Greasing the wheels
The Nigerian National Petroleum Company (NNPC) Limited has signed a settlement agreement deal with ExxonMobil Nigeria on the proposed…
The Nigerian National Petroleum Company (NNPC) Limited has signed a settlement agreement deal with ExxonMobil Nigeria on the proposed divestment of 100 percent interest in Mobil Producing Nigeria Unlimited to Seplat Energy Offshore Limited, sealing a major win for Seplat, which has been eager to expand its portfolio in Nigeria’s oil industry. The $1.28 billion deal, first announced in February 2022, has been entangled in regulatory hurdles for over two years. In a related energy development, Nigeria has secured a $500 million World Bank loan for its electricity sector to boost power distribution after last month’s tariff hike.
Accepting ExxonMobil Nigeria’s proposed divestment of 100 percent interest in Mobil Producing Nigeria Unlimited to Seplat Energy Offshore Limited is a watershed moment in the Nigerian petroleum industry. This deal should have been concluded long ago, but it was unnecessarily delayed by regulatory hurdles driven by personalities concerned more about personal agendas than ensuring the deal’s appropriateness and compliance. Thus, it is better late than never to have the deal finally completed. Nigeria cannot be an attractive investment destination without investors having clarity on entry and exit rules and knowing that once these rules are met, market entry and exit will be seamless. This deal marks a shift from International Oil Companies (IOCs) to local players, at least for onshore petroleum. Globally, IOCs have been rethinking their strategies, especially with the advent of new technologies such as fracking, renewable energy, gas-to-liquids, and deep-sea oil drilling. In Nigeria, we expect to see IOCs concentrate on a few massive projects, preferably offshore, which will allow them to reduce their oil field, office, and staffing footprint in Nigeria. The downside is fewer jobs for Nigerians and, possibly, lower investments. However, these turbulent times provide opportunities for Seplat and other domestic and foreign marginal players, but they need the support of the Nigerian government to succeed.