In a significant development in Nigeria’s oil and gas industry, the Nigerian National Petroleum Company (NNPC) Limited has announced the signing of a settlement agreement that paves the way for ExxonMobil’s divestment of its stake in Mobil Producing Nigeria Unlimited (MPNU) to Seplat Energy Plc.
This agreement, involving MPNU, Mobil Development Nigeria Inc., and Mobil Exploration Nigeria Inc., marks a crucial step towards resolving a long-standing divestment issue.
“Settlement agreement between NNPC Ltd. and Mobil Producing Nigeria Unlimited, Mobil Development Nigeria Inc., and Mobil Exploration Nigeria Inc. signed regarding the proposed divestment of a 100% interest in Mobil Producing Nigeria Unlimited to Seplat Energy Offshore Limited,” NNPC stated.
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This development follows a directive from President Bola Tinubu, issued on May 28, to the Ministry of State for Petroleum Resources (Oil) and NNPC, urging them to address the divestment issue that has stalled the Seplat and ExxonMobil deal for over two years.
Tinubu assured ExxonMobil’s delegation that the federal government was committed to resolving the divestment issues between NNPC and Seplat Energy.
Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, emphasized the urgency of the matter, stating, “Mr. President has given a clear directive to the NNPC GCEO and I to resolve the issue of divestment, and we are doing whatever we can to achieve that.”
Lokpobiri also highlighted the economic repercussions of the stalled deal, revealing that Nigeria lost $34 billion over the past two and a half years due to a significant decline in production from the assets being divested by ExxonMobil to Seplat Energy. Production from these assets plummeted from 600,000 barrels per day (bpd) to the current 120,000 bpd, resulting in a shortfall of 480,000 bpd. At a conservative $80 per barrel, this decline amounted to a $34 billion loss.
The Backstory: Regulatory Challenge
In 2022, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) rejected President Muhammadu Buhari’s consent for Seplat’s acquisition of ExxonMobil’s shallow water assets. The rejection by the upstream regulator came just hours after presidential spokesperson Femi Adesina announced that President Buhari had approved the transaction.
The NUPRC, in a statement shared with the media, revealed that the deal required regulatory approval rather than presidential approval, notifying ExxonMobil that the deal had been declined.
“The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) affirms that status quo remains in respect of ExxonMobil/Seplat Energy share acquisition. Responding to media enquiries on latest development about the transaction, the Chief Executive of the NUPRC Engr. Gbenga Komolafe clarified that the Commission in line with the provisions of the Petroleum Industry Act 2021 is the sole regulator in dealing with such matters in the Nigerian upstream sector,” said NUPRC chief executive Gbenga Komolafe.
“As it were, the issue at stake is purely a regulatory matter and the Commission had earlier communicated the decline of Ministerial assent to ExxonMobil in this regard. As such the Commission further affirms that the status quo remains,” he added.
This contradictory development, which pitted the federal government against its regulatory agency, stirred a backlash from the Nigerian public, highlighting a perceived lack of synergy between the presidency and federal agencies.
Adesina’s statement indicated that Buhari had approved the transfer in his capacity as Minister of Petroleum Resources, emphasizing the transaction’s extensive benefits to Nigeria’s energy sector and economy.
The Legal Tussles
The sale of Mobil Producing Nigeria Unlimited became controversial after ExxonMobil entered a Sale and Purchase Agreement with Seplat Energy. The agreement aimed to enable Seplat Energy to scale up production by 95,000 barrels of oil a day from assets in a joint venture with NNPC.
However, the transaction was halted following a court ruling obtained by NNPC, which argued that it should be given priority consideration in the sale of ExxonMobil’s oil blocks.
The July 6 2022 decision of the High Court of the Federal Capital Territory to block the sale included a share sale and purchase deal struck with Seplat in February.
NNPC sought a court declaration of conflict over the “interpretation of preemption rights under their Joint Operating Agreement (“JOA”) and order NNPC and MPNU to arbitration as required by the JOA.” In response, Seplat Energy argued that it was not a party to the lawsuit and insisted the share purchase agreement remained valid.
However, with the recent signing of the settlement agreement, Nigeria stands to significantly boost its crude oil production. This development could add at least 700,000 barrels per day (bpd) to the current daily production volume, potentially reaching about two million bpd before the end of the year. This increase in production would not only help recover some of the economic losses incurred over the past few years but also strengthen Nigeria’s position in the global oil market.