International Oil Companies (IOCs) must address the issues of abandonment of assets and decommissioning of sites before divesting from the country, the Nigerian National Petroleum Company (NNPC) Limited, insisted yesterday.
The corporation said the IOCs must also demonstrate that they are alive to the ongoing global energy transition process as they divest from oil and gas.
These were some of the conditions set for the companies to meet before divesting from Nigeria.
NNPC Limited Group Managing Director (GMD) Malam Mele Kyari listed the conditions in his remarks at the Fifth Nigerian International Energy Summit (NIES) in Abuja.
Kyari said: “We will work with our partners; we understand the necessity for their investments; we do know that there are issues; we understand that this must take place; but it must also be done in such a way that we are able to deal with issues around abandonment and decommissioning.
“We will also make sure that whatever arrangement that is put in place, will show that we are also alive to the energy transition journey that we have embarked on.”
Six months ago, the NNPC GMD highlighted key guidelines that would guide the evaluation of would-be replacement of divesting partners in the oil and gas industry.
Speaking at the Nigeria Annual International Conference and Exhibition in August last year, Kyari said learning from previous experiences, the NNPC developed requisite Divestment Policy that will provide clear guidelines and criteria for divestment of partners’ interest in all its Joint venture and production sharing contracts arrangements.
To sustain a prosperous business environment, he said the NNPC would pay particular attention to abandonment and relinquishment costs; severance of operator staff; third party contract liabilities; and competency of the buyer.
On the wave of divestment of IOC’s from the upstream sector, the NNPC boss told participants that while the country understands the right of companies to freely divest, it was critical to do the right thing to avoid disruption.
He further said that issues and obligations related to abandonment and decommissioning must be fully addressed and discharged in line with global best practices, regulations, convention, and law.
Kyari said: “Companies that are divesting, they are leaving our country literarily and that’s the way to put it. But they are not leaving because opportunities are not here, these companies are shifting their portfolios where they can add value and not just that but where they can add to the journey of net carbon zero emission.
“We understand this very perfectly. But also, we cannot afford to realize that this country must benefit from the realities of today.”
He confirmed NNPC’s partnership with allies to ensure the attainment of Nigeria 2060 target for carbon neutrality, adding that the Corporation was adopting various strategies towards the attainment of a carbon-neutral economy without compromising the viability of the industry.
He listed the adoption of low carbon technology across operations; deepening natural gas utilisation to reduce energy poverty – via the National Gas Expansion Programme; and intensifying the use of petrochemicals as some of the measures taken by the national oil company.
He also stated that the NNPC was making efforts in the gas sector through the NLNG Train 7, AKK, OB3 and ELPS among others.
Kyari added that the expansion and integration of domestic/regional power grids and growing the domestic gas markets via Autogas/Compressed Natural Gas/Liquified Petroleum Gas to power vehicles remain key to revitalising the industry.
According to him, the passage of the PIA remained a key enabler and laudable reform in the domestic energy sector.
Within the last decade, the Nigerian upstream sector had witnessed significant transactions involving the sale of interests in oil licenses.
Some of these transactions were concluded in the time of high oil prices and in some instances, involved asset transfers from IOCs with long years of exploration and production activities to smaller indigenous companies with limited experience in the upstream sector.
The commissioning obligations and the potential liabilities were also transferred to the new holder of the licence.
In August last year, Shell launched divestment of its 30 per cent stake in Shell Petroleum Development Company of Nigeria Limited subsidiary.
Few days ago, Seplat Energy Plc announced an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited from Exxon Mobil Corporation, Delaware for $1.28 billion.
The transaction entails the acquisition of ExxonMobil Nigeria’s entire offshore shallow water business.
According to the deal, ExxonMobil Nigeria’s shallow water business is an established, high-quality operation with a highly skilled local operating team and a track record of safe operations, producing 95 kboepd in 2020 (92 per cent liquid).
Shell Petroleum Development Company of Nigeria and ExxonMobil are faced with huge remediation costs over their failure to properly decommission and cap their oil and gas assets across the Niger Delta, especially those sold to Nigerians.
The situation has created severe environmental risks and pollution to host communities in the oil-rich Niger Delta.
