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NPDC insists on operatorship of Chevron’s oil blocks on sale

By BusinessNews Staff on October 2, 2013

The Nigerian National Petroleum Corporation (NNPC), owner of 60 percent stakes in the Oil Mining Leases (OML) 52, 53, 55, at the weekend insisted that it reserves the right to hand over the operatorship and handling of drilling at the blocks to its subsidiary, the Nigerian Petroleum Development Company (NPDC).

Chevron, which currently operates production of the blocks, has announced plans to sell its 40 percent stakes in the blocks, and is expected to have started receiving bids from prospective buyers of three oil blocks in the Niger Delta. Among those showing interest are several local Nigerian firms.

A management staff of the NPDC who craved anonymity, in a chat with **Daily Independent** at the weekend, warned prospective buyers of the Chevron’s bids against taking the 40 per cent stake for operatorship of the oil blocks.

“They should have it at the back of their minds that what they are buying is Chevron’s stakes not necessarily the right to operate the bids. I believe this is clear to them,” he said.

Not having operatorship, however poses significant risks for would-be investors in the fields; particularly with the NPDC short on finance and expertise.

In the past, the company had to call in a third-party to operate the blocks, pushing up costs.

Oil industry sources estimate the mean value of the three blocks combined at between $500 and $600 million, and anticipates winning bids will be around those levels.

Chevron said in June it would be selling its 40 percent interest in five onshore blocks, joining Royal Dutch Shell, Italy’s Eni and France’s Total in selling stakes in Niger Delta assets.

U.S. firm ConocoPhillips is also selling its Nigerian assets to Oando Energy for $1.79 billion.

Chevron wants to sell OML 52, 53 and 55 to one buyer and suitors ought to have paid 15 percent of the bids yesterday (September 30), three sources close to the deals told Reuters. The firm will sell two other blocks, OML 82 and OML 85, in a separate bidding process.

The U.S. firm did not respond to a request for comment.

The three blocks have total oil reserves of around 134 million barrels and 5 trillion cubic feet of gas, two sources said. One company was willing to bid $1.7 billion for the assets but it was unlikely it was a credible buyer, the sources said.

Consortium bidders were more likely to be able to raise the financing necessary, sources said, and as with recent sales of Shell oil blocks, Nigerian firms, many in partnership with foreign companies, are likely to win most bids.

Nigeria’s South Atlantic Petroleum (SAPETRO), which already has joint ventures with Total and China’s CNOOC, is expected to bid, as is First Hydrocarbon Nigeria, the local-arm of London-listed Afren, two sources involved in the deals said.

Afren declined to comment and SAPETRO did not respond to a request for comment.

Since 2010 Nigeria has had a policy of encouraging more direct ownership of its oil and gas by Nigerians, either through the state oil company or local private firms. That has raised concerns among foreign oil majors they may lose smaller assets if they do not sell now, industry experts say.

Worries over oil theft, fraught relations with communities living around oil fields and uncertainty over a stalled bill to overhaul fiscal terms has also encouraged majors to sell down.

Many Nigerian firms are backed by powerful political or business figures. The chairman of SAPETRO is General Theophilus Danjuma, a former Minister of Defence and Chief of Army Staff.

[Daily Independent]

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