The planned asset sales by international oil companies to local operators are expected to test President Bola Tinubu’s position as minister of petroleum and his drive to make the country’s oil and gas industry more attractive for investments.
British energy giant Shell announced on Tuesday that it had agreed to sell its Nigerian onshore oil and gas subsidiary, the Shell Petroleum Development Company of Nigeria Limited, to a consortium of five companies known as Renaissance for a total of $2.4 billion. The consortium is made up of four local operators — ND Western, Aradel Energy, First E&P and Waltersmith – and an international firm, Petrolin.
Seplat Energy has been waiting for regulatory approval for its purchase of ExxonMobil’s onshore assets for $1.3 billion since February 2022. Oando recently secured a $800 million loan for the purchase of 100 percent of the shares of Nigerian Agip Oil Company Limited.
The Petroleum Industry Act, signed into law in August 2021 by the then president Muhammadu Buhari, introduced a new requirement that sales or transfers of oil licenses can only proceed after the oil minister has been advised by the regulator.
Experts said the swift approval of Tinubu while ensuring due process and transparency is crucial to attracting new investment and boosting local participation.
The African Energy Chamber (AEC) urged the federal government to take a fast-tracked approach to approving Shell’s asset sale, saying delaying the transaction will only impact the growth of the industry.
“The AEC strongly urges the government of Nigeria to approve the transaction, thereby transferring the onshore assets into the capable hands of the local consortium,” said NJ Ayuk, executive chairman of the AEC. “Local Nigerian companies will lead the next phase of the country’s energy industry transformation and we look forward to the success the consortium will have in the onshore market.”
Uduimoh Itsueli, a former chairman of the Nigerian National Petroleum Company and chairman of Dubril Oil Company Ltd, told BusinessDay in a recent interview that the Nigerian oil industry would be taken over by independents, whether they are Nigerian or foreign independents, because the IOCs are not coming back.
“So, we need to craft the policies so that it can encourage these ones who do not have the same clout as the IOCs. We need to change how we do business. We need to grow our own independents,” he said.
Experts who spoke to BusinessDay said the delay in granting approvals and taking decisions, a constant feature of the Nigerian government’s engagement with oil sector operators, would dampen investment inflow.
Niyi Fagbemle, senior project manager at Sofidam Capital, said there is a need for the federal government to allow the investors to divest just the same way they invested in the country.
He said there should not be a reason for the government to delay the investors, adding that delays would create a negative image for the country.
“Excessively lengthy approval processes could deter local and international investors, further jeopardising the sector’s health. The president needs to act fast,” a senior source who pleaded anonymity said.
Analysts said the immediate past president’s leadership of the oil sector was marked by a slow pace of decision making which needlessly delayed regulatory approvals and ended up frustrating operators.
They said the Buhari years saw business regulations and even critical appointments examined through the narrow lens of ethnicity and policies, and sometimes the counsel of the least informed or qualified but with better access to the president holding sway.
The net effect of Buhari’s leadership of the oil sector is the worst oil production decline in history as well as the quickest flight of investment capital, they added.
Government officials who shout themselves hoarse over ease of doing business, operators say, behave as if they get paid by how thorough they are in frustrating businesses.
Operators say the tone of communication by government regulators and lawmakers with oversight over committees, many with scant knowledge of the sector they pretend to superintend, is often punitive, laced with threats.
Some operators report an aversion for private companies reporting huge profits, forgetting that when private companies succeed, the economy gets bigger as they employ more people, pay more taxes, get involved in more corporate social responsibility and relieve the government of some burden to focus on more urgent areas.
“The decisions made by the Tinubu administration in the coming months regarding the approval of oil major exit deals will be seen as a test of its business acumen and its commitment to creating a stable and predictable investment environment,” Fagbemle said.
