The much-anticipated $860 million divestment by French oil giant TotalEnergies to indigenous firm Chappal Energies has collapsed after Chappal failed to meet critical financial obligations, deepening uncertainties in Nigeria’s oil and gas industry.
On Wednesday, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) confirmed that the long-stalled deal had been cancelled, not revoked as earlier reported
The transaction, first announced in July 2023, was expected to reshape participation in the country’s upstream sector, particularly in natural gas production that feeds Nigeria LNG, one of Africa’s largest liquefied natural gas exporters.
A deal that promised much
In July last year, TotalEnergies EP Nigeria signed a Sale and Purchase Agreement (SPA) with Chappal Energies for the transfer of its 10 percent stake in the Shell Petroleum Development Company of Nigeria (SPDC) Joint Venture.
The SPDC JV, comprising Shell, TotalEnergies, Eni and the Nigerian National Petroleum Company Limited (NNPC Ltd), is one of Nigeria’s most significant oil and gas ventures, operating onshore assets long plagued by sabotage, theft, and environmental liabilities.
The agreement covered not only TotalEnergies’ equity in SPDC JV but also its 10 percent interest in three key oil mining leases: OML 23, OML 28, and OML 77.
These licences, although producing modest volumes of oil, are crucial because they collectively account for about 40 percent of Nigeria’s gas supply to the NLNG plant in Bonny, Rivers State.
At the time, the deal was hailed as part of a wider industry shift, with international oil companies (IOCs) retreating from onshore assets in Nigeria to focus on deepwater operations, while indigenous firms stepped in to acquire the divested assets.
Analysts viewed it as an opportunity for Chappal Energies to consolidate its position in the upstream sector and demonstrate the local capacity to manage large-scale assets.
A stalled transaction
Optimism quickly waned after the initial announcement. Though the deal received ministerial consent and NUPRC approval, payment timelines were repeatedly missed. Chappal Energies struggled to mobilise the required approved fees, despite extending deadlines and frantic attempts at raising financing through local and international lenders.
Confirming the breakdown, Eniola Akinkuotu, head, Media and Strategic Communications at NUPRC, told BusinessDay that the default lay squarely on Chappal Energies’ side.
“It’s not both sides that defaulted. It’s Chappal Energies that didn’t meet its obligation. TotalEnergies met its own obligation,” Akinkuotu said.
Read also: NUPRC withdraws approval for TotalEnergies’ $860 million asset sale to Chappal Energies
He explained that after ministerial consent, Chappal was expected to pay TotalEnergies, after which statutory payments and regulatory fees due to the government would follow.
“But that never happened. And of course, when that didn’t happen, we found out that Chappal never released the money,” he said.
A senior source in the upstream business said Chappal Energies was unable to raise the required $860 million to fund the purchase from TotalEnergies.
“I hope this issue is resolved on time and doesn’t affect TotalEnergies’ pending investments,” he added.
TotalEnergies stuck with onshore exposure
For TotalEnergies, the cancellation is a setback to its strategy of rebalancing Nigerian portfolio. Like Shell and Eni, the French energy giant has been gradually exiting onshore oil operations beset by insecurity and theft, while consolidating investments in deepwater projects such as Egina and Akpo.
The company had hoped the Chappal deal would allow it to offload challenging assets while retaining the economic benefits of its gas supply commitments to NLNG. Now, with the transaction cancelled, TotalEnergies remains exposed to operational risks and costs associated with its 10 percent interest in the SPDC JV.
“This is not where TotalEnergies wanted to be. They’ve been looking to clean up their onshore exposure for years,” said Femi Babajide, a senior energy analyst, told BusienssDay. “The fact that this deal fell through means they are back to square one, holding assets that are profitable on paper but come with heavy operational and reputational baggage.”
What next?
NUPRC has revoked its earlier approval, effectively resetting the transaction process. This leaves TotalEnergies free to seek another buyer, though industry observers say potential suitors may be wary after Chappal’s difficulties.
Some suggest that larger indigenous firms like Seplat, Aiteo, or ND Western could show interest if financing and regulatory hurdles can be navigated.
Others argue that TotalEnergies may need to restructure the offer, perhaps through joint ventures or phased payments, to attract credible buyers.
Chappal Energies has positioned itself as a rising force in Nigeria’s upstream sector, but questions now linger about its financial capacity to manage large-scale acquisitions.
Attempts to reach Chappal Energies for comment were unsuccessful at press time.
A sector in transition
The episode underscores the challenges of Nigeria’s oil sector at a time of global energy transition. While IOCs continue to pivot toward low-carbon projects and deepwater operations, Nigeria is left balancing its need to attract indigenous participation with the realities of financing constraints and regulatory scrutiny.
“The lesson here is that deals must be bankable from day one,” Babajide said. “Regulators are right to insist on environmental and financial commitments, but sellers also need to be realistic about the capacity of local buyers. Otherwise, these transactions will keep collapsing, to the detriment of the industry and the economy.”
