NNPC to Hold 70% of the JV as the ExxonMobil/Seplat Transaction Comes to a Close - Africa’s premier report on the oil, gas and energy landscape.

NNPC to Hold 70% of the JV as the ExxonMobil/Seplat Transaction Comes to a Close

Nigeria’s state hydrocarbon company NNPC Ltd will keep 70% of the stake in the resulting Joint Venture, when the sale and purchase transaction between ExxonMobil and Seplat Energy is concluded, expectedly in the next two to three months.

Seplat Energy will be operator.

This is the compromise position of the negotiating parties, two years and three months after ExxonMobil and Seplat Energy separately announced the $1.28Billion purchase, by the latter, of Mobil Producing Nigeria Unlimited (MPNU), the entire operated offshore shallow water business of ExxonMobil in Nigeria.

It is the outcome of NNPC’s blocking of the sale and purchase, enforced by a court injunction. In the event, the Minister of Petroleum Resources, on the recommendation of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), had withheld consent and there have been arbitration proceedings.

Unblocking the Sale and Purchase

NNPC and ExxonMobil announced, on Thursday, May 30, 2024, that they had signed a settlement agreement deal on the transaction between Mobil Producing Nigeria Unlimited to Seplat Energy Offshore Limited. Translation: NNPC’s obstruction of the sale and purchase has been annulled.

“Settlement agreement between NNPC Ltd. and Mobil Producing Nigeria Unlimited, Mobil Development Nigeria Inc., and Mobil Exploration Nigeria Inc. signed regarding the proposed divestment of a 100% interest in Mobil Producing Nigeria Unlimited to Seplat Energy Offshore Limited,” NNPC  Ltd. noted in a statement.

With this settlement agreement, ExxonMobil and Seplat can now formally approach the Nigerian Upstream Regulatory Commission (NUPRC), to seek the consent of the Federal Government.

The proposed NNPC – Seplat 70: 30 Joint Venture would be the highest stake by the Nigerian state in a JV producing asset since the government reduced its 80% share in the Shell NNPC Joint Venture to 55% in 1989, to incentivize international partners (Shell, TOTAL and ENI) for the Nigerian Liquefied Natural Gas project.

The assets involved in the Seplat purchase of MPNU are four Oil Mining Leases, (OMLs) 67, 68 70 and 104, as well as the Qua Iboe Terminal, one of Nigeria’s largest export facilities; 51% interest in the Bonny River Terminal and Natural Gas Liquids (NGL) Recovery Plants at the East Area Additional Oil Recovery Project (EAP) and the Oso condensate project.

A 70% share of NNPC in the NNPC/MPNU JV will be clearly against the grain: the widely held opinion is that NNPC Ltd will, indeed, be selling down stakes in the 57 acreages in the Niger Delta in which it is a JV participant.

NNPC holds between 55% and 60% in Joint Ventures in assets that deliver over 80% of Nigerian production. A plan has always been on the table, to sell in such a way that NNPC becomes a less than 50% partner in each of those acreages.  The state hydrocarbon company’s commercial relationships with its partners in these assets have been fraught over the years; where it is the passive partner, it has struggled to pay its cash calls. And its “senior partnership” status has been the reason, critics argue, for the underperformance of these assets, and the ruinously long contracting cycle, of over four years on average, for projects.

Indeed, a multi-phase proposal by a Policy Advisory committee, constituted (then President elect) Bola Ahmed Tinubu, in May 2023, estimated that NNPC’s sell-down of its stakes in the JVs, could pull in close to $34Billion into the Nigerian treasury over five -six years, “if the transaction is properly and professionally managed”.

An initial request by the NNPC, was to take 100% of OML 104 and allow Seplat keep 40% plus operatorship of OMLs 67, 68 & 70. NNPC Ltd changed its mind on that course.

This story was originally published in the March 2024 edition of the Africa Oil+Gas Report. The only addition here is the summary of the statement of settlement.

 

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