The Federal Government has allayed fears that on-going asset divestment in the upstream of the oil and gas sector would create crisis in the industry, as it said $11.5 billion would be realised from the sale of about 20 assets with potential for four billion barrels of oil by the end of this year.
There are about eight assets put on offer by the IOCs that are waiting for the minister’s approval. The assets are Oil mining lease OML s 131,214,60,61,62, 63, BrassLNG, kwale –okpai. Others are OMLs 52, 53 and 55 which are awaiting Federal High Court judgment on legal dispute with Britannia-U.
The minister of Petroleum Resources, Diezani Alison- Madueke, who disclosed this while speaking on the topic “Assets Divestments in Nigeria oil and gas: opportunities and Challenges” at the ongoing Offshore Technology Conference, holding in Houston ,
USA, said the exercise continues to create opportunities for indigenous operators.
The minister, who was represented by Andrew Yakubu, group managing director of the Nigerian National Petroleum Corporation (NNPC) said the benefits of the exercise included increases in gas production by the Nigerian Petroleum Development Company (NPDC) to help boost power generation in the country.
She said that with the 55 per cent in eight divested assets, the company was able increase it reserves from 250 million barrels to 2.1 billion barrels.
“With these acquisitions, the company is now contributing over 450million standard cubic feet per day (SCF/d) of gas to the domestic gas market, through Oredo and Utorogu gas plants.
“Plans are at an advanced stage to supply 100million scf by the end of this year, through NNPC/Pan Ocean, and another 200 million scf, when the Utorogu non associated gas NAG2 is completed, also this year”.
The divestment would rather create capacities through the participation of indigenous companies, with a lot of trickle-down effect on the economy at large, she said.
Industry operators however say they want more transparency in the conduct of the exercise, as that would further allow access to more funds to finance the assets.
International oil companies such as Shell, Agip, Chevron, Total and Conoco Philips, have divested assets worth about 2.2 billion barrels of oil equivalent of hydrocarbon reserves at an estimated monetary value of at least $5 billion.
The divestment has inadvertently become the key to the success of government’s local content policy in the upstream. Local Nigerian companies own majority of the oil blocks sold by the IOCs, with the likelihood of an increase in the next few years creating new opportunities for local contractors and their respective financiers.
Financial options and sources, according to Sanmi Famuyide of FBN Capital, have been expanding since 2010 when local Nigerian banks led the acquisition and financing and reserved based lending facility, of up to $230 million for one of the indigenous companies.
Also speaking at the occasion, Egbert Imomoh, chairman of Afren Petroleum, said that transparency in asset bidding is important, adding that it must be competitive and credible.
He said ten years ago, no bank would want to have anything to do with the oil sector, but the story is different today because of the on-going divestment exercise which has encouraged indigenous participation.
Olusola Bello
