Nigeria has finally approved Exxon Mobil Corp.’s $1.3 billion sale of its onshore oil and gas assets to the local energy firm Seplat Energy Plc, marking the end of a prolonged two-year delay, Bloomberg reports.
The move, however, comes in contrast to the rejection of a similar deal by Shell Plc, signaling a mixed stance towards international oil companies seeking to divest their onshore assets in the West African nation. The contrasting outcomes underline the government’s evolving approach to foreign investment in the oil sector, amidst rising environmental concerns and a push for local ownership.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) confirmed the approval of the Exxon deal on Monday, with its Chief Executive Officer, Gbenga Komolafe, making the announcement during a conference in Abuja, Nigeria’s capital.
President Bola Tinubu, who also serves as the Minister of Petroleum, had hinted at the approval during his Independence Day speech on October 1, promising that it would be finalized within days. The decision allows Exxon Mobil to divest its onshore interests and focus on expanding its offshore operations, a strategy that aligns with the company’s recent announcement to potentially invest up to $10 billion in offshore projects in Africa’s largest oil-producing nation.
For Seplat Energy Plc, the acquisition represents a significant opportunity, with the potential to nearly quadruple its oil production to over 130,000 barrels per day. The company, which has positioned itself as a leader in Nigeria’s transition towards local ownership and control of the oil sector, will significantly strengthen its presence in the upstream segment through this deal.
Seplat has previously stated that acquiring Exxon’s assets aligns with its growth strategy of increasing production capacity and expanding its operational footprint.
The approval of Exxon’s asset sale is seen as a win for Seplat and a boost to local participation in Nigeria’s energy sector. However, the situation stands in stark contrast to Shell’s experience. The Anglo-Dutch multinational has faced ongoing hurdles in securing government consent to sell its onshore oil and gas assets to Renaissance, a consortium of Nigerian firms. The deal, valued at over $1.3 billion, was expected to facilitate Shell’s long-desired exit from onshore operations, which have become increasingly challenging due to environmental controversies and community grievances over oil spills.
For years, Shell has grappled with the fallout from frequent oil spills, which have led to widespread pollution in the Niger Delta. Local communities have accused the company of negligence, blaming it for the environmental degradation that has severely impacted their livelihoods. Shell, however, has often attributed these incidents to vandalism and oil theft, which result in damage to infrastructure and subsequent leaks.
The company’s desire to divest its onshore assets is largely driven by these escalating operational difficulties and the shifting dynamics of Nigeria’s energy industry, where international oil companies are gradually pivoting towards offshore investments.
The Renaissance consortium, which comprises ND Western, Aradel Energy, First Exploration & Petroleum Development Company (First E&P), Waltersmith Petroman Oil Limited, and Petrolin, had emerged as the local bidders for Shell’s assets.
Tony Attah, the CEO of Renaissance and a former Shell executive with three decades of experience in the oil and gas industry, was optimistic about concluding the transaction. Nevertheless, the failure to secure regulatory approval represents a significant setback for the consortium and raises questions about the criteria influencing government decisions on such asset sales.
Shell’s spokesperson, responding to the development, indicated that the company remains in discussions with the Nigerian government and is working to meet the regulatory requirements necessary to advance the approval process.
The divergence in outcomes for Exxon and Shell is considered a reflection of broader considerations by the Nigerian government. Exxon’s move to bolster its offshore investments seems to align with the administration’s goals of maintaining the country’s position as a major global oil producer while reducing onshore environmental risks. By contrast, Shell’s onshore operations, plagued by oil spills and local disputes, may have been viewed as less desirable for immediate approval.
Furthermore, President Tinubu’s administration, which took office in May 2023, appears keen on shaping a new regulatory environment that emphasizes local ownership and environmental responsibility. The Exxon-Seplat deal aligns with this vision, potentially signaling a shift towards encouraging partnerships that favor indigenous companies. The approval also comes amid Nigeria’s broader push to increase local content in its oil and gas industry, ensuring that a greater share of the sector’s wealth benefits the domestic economy.
