French oil giant TotalEnergies has found a buyer for its onshore oil assets in Nigeria. The company plans to sell its stake to the indigenous oil firm, Chappal Energies, for a sum of $860 million.
This transaction, expected to close by December 31, 2024, is part of TotalEnergies’ strategic realignment towards more secure offshore investments, away from the increasingly challenging onshore operations.
According to Bloomberg, the divestment deal encompasses a 10% stake in 15 oil mining leases, along with the ownership of the Forcados and Bonny export terminals. These terminals are pivotal components within the Shell Petroleum Development Company (SPDC) joint venture.
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The financing for Chappal Energies’ acquisition will come from an entity associated with TotalEnergies or a financial institution chosen by the French company. Additionally, trading firm Trafigura and a consortium of global banks are contributing funds to support this transaction.
This move by TotalEnergies is not an isolated incident but part of a broader trend among International Oil Companies (IOCs) divesting from Nigeria’s onshore sector.
Earlier this year, TotalEnergies’ CEO, Patrick Pouyanne, announced the company’s intention to divest its minority stake in the Nigerian onshore oil joint venture during a financial results presentation. Pouyanne highlighted the growing operational challenges and security concerns in the Niger Delta as key reasons for this decision.
“We want to divest our share of SPDC, and we are looking to reshape the portfolio. Producing this oil in the Niger Delta is not in line with our [Health, Security, and Environmental] policies; it’s a real difficulty,” Pouyanne explained.
Despite its divestment plans, TotalEnergies aims to retain its Nigerian gas assets, which are considered crucial for the company’s future expansion in liquefied natural gas development.
Nigerian Oil Sector Challenges
TotalEnergies’ decision to exit the onshore oil segment is influenced by persistent issues in the Niger Delta, including oil spills, theft, sabotage, and operational difficulties. These challenges have led to expensive repairs and prolonged legal battles, undermining the profitability and sustainability of onshore operations.
The company is seeking to focus on offshore fields as a way of creating a more stable and secure environment to continue its operations in Nigeria.
The Wider Trend of IOCs Divestment
TotalEnergies is not alone in this strategic shift. Other major IOCs have also been divesting from Nigeria’s onshore sector. In May 2024, Shell announced the sale of its 30% stake in SPDC to a consortium primarily composed of local companies for up to $2.4 billion. Similarly, ExxonMobil and Norway’s Equinor have also sold their assets in Nigeria in recent years, opting to concentrate on more profitable and less risky ventures elsewhere.
This wave of divestment comes at a critical time for Nigeria, which is grappling with the need to boost its oil production to support economic growth and stability.
However, the IOCs exits, currently marked by TotalEnergies’ exit from the onshore sector, presents both challenges and opportunities for Nigeria. Energy experts say on the one hand, it denotes the need for the country to address the security and operational issues to retain and attract investment in its oil sector. On the other hand, it provides an opportunity for indigenous companies like Chappal Energies to step up and take a more prominent role in the industry.