(BUSINESS) Oil War: NNPC, NUPRC battle Seplat over $1.3bn Mobil oil block
...As Buhari reverses self
The last may not have been heard on the acquisition of the $1.3 billion worth of shares of Mobil Producing Nigeria Unlimited by an indigenous oil company, Seplat Energy offshore Limited.
This follows a surprise announcement last week of the reversal of an earlier consent granted Seplat Energy by President Muhammad Buhari to acquire the shares of the American oil giant, which negotiations have been concluded some months back.
There were reports last week that Muhammadu Buhari had caved in to pressures by the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, which opposed the president’s decision authorising Seplat Energy Limited to buy the shares previously owned by Exxon Mobil in oil blocks in Nigeria’s Niger Delta region. This was even as Seplat Energy has through a statement by its Chief Financial Officer, Emeka Onwuka, said the company has received no official notification of such a decision and is seeking clarification from the relevant authorities.
He said: “We will continue to work with all parties to achieve a successful outcome to the proposed acquisition and will provide an update in due course,” Onwuka said. The announcement, he said, was made pursuant to Rule 17.10 of the Rulebook of the Nigerian Exchange, 2015 (Issuer’s Rule).
The reversal of the president’s decision was confirmed by the Senior Special Assistant to the President on Media and Publicity, Mallam Garba Shehu.
He said Buhari had decided to back NUPRC, which had insisted on its refusal to assent to the ExxonMobil/Seplat Energy share acquisition worth $1.3 billion.
Garba also said the earlier confusion in the President’s decision was because the various agencies involved in the decision had not coordinated well among themselves. He added that President Buhari now wanted NUPRC position to be supported.
According to Garba: “It has become clear that the various agencies involved in decision had not coordinated well among themselves and having looked at all of the facts with all of the ramifications, the president decided the position of the regulator is to be supported.”
Buhari had Monday last week afternoon approved the acquisition of the entire share capital of Mobil Producing Nigeria Unlimited by Seplat Energy Offshore Limited.
In an official tweet by the Presidency, titled: ‘President Buhari consents to the acquisition of Exxon Mobil shares by Seplat Energy Offshore Ltd,” the Presidency said Buhari had authorised the acquisition in his capacity as Minister of Petroleum and it was aimed at attracting foreign direct investment to the country.
The tweet added that the president also directed that Exxon Mobil and Seplat mitigate all environmental and abandonment liabilities.
The tweet read: “In his capacity as Minister of Petroleum Resources, and in consonance with the country’s drive for Foreign Direct Investment in the energy sector, President @MBuhari has consented to the acquisition of the entire share capital of Mobil Producing Nigeria Unlimited by Seplat Energy Offshore Limited.
“Exxon Mobil had entered into a landmark Sale & Purchase Agreement with Seplat Energy to acquire the entire share capital of Mobil Producing Nigeria Unlimited from Exxon Mobil Corporation, Mobil Development Nigeria Inc, & Mobil Exploration Nigeria Inc, registered in Delaware, USA. Considering the extensive benefits of the transaction to the Nigerian Energy sector and the larger economy, President @MBuhari has given ministerial consent to the deal.
“The President, in commitment to investment drive in light of the Petroleum Industry Act, granted consent to the Share Sales Agreement, as requested by the parties to the transaction, and directed that the approval be conveyed to all the parties involved.
“Consequently, Exxon Mobil/Seplat is expected to carry out operatorship of all the oil mining licenses in the related shallow water assets towards production optimisation to support Nigeria’s OPEC quota in the short term as well as ensure accelerated development and monetisation of the gas resources in the assets for the Nigerian economy.”
But Seplat Energy, said last week Thursday, it had not yet been officially informed about the withdrawal of Federal Government’s consent in its $1.3 billion oil deal with Mobil Producing Nigeria Unlimited, MPNU. The company, however, promised to continue working with relevant parties to conclude the proposed acquisition.
The company stated: “Seplat Energy has become aware of a news report claiming that Ministerial Approval of the Company’s proposed acquisition of the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) has been withdrawn.
“Seplat Energy has received no official notification of such a decision and is seeking clarification from the relevant authorities. We will continue to work with all parties to achieve a successful outcome to the proposed acquisition and will provide an update in due course.”
Before the imbroglio, Seplat Energy had agreed to acquire the entire share capital of MPNU at the cost of $1.3 billion plus up to $300 million contingent consideration.
But the Nigerian National Petroleum Company Limited had disagreed, arguing that as a partner, it should have been granted the right of first refusal in purchasing the assets. The Nigerian Upstream Petroleum Regulatory Commission, NUPRC had also objected to offering the assets to Seplat Energy Plc.
Meanwhile, Nigeria’s oil production plunged by 2.3 million barrels in July 2022 compares to the June figure. The monthly oil report by OPEC for August shows that crude oil production output dropped by an average of 74,000 barrels per day in July. This means that the country lost about 2.3 million barrels of oil in the month of July alone.
Average cost of Brent, Nigeria’s best, was $105.12 /barrel, meaning that Nigeria earned only $241.1 billion from oil in July.
OPEC data indicates that Nigeria oil production in June was 1.158 million barrels per day, but this dropped to 1.084 million barrels per day in July.
OPEC has reduced its global demand growth forecast for this year to 3.1mn b/d, down by 300,000 b/d from its previous-month estimate, given “expectations of a resurgence of Covid-19 restrictions and ongoing political uncertainties” in the second half of 2022.
In its Monthly Oil Market Report (MOMR) the group now sees world oil demand at 100.03mn b/d in 2022. It sees demand growth at 2.7mn b/d in 2023, unchanged from its previous report.
According to OPEC, Nigeria’s production, based on secondary sources, went up marginally to 1.18 million barrels a day (mbpd) in July, from 1.17mbpd in June, just as its rig count remained unchanged at 11 for the two months.
Nigeria’s oil production crashed by about 14.94 million barrels in the second quarter of this year, an indication that the country’s oil earnings plunged by about N703.76bn, being the worth of the crude that was lost during the review period.
The Federal Government, as well as operators in the oil sector, has repeatedly decried the plunge in Nigeria’s oil production, attributing the decline to acts of vandalism by oil thieves.
Others include the non-restart of shut-in oil wells, ageing facilities, the inability of the national oil company and the many independent companies to replicate the capacity demonstrated by the exiting IOCs.
The challenges, the government said, have rendered the government’s aspiration of achieving three million barrels per day oil production and 40 billion barrels reserves almost impossible, with the reserve stagnating between 36 and 37 billion barrels for years.
The government recently raised alarm over the rising rate of crude oil theft in the Niger Delta, disclosing that about $3.27 billion worth of oil had been lost to vandalism and theft in the past 14 months. It said high-level cases of oil theft had become a threat to the country’s corporate and economic existence, with the industry now thinking of transporting crude oil from fields to export terminals by trucks.
In a presentation at a stakeholders’ engagement in Abuja, Nigeria’s capital, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said the government was extremely worried about the huge loss of oil revenue to vandals.
Chief Executive of NUPRC, Gbenga Komolafe, who disclosed this, said much of the crude oil losses came from Bonny Terminal Network, Forcados Terminal Network and Brass Terminal Network.
He listed factors aiding the criminal activities to include economic challenges, inadequate security, poor surveillance, poor community engagements, exposed facilities and stakeholders’ compromises, stressing that due to the high level of theft, the country had been unable to meet its OPEC production quota.
Komolafe said the government was determined to end the menace, so the country could benefit from the rising price of oil and also protect the environment from oil spills.
He said: “The issue of oil theft has become a very worrisome one to the government of Nigeria and I believe to you as investors too.”
He said it was important that government and oil companies work together to resolve the issue, especially on the agreed volume of oil lost to vandals, since the issues strike at the heart of federation revenue.
“You will recall that in the last one week, we have set up a crack team to determine the accurate figure because as a government, we cannot continue to act on the basis of an abstract or inaccurate figure in dealing with an important issue as crude oil theft because the issue goes to the heart of federation revenue.
“The concern of the government is to increase our national oil production. Basically, we are an oil economy and when the upstream is sick, it affects the well being and health of the country.
“The situation happening in the upstream is getting to the level of threat to the existence and well-being of Nigeria. As responsible regulators, we are very concerned about it.
“We have been doing a lot and we are not relenting. We will do everything possible to increase oil production in a manner that will make the nation benefit from the upward swing in the international price of crude oil,” Komolafe added.
Reacting to proposals by some operators that crude oil could be transported by trucks as an alternative measure, the NUPRC boss stated: “I quite agree that alternative evacuations that are being proposed now will be just an intervention mechanism that cannot be a permanent solution to the problem we are facing.
“I will take note of that as a regulator because already, people are pressured by the challenge to look for alternative solutions. They are seeing it (trucking) as a solution but they are not having a long-term look at the effect that the criminals could equally switch their strategies (to attack the trucks).”
In his presentation, the Chairman/Managing Director of ExxonMobil, Richard Laing, who represented the Oil Producers Trade Section, OPTS, of Lagos Chamber of Commerce, pointed out that though the issue is not new, it had grown from just oil theft to organized criminality, with the sophisticated operation.
He said: “As an industry, I know how hard my colleagues work to produce products that we need and to suffer the level of theft that we have is disheartening. But more importantly, it is a threat to investments, a threat to the health of the industry and wealth of the nation
“It is important that the stakeholders integrate their activities and their thoughts. As OPTS, we have met with a number of stakeholders over the last several months and we want to make sure that whatever we do is joined up and effective.
“The language is very important and I think we use theft rather quickly. I don’t think this is theft, this is organized criminal activity. The level of sophistication in terms of tapping into the pipelines, the distributions, efforts required to move hundreds of thousands of barrels a day isn’t some guy coming along and tapping into a pipeline and taking container crude oil. It is organized criminality.’’
82% of production was stolen in Feb
On its part, the Independent Petroleum Producers Group, IPPG, disclosed that about 82 per cent of its oil production was stolen in the month of February 2022.
Represented by the Managing Director of Waltersmith Petroman, Chikeze Nwosu, the group said independent producers are facing existential threats.
Nwosu explained that the oil theft challenge had grown from what it used to be in the past when it was just about four per cent, lamenting that it was as high as 91 per cent in December 2021.
“The TNP (Trans Niger Pipeline) is the major issue. We have seen crude theft grow from single-digit percentages to 91 per cent in December for some of the operators who produce into the TNP, 75 per cent in January and the February report we got has an average of 82 per cent,” he said. Nwosu pointed out that the situation seemed to be getting worse, despite all efforts to curb it and called for urgent action from the government and stakeholders.
At a separate on-the-spot assessment of some pipelines damaged by vandals at Ibaa community in Emeoha Local Government Area of Rivers State, Minister of State for Petroleum Resources, Timipre Sylva, said the Federal Government would no longer condone any form of criminality in the nation’s oil and gas facilities and installations.
He said aside from causing huge losses for the country, the criminals involved in pipeline vandalism are also destroying the livelihoods of locals and the environment.
To resolve the issue, he said: “The community must be involved; the security arm must be involved and the third arm, which is the operating public must be involved. I want to let everybody know that these criminals have their days numbered because the country has lost so much from their activities.”
On his part, the GMD/CEO of Nigerian National Petroleum Company Limited, NNPC, Mele Kyari, lamented that the scale of crude oil theft and pipeline vandalism seen now was beyond explanation. He further said all hands must be on deck to contain the spate of crude oil losses in the country.