Nigeria eyes fresh 480,000bpd as NNPC, ExxonMobil sign new deal

Nigeria may increase its daily output of crude oil by 480,000 barrels as a result of a move towards a resolution between ExxonMobil and the Nigerian National Petroleum Company Limited regarding the latter's asset sale to Seplat Energy.

A settlement agreement between ExxonMobil companies in Nigeria and the NNPCL regarding the proposed sale of a 100% stake in Mobil Producing Nigeria Unlimited to Seplat Energy Offshore Limited was confirmed on Thursday.

This occurs just two days after President Bola Tinubu declared he would step in to stop the NNPCL and ExxonMobil fiasco that was impeding Seplat's acquisition of the assets.

Heineken Lokpobiri, the Minister of States for Petroleum, recently stated that Nigeria had lost roughly $30 billion over the previous 2.5 years due to the botched divestment.

The minister voiced worries over Nigeria's daily loss of roughly 480,000 barrels of crude oil as a result of the Seplat/ExxonMobil dispute.

Prior to the crisis starting in 2022, he said the asset was producing about 600,000bpd, and the country was losing millions of dollars every day.

In 2022, ExxonMobil and Seplat Energy announced a $1.6 billion sales agreement whereby Seplat would acquire all of ExxonMobil's shares in the NNPCL.

But just when everyone was expecting the deal to close, a letter from the Nigerian Upstream Petroleum Regulatory Commission dated May 16, 2022,
But just when everyone was expecting the deal to close, the Nigerian Upstream Petroleum Regulatory Commission sent ExxonMobil a letter on May 16, 2022, stating that the NNPCL had exercised its right of pre-emption first refusal on the assets, making the deal unfeasible.

A joint venture's right of pre-emption gives its partners the legal ability to be the first to be given consideration for any planned sales or acquisitions of the venture's assets, should either party decide to trade them off.

The NNPCL reportedly objected to the sale of ExxonMobil's equity to Seplat and insisted on exercising its right of first refusal immediately after, at which point the business allegedly made ExxonMobil an offer exceeding $1.6 billion.

However, a resolution to the crisis appears to be in sight following roughly two years of litigation.

The minister claimed that since the dispute started, the asset's oil production has decreased from 600,000 barrels per day to 120,000 barrels per day.

According to Lokpobiri, the price of a barrel of oil has been averaging $80 for the last 25 months. Multiplying 480,000 bpd by 2.5 years yields approximately $34 billion. If one asset was producing 600,000 barrels, but due to issues we are attempting to fix, production dropped to 120,000 barrels, meaning we lost roughly 480,000 barrels per day. When you multiply it by $80, you get roughly $240 million every day. When you multiply it by 2.5 years, you get over $30 billion. Put in that into our economy today, the dollar will naturally drop. This exchange rate is a matter of demand and supply”.

The NNPCL announced the signing of a settlement agreement, suggesting that the President's intervention had the desired effect.

The energy business announced that it had signed a settlement agreement with Mobil Producing Nigeria Unlimited, Mobil Development Nigeria Inc., and Mobil Exploration Nigeria Inc. concerning the planned sale of Mobil Producing Nigeria Unlimited to Seplat Energy Offshore Limited for a hundred percent of its shares.

Nigeria's meagre oil output is expected to increase by roughly 480,000 barrels if the disputes surrounding the asset's sale to Seplat are resolved.

Seplat responds

Director of External Affairs and Social Performance at Seplat, Chioma Afe, made a hint about this when she called the development a positive step.

In a Thursday interview, Afe mentioned that the energy firm was waiting for approvals to be finalised, especially with the regulators.
Age said, "What Exxon and NNPC announced is a positive outcome and a step in the right direction."

She informed our correspondent that as of Thursday, the company did not have access to the agreement's specifics, and she would not be able to comment on its importance.
"I can discuss what we can infer from that statement, which is that it's a positive move. That was one obstacle. ExxonMobil and NNPC had to join us at the table to sign a document confirming our consent to the divestment. which is fantastic," she said.

Afe revealed that additional steps must be completed, such as obtaining regulatory approvals and the official government stamp, stating, "We are waiting on that."

Speaking of the effects of the resolution, Afe said it would serve to grow the overall business of Seplat.
Regarding the country's economy, she remarked, "What's more important is that it will add to the number (of barrels) the country is seeking to be able to meet our OPEC number; what it will do for the national number." We are very interested in it because it will greatly contribute to the national output.

As of press time, ExxonMobil had not responded to a question from our correspondent.

For more than two years, the divestment agreement between Seplat and ExxonMobil has been inactive.

NNPC blocked ExxonMobil's attempt to sell assets to Seplat on July 12, 2022.
According to the report, NNPC obtained a court ruling that temporarily barred ExxonMobil Corporation from selling Seplat Energy Plc any Nigerian assets.

An Abuja judge had granted NNPC an “order of interim injunction” on July 6, 2022, barring Exxon “from completing any divestment” in a unit that ultimately operates four licenses in Nigeria.
Seplat, a producer based in Lagos, had committed to buying the US oil major's subsidiary in February for a minimum of $1.28 billion.

According to the report, NNPC wanted to revoke the permits and stop the transaction.

On July 5, 2022, NNPC filed a lawsuit against Mobil Producing Nigeria Unlimited, requesting the Federal High Court to declare a preemption rights dispute between the parties or to mandate that they arbitrate the dispute.

Seplat, which was not involved in the legal dispute, stated that it "remains confident that the matter will be brought to a proper conclusion by the law" and that its agreement with Exxon was "still valid."

However, following NNPC's announcement on Thursday, the way might be clear for the deal to be concluded.
With this acquisition, Seplat would gain access to shallow-water assets that Exxon operated in a joint venture with NNPC, adding roughly 95,000 barrels of oil equivalent per day to its daily production.

International oil companies that operate in Nigeria have been selling off significant portions of their portfolio to local players for over ten years; this trend has recently picked up speed.