Onshore divestment by IOCs on the rise
There are growing concerns over the rise in the level of divestment in Nigeria’s Delta region by the international oil companies (IOCs).
Records indicated that before the end of this year, about 22 oil blocks mostly in the onshore basin of the Niger Delta, will be sold by the IOCs as part of their efforts to transfer their resources to other lucrative regions and increase their offshore investments.
The major international players in Nigeria’s oil and gas sector are Shell, ExxonMobil, Chevron, Total, and Eni.
According to the United States Energy Information Administration (EIA), IOCs participating in onshore and shallow water oil projects in the Niger Delta region became affected by the instability in the region, forcing a general trend for IOCs to sell their interests in onshore oil projects.
Another concern by the IOCs is the uncertainty over the long awaited Petroleum Industry Bill (PIB) which seeks to increase governments take in the oil resource.
Some of the already divested blocks include Oil Mining Licences (OMLs) 3, 38, 41, 26, 30, 34, 40 and 42. There are also ongoing deals such as: OMLs 60, 61, 62, 63, 131 and OPL 214.
Already, the IOCs have offered the following blocks for sale: OMLs 13, 16, 71, 72, 52, 53, 55, 83 and 85.
Data compiled by the Oil and Gas Year 2013 released recently indicated that at the end of 2013, exploration and production firms in Nigeria have sold, at least, 300,000 barrels of oil equity.
OGY 2013 report said: “The flight of OICs from all but the most lucrative of onshore assets has left a growing inventory of underperforming onshore acreage, all of which has passed to the hands of the staterun Nigeria National Petroleum Corporation’s (NNPC) subsidiary NPDC.”
In 2013, there were serious supply disruptions, mostly due to pipeline damages associated with oil theft, which resulted in the shut-in of the Trans Niger Pipeline and Nembe Creek Trunkline and force majeure on the shipments of multiple crude grades for several times.
The US energy agency said from January to November 2013, crude oil production averaged slightly.
The US agency said the PIB has also prompted questions about the commercial viability of deepwater projects under the proposed changes to fiscal terms.
Deepwater projects have typically included better fiscal terms than onshore/shallow water projects, but the PIB, if passed into law, is expected to increase the government’s share of production revenue, particularly during periods of high oil prices.
Officials in Abuja, however, have described the ongoing divestment by IOCs as a welcome development.
Andrew Yakubu, the Group Managing Director of NNPC, recently, has dismissed insinuations that the divestments from certain onshore oil blocks by some international oil companies (IOCs) could lead to crisis in the nation’s oil and gas industry.
According to him, the divestments are not only healthy for the oil and gas industry in Nigeria, but will also go a long way in promoting effective indigenous participation in core upstream activities.
He said: “These are not withdrawals in the real sense of withdrawals.”
“The fact is that a number of these IOCs are moving into more challenging frontiers in the deep offshore and are leaving the onshore blocks which they consider less challenging.”
Yakubu said the major players that were divesting have actually been sitting on each of the affected acreage, allowing them to go fallow for years without significant development.
“So, it is only fair for them to release these blocks so that others, especially the indigenous operators, can have the blocks and grow in the upstream business,” he argued.