Oil
FG scrutiny hinders Nigeria oil and gas mergers
ABUJA – The Federal government scrutiny of the lingering transaction between Oando plc and ConocoPhilips has left Shareholders of Oando plc hoping for a quick conclusion of the deal that would see the Nigerian energy company purchase ConocoPhillips’ assets in the country.
“The Conoco-Oando transaction is still going through due diligence by officials at the Department of Petroleum Resources (DPR),” said Diezani Alison-Madueke, minister of petroleum resources, last Friday at the World Economic Forum (WEF) Africa in Abuja. “The deal has not got to the minister’s table yet, but we are on it.”
Oando recently announced that it had extended the completion date for the acquisition from April 30, 2014 to June 30, 2014. It said the extension was to enable the companies involved to satisfy all closing conditions, including the anticipated consent of the minister of petroleum resources in Nigeria, according to a filing at the Nigerian Stock Exchange (NSE).
The delayed transaction highlights the risks and legal uncertainty hindering the growth of the Nigerian oil industry.
“The majority of transfers of ownership of oil and gas licences need government consent, a requirement that has caused unprecedented delays to what should be straightforward transactions,” said Constantine Ogunbiyi, one of the founders of Afren, an indigenous oil company.
ConocoPhillips’ holdings in Nigeria include interests in oil-production leases and stakes in offshore prospects.
Oando agreed to buy the assets for $1.65 billion in December 2012 as it sought to move into the higher margin oil exploration and production business.
The company paid a $435-million initial deposit and announced in January 2014 that it had secured all financing required to close the deal, of which the estimated net purchase price payable to complete the acquisition is about $1.05 billion.
The delayed transaction has weighed on Oando’s stock, which is down -34.02 percent year to May 12, 2014, underperforming the NSE All Share Index (ASI), which has lost -6.71 percent in the same period.
The successful completion of the acquisition was expected to boost production of Oando’s upstream subsidiary, Oando Energy Resources, to about 50,000 barrels per day from about 5,000 bpd currently.
Analysts say there is increasing demand for assets in the Niger Delta, which holds a large portion of Nigeria’s 37 billion barrels of oil reserves, spurred by divestments from international oil majors with total completed deal size of over $6.7 billion between 2010 and 2013. The light sweet crude grade mostly found in the area is relatively easy to drill, and some Nigerian companies, such as Seplat which recently raised $500 million from a dual London/Lagos IPO, have said they can better handle the security challenges faced by the foreign oil majors.
While Nigerian assets are currently offered at a significant discount to global assets, this discount is narrowing as asset bid prices rise, according to CBO Capital, a research and investment firm.
“On average, assets are sold at up to a 45-percent discount compared to global prices and this makes Nigerian assets among the most attractive investments, considering the huge upside potential on the reserve profile of the assets,” said CBO Capital in a November 2013 report.
Deals in the sector are, however, often fraught with complications, such as the legal battle that Chevron is currently embroiled in with Britannia-U over the sale of its Niger Delta blocs worth up to $1 billion, or more cynically by political considerations.
“Do not believe everything the government proffers as the reason for holding up the Oando transaction,” one oil industry source told BusinessDay. “We are currently in pre-election mode where everything in Nigeria historically slows down, and may have to wait to get more clarity on this deal after the vote.”
– BUSINESS DAY
In a strategic move to revitalize Nigeria’s oil and gas sector, the Federal Government has unveiled two key fiscal incentives aimed at attracting investment and enhancing energy security.
The announcement was made by Mr. Wale Edun, the Minister of Finance and Coordinating Minister of the Economy on Wednesday.
The first initiative, the Value Added Tax (VAT) Modification Order 2024, introduces critical exemptions for essential energy products and infrastructure, including Diesel, Feed Gas, Liquefied Petroleum Gas (LPG), Compressed Natural Gas (CNG), Electric Vehicles, Liquefied Natural Gas (LNG) infrastructure, and Clean Cooking Equipment.
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These exemptions are designed to reduce living costs for Nigerians, promote energy security, and accelerate the transition to cleaner energy alternatives.
The second initiative, the Notice of Tax Incentives for Deep Offshore Oil & Gas Production, offers new tax relief options for deep offshore exploration projects.
This measure aims to position Nigeria’s deep offshore basin as a premier destination for international oil and gas investments, boosting the country’s appeal to foreign investors.
These reforms are part of a broader set of policy initiatives, known as Policy Directives 40-42, endorsed by President Bola Ahmed Tinubu.
The directives reflect the administration’s commitment to fostering sustainable development in the energy sector and enhancing Nigeria’s competitive edge in the global oil and gas market.
By Yemie Adeoye
NIGERIA’s President Bola Tinubu has announced that the protracted ExxonMobil-Seplat upstream oil divestment will be formally approved by the Minister of petroleum within a matter of days, just as he announced his government’s intention to expand the Compress natural Gas, CNG buses initiative.
The President who stated this during his Independence day nationwide broadcast stated that the move is in line with his administration’s commitment to free enterprise, free entry and free exit in investments which is the hallmark of his administration investment policy.
“Fellow compatriots, our administration is committed to free enterprise, free entry, and free exit in investments while maintaining the sanctity and efficacy of our regulatory processes. This principle guides the divestment transactions in our upstream petroleum sector, where we are committed to changing the fortune positively. As such, the ExxonMobil Seplat divestment will receive ministerial approval in a matter of days, having been concluded by the regulator, NUPRC, in line with the Petroleum Industry Act, PIA. This was done in the same manner as other qualified divestments approved in the sector.”
The President also seized the opportunity to plead with Nigerians to be patient with his administration’s reform policies. “As your President, I assure you that we are committed to finding sustainable solutions to alleviate the suffering of our citizens. Once again, I plead for your patience as the reforms we are implementing show positive signs, and we are beginning to see light at the end of the tunnel”.
“Our energy transition programme is on course. We are expanding the adoption of the Presidential Initiative on Compressed Natural Gas for mass transit with private sector players. The Federal Government is ready to assist the thirty-six States and FCT in acquiring CNG buses for cheaper public transportation.
Fellow Nigerians, while we are working to stabilise the economy and secure the country, we also seek to foster national unity and build social harmony and cohesion. Our economy can only thrive when there is peace”. he enthused.
As part of the administration’s push to improve Ease of Doing Business (EoDB), Nigeria’s Vice President Kashim Shettima has expressed support for ExxonMobil’s plan to invest $10 billion in the country’s deep-water oil sector.
Speaking on Wednesday, September 25, 2024, during a meeting with ExxonMobil executives at the 79th United Nations General Assembly (UNGA) in New York, Shettima called the investment “a clear testament to the administration’s economic reforms and investor-friendly policies.”
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This announcement follows news that international maritime company DP World intends to develop a multibillion-dollar port project in Nigeria.
Stanley Nkwocha, Senior Special Assistant to the President on Media and Communications, shared the development in a statement on Wednesday. He quoted Shettima as saying: “ExxonMobil’s potential investment aligns with the vision of President Bola Ahmed Tinubu’s administration for a more investment-friendly Nigeria.
We are committed to fostering an environment that supports such transformative projects.”Shettima also discussed the administration’s broader efforts to improve the ease of doing business, highlighting the “Renewed Hope Agenda,” which aims to simplify bureaucratic processes, enhance transparency, and offer fiscal incentives to attract global investors.
“Our administration has taken bold steps to unify the exchange rate, remove fuel subsidies, and implement tax reforms. These measures, though challenging in the short term, are intended to create a stable and predictable business environment in the long term,” he added.
On the oil and gas sector, Shettima mentioned that the government is revising the fiscal framework for deep-water operations to attract investment while ensuring fair returns for the Nigerian people.
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