On­shore divest­ment by IOCs on the rise

Daily Trust - - BUSINESS - By Hamisu Muham­mad

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.

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