigenous companies in partnership with foreign entities bidding for ExxonMobil and Shell’s assets.
Re: NNPC’s Grab And Grab Will Demarket The Nigerian Hydrocarbon Opportunity.
By Adewole Kehinde
I came across an article published by the “Editorial Board of Africa Oil+Gas Report” titled “NNPC’s Grab and Grab Will Demarket the Nigerian Hydrocarbon Opportunity.”
Indications from the body of the article show that some enemies of the NNPC Limited are behind the write-up to tarnish the image of the Nigerian National Petroleum Company Limited.
For the purpose of clarification, the Petroleum Industry Act establishes incorporated joint companies under Section 65 of the Act. The NNPC Limited is to conduct its affairs on a commercial basis in a profitable manner without recourse to government funds and their memorandum and articles of association shall state these restrictions.
The NNPC is also required to declare dividends to its shareholders and retain 20% of profit as retained earnings to grow its business like any other incorporated entity incorporated under the Companies and Allied Matters Act, as provided under Section 53(7) of the Petroleum Industry Act.
With the above, the NNPC Limited has a right of pre-emption on all its Joint Venture Contractors (JVCs).
Also the NNPC Limited supervises the mechanism of funding the Joint Venture Operations through the Cash-Call Process.
From my available information, NNPC Limited current Joint Venture Partners are:
Shell Production & Development Company (SPDC) – NNPC 55% / SHELL 30% / ELF 10% / AGIP 5%.
Mobil Producing Nigeria Unlimited (MPNU) – NNPC 60% / MPN 40%
Pan Ocean Oil Corporation Nigeria (POOCN) – NNPC 60% / POOCN 40%
Chevron Nigeria Ltd (CNL) – NNPC 60% / CNL 40%
Nigeria Agip Oil Company (NAOC) – NNPC 60% / NAOC 20% / OANDO 20%
Total Exploration & Production Nigeria (TEPNG) – NNPC 60% / TEPNG 40%
First Exploration & Production Ltd (FEPL) – NNPC 60% / FEPL 40%
West African Exploration & Production (WAEP) – NNPC 55% / WAEP 45%
Seplat Petroleum Development Company Plc (SEPLAT) – NNPC 60% / SEPLAT 40%
Nigeria Petroleum Development Company (NPDC) –
Amni International Petroleum Development Company Ltd (Amni) – NNPC 60% / AMNI 40%
Newcross Exploration & Production Company Ltd (NEPL) – NNPC 55% / NEPL 45%
Aiteo Eastern Exploration & Production Company Ltd (AITEO) – NNPC 55% / AITEO 45%
Eroton Exploration & Production Ltd (Eroton) – NNPC 55% / EROTON 45%
Belema Oil Producing Ltd (Belema) – NNPC 60% / BELEMA 40%
Now let me make it clear to my readers what pre-emption is all about.
It is the purchase of goods or shares by one person or party before the opportunity is offered to others.
The purpose of pre-emption rights is to give current shareholders the opportunity to protect their stake in the company from becoming diluted if more shares are issued.
So from my understanding, NNPC was exercising its right of pre-emption on the ongoing divestment of ExxonMobil JV assets so as to protect its stake in the company from becoming diluted if more shares are issued.
NNPC as Limited company is operating on commercial basis and bound to make profit like every other commercial ventures, I don’t see anything bad in a commercial business that is targeting to make profit “to grab and grab” since the Law has permitted them to make profit under Section 53(7) of the Petroleum Industry Act.
For the information of the sponsors of the article, the Petroleum Industry Act has opened ways for investors to take interest in the Oil and Gas sector in Nigeria.
The article raised the issue of Nationalization and assumed that investors around the world will mark Nigeria as a no-go area. NNPC Limited like I have said is a commercial entity and can pick interest in other oil and gas companies.
The good news is that the pre-emption will help to check exploitation; ensures steady supply of services; encourages efficient use of resources; protection of strategic oil and gas industries; ensures equitable distribution of resources; elimination of Monopoly and help in mobilisation of capital.
On a final note, the Nigerian National Petroleum Company Limited is not ready to take over the entire concession map but in business to make profit and run the company in a transparent manner.
Adewole Kehinde is the Publisher of Swift Reporters and can be reached via 08166240846, 08123608662