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Oil blocks: Indigenous firms, others to pay $11.5bn

By on May 9, 2014

Indigenous oil exploration and production firms as well as their foreign counterparts would have by the end of the year paid $11.5bn for oil assets being divested in Nigeria by Shell, Total, Agip, ConocoPhillips, Eni and other international oil companies operating in the country.

The Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, said this in a paper titled: ‘Asset divestment in Nigerian oil & gas industry: Opportunities and challenges’, made available to our correspondent on Wednesday.

She recalled that  the IOCs operating in Nigeria began divestment from onshore and shallow-water assets in the Niger Delta region about four years ago, adding that the reasons for the spate of divestments was because the oil majors considered the assets as less profitable.

The minister explained that Shell, Total and Eni initiated the divestment programme in 2010, when they offered for sale their combined 45 per cent stake, which resulted in the sale of eight Oil Mining Licences to indigenous and smaller exploration companies by the end of 2012.

She noted that assets worth about 2.2 billion barrels of oil equivalent of hydrocarbon reserves had already be divested by the IOCs, with a corresponding monetary value of at least $5bn.

The companies, which took over the assets include Shoreline Power and Heritage Oil (Shoreline Natural Resources), which acquired OML 30; Petrolin, Niger Delta Exploration & Production and Walter Smith Petroleum (ND Western), which bought OML 34; Eland Oil and Gas and Starcrest Nigeria (Elcrest), which took over OML 40; as well as  Nestoil, Aries Energy, VP Global Limited and Kulczyk Oil Ventures (Neconde), which acquired OML 42.

Others are Afren and First Hydrocarbon Nigeria, which acquired OML 26; and Platform Petroleum, Shebah Petroleum and Maurel and Prom (Seplat), which acquired OML 4, 38, and 41.

With about $5bn already in the pockets of the IOCs, the minister said the figure might increase to $11.5bn by the end of 2014 with indigenous companies playing a significant role.

Alison-Madueke said, “The IOCs operating in Nigeria at the moment have divested assets worth about 2.2 billion barrels of oil equivalent of hydrocarbon reserves (working interest) at an estimated corresponding monetary value of at least $5bn.

“The divestment campaign was highly competitive and attracted interest from a number of indigenous and foreign companies. By the end of this year, the total number of blocks that are likely to be divested is estimated to exceed 20, with not less than 4 billion boe and a monetary value of about $11.5bn.”

The minister said the IOCs’ divestments in Nigeria signified a shift in their strategy towards the offshore, which now accounts for at least 60 per cent of the country’s total production.

She gave an assurance that the spate of divestments would not lead to a crisis in the nation’s oil and gas industry, saying the divestment campaign was changing the onshore corporate landscape and creating material brown-field opportunities for upstream players looking to enter the Nigerian upstream space.

She explained that the divestment of assets had inadvertently become key to the success of the government’s local content policy in the upstream sector.

Alison-Madueke, however, gave an assurance that indigenous independents could take over spare capacities that had been shut in by the IOCs.

She said, “The indigenous Nigerian companies have been presented with the opportunity to develop local operatorship capacity as well as boost local production, and consequently grow into major upstream players.

“Today, local Nigerian companies own majority of blocks sold by the IOCs, with the likelihood of an increase in the next few years, thereby, creating new opportunities for local contractors and their respective financiers.”

 

 

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