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Petrobras to Auction $5bn of Nigerian Oil Assets

By on March 28, 2013

Brazilian oil company Petrobras is preparing to auction its stakes in Nigerian oil fields to raise cash for domestic projects; a deal that may fetch up to $5 billion, sources close to the deal informed the Reuters news agency.

The state-controlled company, formally known as Petroleo Brasileiro SA, has hired Standard Chartered Bank to manage the process, which will kick off in the next two months, banking and oil industry sources said.

Asian state oil companies are expected to bid in the hopes of adding more production assets to their portfolios. Private equity funds are also interested, banking sources said. Standard Chartered and Petrobras declined comment.

The decision to sell the Nigeria assets marks a retreat from foreign markets once considered strategic in favour of realising the Brazilian government’s goal for the South American country to become self-sufficient in energy.

Petrobras will sell its 8 per cent stake in the Nigerian offshore Agbami block, which is operated by US energy firm Chevron and its 20 per cent share of the offshore Akpo project, operated by France’s Total.

Crude oil production from the Agbami field began in 2008. Output from the project can reach 250,000 barrels per day (bpd), and it holds estimated reserves of 900 million barrels.
Akpo began production in 2009 and has plateau output of 175,000 bpd of light condensate oil and nine million cubic metres of gas. It has proven and probable reserves of 620 million barrels of condensate and more than 28 billion cubic metres of gas, according to Total.

Petrobras began operations in Nigeria in 1998 in the deep waters off the coast of the Niger Delta.
Petrobras is divesting assets and redirecting investment towards higher-return activities such as exploration and production to finance a five-year, $237 billion capital spending plan, the world’s largest corporate investment programme.

Petrobras hopes to more than double current oil and gas production by the start of the next decade to about 5.2 million barrels of oil equivalent a day and also help Brazil become self-sufficient in refined products as well.

By divesting assets such as the Nigerian blocks, Petrobras can focus more on exploring for oil in a vast deep sea region off the coast of Brazil known as the subsalt, thought to contain dozens of billions of barrels of high-quality oil.

Cash flow has been crimped by falling output and the government’s refusal, on anti-inflation grounds, to let Brazilian gasoline and diesel prices rise in line with world prices. This has forced Petrobras to subsidise consumers even as its debt rises above its internal limits.

Selling assets has not been easy, however, as potential buyers have sensed its need for cash and made low bids.

The company recently cut its asset sale goal to $9.9 billion from nearly $15 billion after it failed to get attractive offers for energy assets in the Gulf of Mexico.
ConocoPhillips, meanwhile, is selling its Nigerian businesses to Oando Energy for around $1.79 billion so it can focus on increasing its lower-cost US shale oil and natural gas projects.

Meanwhile, the House of Representatives has mandated its Committees on Interior, National Security and Intelligence as well as Petroleum Resources (Upstream) to conduct an investigation into the N5.6 billion oil pipeline protection contract awarded to some private security companies.

The contentious oil pipeline protection contract was awarded to ex-Niger Delta militants in a deal meant to solicit their cooperation and provide jobs for their followers after they had accepted the federal government’s amnesty programme in 2009.
But the contract has failed to achieve its objective as oil theft and illicit bunkering in the region have risen in recent times.

The lawmakers yesterday accused the federal government of awarding the said contract to the security firms through the Nigerian National Petroleum Corporation (NNPC) in spite of the fact that the responsibility of pipeline protection falls under the purview of the Nigerian Security and Civil Defence Corps (NSCDC).

In a motion sponsored by Hon. Robinson Uwak (PDP/ Akwa Ibom), the lawmaker said the action was a violation of the NSCDC Act 2003 and amounted to an encroachment on the statutory responsibility of the civil defence corps.

Uwak said that in spite of this provision in the law, the federal government had embarked on spending billions of naira annually on oil pipelines protection contracts.
He expressed concern that this breach of the NSCDC Act also violates the objectives of the 1999 Constitution to minimise waste of public resources.

“The huge sums of money spent in servicing the pipeline contracts could be invested in funding the NSCDC to enable the corps carry out its statutory functions rather than giving it to private firms in violation of the law and a situation that could compromise national security,” Uwak said.

The motion was adopted without any debate and the relevant committees given four weeks to submit the report of their findings.

Also Wednesday, the House passed through the second reading the N259.7 billion Federal Capital Territory (FCT) 2013 Appropriation Bill.

The highlights of the budget include N48.03 billion for personnel costs, N55.9 billion for overhead costs, while N155.8 billion was earmarked for capital projects in the FCT.

( This Day )