Market News

HIGHLIGHTS

Komolafe says signing ceremonies to be held in days

Oando, Chappal buying onshore, shallow water assets

Deals represent major shift from IOCs to local players

Nigeria's upstream regulator said it has approved long-awaited divestment deals by Eni and Equinor, allowing local players Oando and Chappal Energies, respectively, to acquire their oil-producing assets.

Addressing an oil and gas conference in Abuja on July 3, Gbenga Komolafe, head of the Nigerian Upstream Petroleum Regulatory Commission, said the body has greenlit a deal between Nigerian Agip Oil Company – Italian major Eni's Nigerian subsidiary – and Oando, which is set to become one of Nigeria's largest oil producers through the deal.

Komolafe added that Equinor's deal with Project Odinmim, Chappal's special-purpose vehicle for the transaction, has also been approved.

"The [Eni] divestment has been concluded and the signing ceremony will come up any moment," said Komolafe. "The Equinor-Project Odinmim project divestment was also completed."

Eni first announced the sale of its Nigerian unit to Oando in September 2023, but the deal stalled after state-owned Nigerian National Petroleum Company, which holds 60% equity in the blocks, floated the idea of exercising its right of first refusal on the licenses.

Oando chief operating officer Alex Irune said the NUPRC approval was "a welcome development" and praised the recently enacted and "rigorous" Petroleum Industry Act. However, Irune added that of the company's four transactions, just two have so far been approved.

"We have no choice after acquiring those oil and gas assets but to adopt integrated operations," said Irune, an advocate of greater cooperation between local Nigerian companies.

Eni did not immediately respond to a request for comment.

The transactions, which could close imminently subject to a ministerial signoff, mark a significant turning point in the oil sector of Africa's largest producer, with international oil companies divesting and being replaced by local producers, experts said.

Nigerian oil production has fallen well below its capacity of over 2 million b/d of crude and condensate due to rampant oil theft and sabotage in the restive Niger Delta, as well as underinvestment and sluggish exploration activity.

The country produced 1.47 million b/d in May, according to the Platts OPEC Survey from S&P Global Commodity Insights.

Shell is in the process of selling its onshore business to Renaissance, a consortium of mostly local companies, while ExxonMobil's $1.3 billion sale to home-grown Seplat has faced regulatory and legal hurdles.

On July 3, however, Komolafe said the Shell divestment deal with Renaissance was currently being reviewed, while that of ExxonMobil had reached an advanced stage of approval. In June, NNPC withdrew its legal challenge to the ExxonMobil-Seplat deal, which will increase London- and Lagos-listed Seplat's output from 51,000 b/d of oil equivalent currently to 146,000 boe/d.

Komolafe previously said approvals of divestment deals would speed up if IOCs agreed to shoulder the burden of oil spills and clean-up, potentially prolonging the process.

Yet representatives of local oil companies said they were capable of boosting Nigerian output by 200,000 b/d within two years if the government speeds up the approvals of the deals.

Major transaction

Eni's deal with Oando, estimated at $500 million, includes the major's interests in four onshore oil licenses, OMLs 60, 61, 62 and 63, as well as stakes in the Brass terminal, onshore exploration concessions and power plants.

The Italian company currently holds a 20% operating stake in the joint venture, alongside Oando with 20% and state-owned Nigerian National Petroleum Company with 60%.

Oando, which is run by Nigerian president Bola Tinubu's nephew, is producing 25,000 b/d, Irune told Commodity Insights in a March interview, and is set to double its output to 50,000 boe/d with the Eni deal.

Equinor's deal with Chappal will see it hand over its 53.85% stake in block OML 128, including a 20.21% interest in the Agbami oil field, which is operated by US major Chevron and produces just under 100,000 b/d of oil, according to the NUPRC.