Nigerian Firms Buying Out Foreign Oil Companies

Nigerian oil facility
Crude production facility in Nigeria

AFRICANGLOBE – Three international oil companies (IOCs) – Shell, Total and Eni (Agip) – have raked in $2.569 billion (N411.04 billion) from the sale of a jointly held stake in seven oil blocks within the last two years.

The multinationals were said to have sold a 45-per-cent stake in the seven oil concessions in five transactions.

The oil blocks, which are now operated by the Nigerian Petroleum Development Company (NPDC), the upstream subsidiary of the Nigerian National Petroleum Corporation (NNPC), were acquired by local companies alongside their foreign partners. They are Oil Mining Leases (OMLs) 3, 38, 41, 26, 42, 30 and 34.

Prior to their sale, NNPC was the majority shareholder with 55 per cent equity in the joint venture. Shell Petroleum Development Company (SPDC) was the operator of the joint venture with a 30-per-cent stake; Total Exploration & Production (Nigeria) Limited – 10 per cent; and Nigerian Agip Oil Company (NAOC) – 5 per cent.

But following growing attack on their facilities by militants in the Niger Delta between 2007 and 2009, the IOCs embarked on a divestment programme to sell some of their onshore assets in the region.

With the sale of the blocks by Shell and its partners, reserves of about one billion barrels of oil equivalent (bboe) had been transferred to local operators.

Seplat Petroleum Development Company, in partnership with French-based Maurel and Prom, paid $386 million to acquire OMLs 3, 38 and 41, while First Hydro Carbon Nigeria, alongside AFREN as foreign partners, bought OML 26 for $148 million.

Neconde Energy Limited and its foreign partners, Kulczyk Oil Ventures, paid $585 million for OML 42, while OMLs 30 and 34 were acquired by Shoreline and Niger Delta Exploration and Production Plc (NDEP) at $850 million and $600 million, respectively.

Shoreline was partnered by Heritage, while NDEP acquired its block with the Petrolin Group.

Managing Director, Oando Energy Resources Limited, Mr. Pade Durotoye, who gave the details on the acquisitions at the 19th Africa Oil Week in Cape Town, South Africa, noted that there had been an increase in divestment by the IOCs through bilateral agreements with indigenous companies and government bid rounds.

Durotoye believed that the divestment by the IOCs presented local companies with better opportunities in the upstream oil and gas sector.

He recalled that the Marginal Field Reform Programme of 2001 (which had helped in making this feat achievable), was initiated to encourage IOCs relinquish fields that had proven but undeveloped reserves for 10 years.

According to him, “Favourable terms granted to local companies will make previously non-profitable projects profitable.”

For instance, he pointed out the indigenous tax and royalty rate of 50 per cent, as against the 85 per cent applied on non-indigenous operations; sliding-scale royalties to government driven by production; and sliding-scale over riding royalties to original field owners.

Durotoye disclosed that Oando’s upstream portfolio consisted of nine assets in the Gulf of Guinea, which are at varying stages of production ranging from exploration, development and production.

The nine assets, according to him, are operated in partnership with indigenous and international partners.

He added that it had two assets with current production capacity of 5,000 barrel of oil per day (bpd)

The company’s nine assets include: the Abo field in OML 125; Ebendo field – OML 56; Qua Iboe field – OML 13; Akepo field – OML 90; and Block 5 in the Exclusive Economic Zone (EEZ) of the Democratic Republic of Sao Tome and Principe.

An industry source revealed that the Akepo Field is under development and is expected to hit oil by March 2013, which when combined with the capacity of the other producing assets would put Oando’s production at between 12,000 and 15,000 bpd.