Oando’s power move
Oando, an energy company, has agreed to acquire 100% of the shares of Nigerian Agip Oil Company, an oil and gas unit of Italian firm Eni…
Oando, an energy company, has agreed to acquire 100% of the shares of Nigerian Agip Oil Company, an oil and gas unit of Italian firm Eni. The completion of this deal is pending ministerial consent and regulatory approvals. This acquisition increases Oando’s participating interests in OMLs 60, 61, 62, and 63 from 20% to 40%. Additionally, Oando’s ownership stake in various NEPL/NAOC/OOL Joint Venture assets and infrastructure, including 40 discovered oil and gas fields, 12 production stations, approximately 1,490 km of pipelines, three gas processing plants and the Kwale-Okpai phases 1 & 2 power plants, has also expanded.
The trend of oil majors divesting their assets in Nigeria can be attributed to various factors. These include the global push towards renewable energy, the rise in green energy investments and the potential impact of the Petroleum Industry Act, which may necessitate International Oil Companies (IOCs) to relinquish more resources than they prefer. When compared to deepwater exploration that does not require regular interfacing with host communities and boasts of larger reserves, IOCs may consider focusing on deepwater oil exploration a better bargain. President Bola Tinubu is required to sign off on the deal. Given that his nephew, Wale Tinubu, is the chief executive officer of Oando, he may declare a conflict of interest since the Constitution is silent on such a scenario. Overall, the deal may bolster hope in Wale Tinubu’s leadership of Oando, which has battled significant resistance from a faction of its shareholders. The deal should boost Oando’s presence in the industry’s upstream, midstream and downstream sectors. Anticipating the future, Oando is expected to channel investments into novel exploration and production projects while enhancing its infrastructure. In 2014, ENI’s chief executive Paolo Scaroni said, during a parliamentary hearing in Italy, that the company was considering leaving Nigeria due to oil theft. However, the company reconsidered that decision and continued operations. ENI’s concerns have clearly remained; that is the same for many IOCs. For example, Shell is in talks to sell its stake in a Nigerian oil and gas joint venture to ND Western Ltd due to a Supreme Court ruling, pending an appeal related to a 2019 oil spill. Similarly, ExxonMobil is selling its equity interest in Mobil Producing Nigeria to Seplat Energy. We anticipate that this pattern of IOCs divesting from shallow-water assets will continue, either leading to their departure from Nigeria or a shift towards deep-water assets, where issues related to oil bunkering and host communities are less prominent. While there is a gain for local operators, the industry loses the ability to attract the type of capital that the IOCs possess.