‘Why IOCs may continue to divest their assets in Nigeria’

• Petroleum Engineers decry lack of clarity, uncertainty in nation’s oil sector
• Say delay in oil licensing round deprive sector of new assets

About 64 years after commercial oil discovery in Oloibiri Oilfield, Society of Petroleum Engineers (SPE) yesterday, in Abuja, stated that the current wave of divestment hitting the nation’s oil and gas industry was necessary to allow smaller entities contribute to economic activities, in areas that have become less attractive to international oil companies (IOCs).

Speaking ahead of the yearly, Oloibiri Lecture Series and Energy Forum (OLEF), expected to hold later this week, Chairman SPE Nigeria Council, Joseph Nwakwue, however noted that driving force for the divestment included lack of clarity as well as uncertainties.

Also decrying the delay in licensing round, with no new assets being put in the market in about 13 years, Nwakwue stressed that the implications are not only affecting government, who would have earned revenues but the entire industry as the development increases the barriers to entry.

Nwakwue also listed the growing insecurity in the country as a factor that could trigger divestment, adding that the cost of doing business in the country has risen due to security challenges as IOCs stake a lot of resources in performing basic activities in the fields.

“This state of affairs, alongside other drivers, has birthed a budding secondary market for assets. We think it’s about time to set clear guidelines (technical, commercial and regulatory) for this secondary asset market, hence, our decision to use our major policy platform (The Oloibri lectures) to bring all the players (policy, regulatory and commercial authorities) together to discuss this issue,” he stated.

While most of the IOCs have expressed interest in divesting their assets in Nigeria, Nwakwue said the development is never a vote of no confidence in the country.

Nwakwue however stated that while the development was normal in business environment, the rules that lead to seamless divestment are not clear in the country.

“It is a good thing that the secondary asset market is developing. But that market must have rules. All the players need to clear what the rules are. We need to clearly understand the regulation for the secondary market,” he stated.

According to him, the maturing nature of the Niger Delta as well as scarcity of asset in the nation’s oil and gas sector have created barrier to entry and trigger divestment.

Nwakwue said the oil majors, while looking to optimize their investment may not pay attention to mature basins like the Niger Delta, therefore they would consider divestment to boost their global portfolio.

To him, “The uncertainty occasioned by the delay in PIB has been a huge blow to our competitive position. It is clear as reserves and output has stagnated and investment levels have dropped to record lows. It has really been a wait-and-see situation.

“The industry does a better job with geologic and project development uncertainties than with fiscal uncertainty. Nigeria must act to ensure clarity and reduce the uncertainty so we can get on with our business.”