Divestment of oil and gas assets in Nigeria need not be complex and protracted

For years now, Nigeria has witnessed a flurry of divestments of international oil companies (IOCs) from their onshore and shallow water assets in the Niger Delta. The pace of the divestment is accelerating. On May 3, 2024, the regulator of the country’s upstream oil sector announced that international oil companies, including Shell Petroleum Development Company, Nigeria Agip Oil Company, Mobil Producing Nigeria Unlimited, and Equinor, were set to divest their investments in a total of 26 oil blocks in Nigeria and, in virtually all of the cases, to indigenous oil firms.

According to the regulator, “a total of 26 blocks are proposed to be divested. These blocks have an estimated total reserve of 8.211 million barrels of oil, 2,699 million barrels of condensate, 44,110 billion cubic feet of associated gas, and 46,604 billion cubic feet of non-associated gas. This is a significant contribution to the nation’s hydrocarbon resources.”

“While some see the divestments as the beginning of the end of the involvement of the IOCs in fossil fuel activities, others have a more realistic view of the transition we are seeing.”

According to a Wood Mackenzie report, divestments in Nigeria since 2010 have totalled $21 billion, with a pending $1.2 billion ExxonMobil sale. Some of the notable divestments in Nigeria in recent years are:

Shell’s divestment of its operated Joint Venture (JV) licences held by its Nigerian onshore subsidiary, the Shell Petroleum Development Company (SPDC), to Renaissance, a consortium of five companies comprising four Exploration and Production (E & P) companies based in Nigeria and an international energy group. This includes a 30% interest in its 19 oil mining leases (OMLs). The completion of this transaction is subject to approvals by the Federal Government of Nigeria (FGN).

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Mobil Producing Nigeria Limited’s (MPNU) divestment of its entire share capital from Exxon Mobil Corporation to Seplat Energy.

Most recently, TotalEnergies indicated interest in divesting its 10 percent stake in its onshore operations with SPDC to indigenous buyers following SPDC’s divestiture in January.

Subject to regulatory and contractual approvals, Equinor Nigeria Energy Companies (ENEC) divested its 53.85 percent interests in OML 128, and its 20.1 percent interests in the Agbami oil field operated by Chevron, to Chappel Energies, an indigenous firm.

While some see the divestments as the beginning of the end of the involvement of the IOCs in fossil fuel activities, others have a more realistic view of the transition we are seeing. They believe that the oil companies are fleeing the ancient troubles associated with operating in increasingly militant communities in the Niger Delta, where their assets have come under incessant attacks by youths and oil thieves in equal measure.

Today, Nigerians are asking one pertinent question: should such oil and gas divestments that we see be this protracted and difficult? The answer should be no, but in Nigeria everything is made complex and complicated to sustain their rentier culture, which has bedevilled the Nigerian economy.

At a recent industry dialogue on divestments by IOCs in Abuja, the Chief Executive, Nigeria Upstream Petroleum Regulatory Commission, Gbenga Komolafe, appeared more concerned about the need “to give insight and guidance, as well as consider due diligence and interrogation on compliance with the laws and processes that govern the proposed divestment of oil and gas assets by international oil companies to indigenous companies.”

While not abandoning this goal, the regulator should instead be more concerned about the requirement for speedy completion of the transactions, given the huge potential that this will have in boosting oil production in Nigeria.

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It is unacceptable that one aspect of President Bola Tinubu’s Independence Day address that caught attention was his mention of the imminent approval of the ExxonMobil divestiture by the NUPRC. It’s surprising that a private company’s transaction should become a matter of national importance in a presidential broadcast, as this demonstrates failure in our processes. The ExxonMobil divestment and the delayed approval for a similar move by Shell highlight a broader issue: the divestment approval process for gas and oil assets in Nigeria is often too slow and unnecessarily complex.

At its core, this is a private sale. A routine transfer of interest that should not require celebratory mention in a national address. Yet, the delays have made it a milestone. While regulators must ensure buyers are qualified and capable, it’s equally important that the process doesn’t drag on for so long that it becomes a national talking point. Approval delays signal inefficiency; they damage investor confidence and deter potential investments for a nation that is desperate for inward flows. These delays impede much-needed capital injections, hinder production growth, and ultimately affect Nigeria’s revenues. The longer the process, the more it reflects poorly on Nigeria as a business-friendly environment. Investors prefer clear and predictable processes, not those filled with bureaucratic delays and corruption risks. While the current government’s efforts to expedite some transactions are commendable, there’s still room for improvement, especially with the expected uptick in M&A activity in the oil and gas sector.

This dynamism can be positive but only if we streamline our processes. To improve, we should first simplify and standardise approvals by creating a road map, leveraging technology to cut through red tape. Secondly, we should increase transparency with straightforward and accountable mechanisms that reduce corruption risks. In addition, Nigeria must enhance stakeholder engagement by fostering dialogue between government, industry, and communities to align interests long before the IOCs finally abandon the assets. Finally, Nigeria should invest heavily in improving regulatory capacity, ensuring faster, more effective approvals, as well as maintaining political neutrality and keeping the process consistent, technical, and predictable. Nigeria has a duty to continue to make the divestment process more efficient.

Building upon the concerns of many, an international researcher, Prof. Rick Steiner of Alaska (USA), supported by the Centre for Research on Multinational Corporations (SOMO), conducted a study on divestment and decommissioning in the Niger Delta. His findings have been published in the research report “Just Transition: Reforming Oil Industry Divestment, Decommissioning, and Abandonment in the Niger Delta, Nigeria.” Based on the recommendations of this report and drawing on previous research, Niger Delta civil society organisations are publishing today ‘The National Principles for Responsible Oil Industry Divestment’ and advocating for transformative changes to render the divestment process inclusive, transparent, and sustainable. The principles include: All oil industry divestment applications should be publicly noticed at least 90 days prior to submission to the Federal Government of Nigeria. It is imperative to recognise the urgent necessity for devising strategies to manage the industry’s decline responsibly.