Mele Kyari, the group managing director of NNPC, has said International Oil Companies (IOCs) divesting from Nigeria’s upstream sector must address issues of abandonment and decommissioning of oil assets.
Decommissioning, which is the general term for returning an oil production site to its pre-lease condition at the end of the useful life of the oil asset, can be a costly exercise for the companies involved. Many fields abandoned in Nigeria are not decommissioned largely because the local companies who acquire them don’t have the required funds to do so.
“We will not end the 2012 situation in Nigeria; it will be done in a manner that brings value to Nigeria,” said Kyari at a panel session during the Nigerian International Energy Summit in Abuja on Tuesday.
He had said on Monday that to sustain a prosperous business environment for Nigeria, the national oil company would pay particular attention to abandonment and relinquishment costs, severance of operator staff, third-party contract liabilities, and competency of the buyer of any divested asset.
The completion of the Seplat/ExxonMobil deal is subject to ministerial consent and other required regulatory approvals. It is usually at this stage that such deals emerge whole or come out bleeding in every opening.
While the NNPC has not hidden its intention to snap up the assets, it has struggled to raise financing. Only last month, the NNPC and the African Export-Import Bank agreed to raise $5 billion as corporate finance to fund major investments in Nigeria’s upstream sector.
It is not clear if the NNPC has obtained this financing but there are fears its cooperation would be harder to secure.
Some analysts say that for the deal to get to this stage, NNPC may have already provided some support or laid conditions that must be met.
Ayodele Oni, energy lawyer and partner at Bloomfield Law Practice, said there are pre-emption rights for NNPC’s joint operating agreements.
These pre-emption rights usually give the NNPC the right to match the best (financial) terms for any such acquisition and acquire the said asset, according to him.
“Usually, one condition to closing such deals is a document evincing the waiver of pre-emption rights by the NNPC and other joint venture partners, if any. Thus, generally speaking, and depending on the stage they are at and whether a waiver has even been obtained from NNPC, it may be able to scuttle same,” Oni said.
According to the terms of the Joint Venture (JV) contract, the NNPC, which holds a 60 percent share in the Mobil Producing Nigeria Unlimited (MPNU) JV, has the right of first refusal in any asset sale agreement.
Some analysts have said that NNPC could throw a monkey wrench into the deal because its views would be taken seriously before the deal secures ministerial blessing.
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A source close to the government said it might be hard to get this blessing on account of “the issues NNPC is throwing up.”
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