Pressure from President Bola Tinubu, following two high-level visits from ExxonMobil’s top shots, has cleared the hurdle in the path of the international oil company’s asset sale to indigenous heavyweight, Seplat Energy Plc.
That’s after the Nigerian National Petroleum Company (NNPC) Limited signed a settlement agreement for the divestment of the international oil major’s $1.28 billion stake in Mobil Producing Nigeria Unlimited (MPNU) to Seplat Energy Plc, in what is a precursor to regulatory approval.
The agreement, which had stalled for two years finally saw green light after visits by top executives from the oil major to Tinubu, himself a former ExxonMobil staff.
Disagreements and a court ruling that temporarily prevented ExxonMobil from selling its assets to Seplat Energy held back the deal from going over the line.
NNPC did not reveal the terms of the settlement, which comes after Tinubu, who doubles as petroleum minister, and his two junior petroleum ministers met Liam Mallon, ExxonMobil upstream president and Shane Harris, its Nigerian business’ managing director on May 28.
“The president has given a clear directive to NNPC and me to resolve the issue of divestment, and we are doing whatever we can to achieve that,” Heineken Lokpobiri, minister of petroleum state (oil) said at the meeting.
Tinubu on June 9 2023 also had a closed-door meeting with executives of ExxonMobil where the President pledged to ensure competition in the country’s oil and gas industry.
“One of the issues appears to be NNPC’s right of pre-emption/right of first refusal. If that is resolved, a substantial issue would have been resolved,” Ayodele Oni, energy lawyer and partner at Bloomfield law firm said.
With this settlement agreement, BusinessDay’s findings showed ExxonMobil and Seplat can now formally approach the Nigerian Upstream Regulatory Commission (NUPRC) to seek the consent of the Federal Government.
NUPRC said at the start of May 2024 that Exxon and NNPC would have to settle for a review to be conducted or any recommendation for its approval submitted to the petroleum minister.
Before recommending any deal for ministerial approval, the regulator said it has to determine if intending buyers have the financial resources and technical expertise to manage their acquisition targets, and whether sellers or buyers will be responsible for environmental remediation, host community obligations and decommissioning liabilities.
NUPRC also said the government had set 31 August as a deadline to clear Nigeria’s backlog of unapproved upstream deals.
Africa Oil & Gas Report, an energy intelligence publication, said NNPC Ltd will keep 70 percent of the stake in the resulting Joint Venture when the sale and purchase transaction between ExxonMobil and Seplat Energy is concluded.
“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 percent share in the Shell NNPC Joint Venture to 55 percent in 1989, to incentivize international partners (Shell, TOTAL and ENI) for the Nigerian Liquefied Natural Gas project,” the intelligence publication said on Thursday.
NNPC holds between 55 percent and 60 percent in Joint Venture assets that deliver over 80 percent of Nigerian production.
“A plan has always been on the table to sell in such a way that NNPC becomes a less than 50 percent partner in each of those acreages,” Africa Oil & Gas Report said.
Experts said the state of the 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.
The $1.3 billion deal between ExxonMobil and Seplat Energy involved the acquisition of a 40 percent stake in MPNU, which includes four oil mining licenses, more than 90 shallow-water and onshore platforms, and 300 producing wells.
BusinessDay’s findings showed ExxonMobil is reducing its presence in Africa’s biggest oil-producing country, shrinking its office space and scaling back operations in the country.
Exxon has reportedly vacated its large office in Lagos, opting for a smaller, more centralised location. Similar downsizing is expected in other Nigerian cities where the company has a presence.
According to Reuters, Exxon is relocating staff from the 12-floor Mobil House, reportedly leased at the cost of $10 million annually, to a six-floor office building 22 kilometres away in the upscale Ikoyi area, built to accommodate half the personnel working at the former offices.
“The new office leaves no one in doubt about its plans for Nigeria,” a staff member of the company told Reuters.
The exact number of employees affected by the office closures is unclear, but the move will likely result in job losses and a smaller overall footprint for Exxon in the country.
Industry analysts suggest that Exxon’s decision is part of a wider trend among international oil companies (IOCs) in Nigeria. Many IOCs are facing pressure to reduce costs and streamline operations, leading to a shift towards smaller, more efficient teams.
The long-term impact of Exxon’s downsizing on the Nigerian oil and gas sector remains to be seen. The move however underscores the industry’s challenges.