FG lists conditions for oil majors’ divestment from upstream operations
As oil majors unveil their divestment plans in Nigeria, in line with the energy transition agenda, the Nigerian National Petroleum Corporation (NNPC), yesterday, listed conditions for their exit plans to be granted.
According to the NNPC, special attention would be paid to abandonment and relinquishment costs; severance of operator staff; third party contract liabilities; competency of the buyer; post purchased technical, operational, and financial capabilities especially in the era of activist investor’s sentiments against the funding of fossil fuel projects and alignment with Nigeria national strategic interest.
The Group Managing Director of the NNPC, Mele Kyari, yesterday, at the 2021 edition of the Nigeria Annual International Conference and Exhibition (NAICE) organised by the Society of Petroleum Engineers (SPE), in Lagos, announced the government’s plans to develop a comprehensive divestment policy that would provide clear guidelines and criteria for divestment of partner’s interest.
According to Kyari, while the NNPC partners reserve the right to divest their interests, the national oil company also has a duty to provide clear-cut guidelines and criteria for such divestment to guarantee a win-win situation for all parties.
He said: “We are seeing a wave of divestment by oil majors operating in Nigeria. NNPC as a national oil company cannot stop partners from divesting their interest, even though it creates a challenge for us in ensuring that we get the right and competent investors to take the position and add value to the assets.
“NNPC will ensure that Nigeria’s National strategic interest is safeguarded, by developing a Comprehensive Divestment Policy”.
According to the Kyari, the NNPC will, in subsequent deals, tweak its rules of engagement by making clear distinctions between divestment of shares and operatorship agreements under various joint operating agreements, while leveraging its rights of pre-emption as well as evaluating the operational competency and track records of new partners.
Kyari reckoned that the imperatives of energy transition and the influence of activist investors on the global energy industry are making oil and gas companies diversify their portfolio to low-carbon investments by whetting the appetite for investment in cleaner energy sources like wind, solar, hydrogen, natural gas, and biofuels.
He added that the new energy sources have obvious wider business implications on the oil and gas industry.
The NNPC boss advised oil-dependent economies to brace for the bumpy ride ahead, as the global transition to non-fossil sources of energy will mean declining revenue, foreign exchange, and weaker funding of projects particularly in the context of green finance and activist investor’s action on the boards of major oil companies and global financial institutions.
He, however, assured that the NNPC would play a key role in the global transition to low-carbon energy in the near future by latching on Nigeria’s huge natural gas reserves; which has become the greatest enabler in making the switch over.
“We are deepening natural gas utilization under the National Gas Expansion Programme (NGEP) to earn more carbon credit and create a net-zero carbon environment in line with our drive of becoming an energy company of global excellence.”
“NNPC is currently extending natural gas infrastructure backbone through the OB3 and AKK gas pipelines to deepen domestic gas utilization, support industrial growth and job creation.
Our goal is to take the right quantities of gas to every part of Nigeria at the right quality and the right price.
“NNPC is leveraging technology to achieve better systems and processes optimization to support performance, accountability, and value creation that exceeds the simple fulfillment of our business mandates”, he stated.
Earlier, the Chairman, SPE, Nigeria Council, Mr. Olatunji Akinwunmi, said without a doubt, the energy landscape is evolving very rapidly, with an increasing share of non-petroleum energy sources and new frontiers of energy solutions being explored, especially in the more advanced economies.
He stated that the future of the demand for oil and gas and relatedly the supply of energy are expected to be based on the tripod as captured in our conference theme.
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