On IOCs divestment from Nigeria | Dailytrust

On IOCs divestment from Nigeria

NNPC
NNPC

At the recent Nigeria International Energy Summit (NIES2022) which was  held in Abuja, the Group Managing Director Nigeria National Petroleum Company (NNPC), Mele Kyari, stated that International Oil Companies (IOCs) are divesting from Nigeria to meet net-zero commitments and shift their investment portfolios.

“Companies are divesting’’ he said. “They are not leaving because opportunities are not here but because they are shifting their portfolios where they can add value and not just that, but where they can add to the journey towards carbon net-zero commitment.’’

There are five IOCs operating in Nigeria – Shell Producing Development Company (SPDC), TotalEnergies, Chevron, ExxonMobil and Eni. They are collectively responsible for producing 45 per cent of oil and 40 per cent of gas in the country. These figures are sourced from the energy report of a national newspaper in Nigeria.

Reports indicate that most of the assets targeted for divestment by the IOCs are the onshore properties located mostly on the shallow waters on land. These are the so-called marginal fields which are mostly relatively low in the quantity of crude oil found in them.

Though the reason given for the divestment as stated by Kyari has to do with the need by the IOCs to shift their investment to areas compliant with the requirements of the global energy transition standards, it must be stated that the IOCs have been facing a lot of operational challenges in the areas they are divesting from. These challenges have to do with pipeline and facility vandalisation, community restiveness, sabotage, oil theft, insecurity and environmental issues.

Thus we cannot but factor in these untoward developments as part of the reasons why the IOCs have been gradually divesting from the country for some time now.

A report in the Africa Report, a journal on African politics and business, stated that in the past 11 years the IOCs have divested a total of 26 Oil Mining Licences (OMLs) in the Niger Delta Basin with more set to be sold.

Government must view this development with all seriousness given the fact that the Petroleum Industry Act (PIA) which was recently passed by the National Assembly and signed into law by President Buhari, made far-reaching provisions which hope to open up Nigeria’s oil and gas industry to encourage local and foreign investors alike. Of particular interest to the IOCs, which have to bear the brunt of the disruptions in their operations, is the provision in the PIA which imposes duty and responsibility to protect oil and gas assets on host communities. Specifically, Clause 257 of the act stipulates that any community that fails to protect oil assets in its community from vandalism will be held accountable for the repairs.

Against this background, it is worrisome that the IOCs that have been an integral part of the Nigerian oil and gas sector for decades would seek to divest from Nigeria at a time that the sector patently needs them to partner with the country into the next important stage of the development of the sector.

This is more so as the Domestic Oil Companies (DOCs) which have moved to purchase these assets being divested by the IOCs, would still require technical support to operate them. Following the purchase of the assets divested by the IOCs, the DOCs should consider going fully into enlarging the scope of their operations to cover the upstream, midstream and downstream value chain of the oil and gas sector.

We must also state that our oil and gas industry is still far from operating at the level it should be; our refineries are still not operating optimally to meet our domestic requirements, a fact exemplified by the current fuel scarcity which has been with us for weeks now. Also, our domestic gas utilization is still not up to scratch with the price of the commodity out of reach of most households.

That is why we cannot agree more with a former Minister of State for Petroleum, Ibe Kachikwu, who called on government to engage the IOCs on why they are leaving the country at this critical time. Part of the engagement should be to leverage on the long-term partnership developed with the IOCs to ensure that the break, if it comes to that, should not be abrupt but over a transition period during which some of the gaps in the running of the industry would be mastered by our domestic operators.

Government should also view this as a wake-up call on how the country’s oil and gas industry is being run. In doing this, it must take stock of developments in the global oil and gas industry in order to draw some valuable lessons for the way forward. We should note that hydrocarbon finds are increasing around the world and the IOCs are taking advantage of these developments to move to areas with more favourable operating and investment environment.

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