NUPRC lists divestment framework for potential investors in SPDC assets

 

.Offers 12 oil blocs to investors in 2024 bid round

 

 

Ugo Amadi and  Blessing Akorowosi

 

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has listed the conditions that must be met by potential investors willing to invest in the assets and liabilities of Shell Petroleum Development Company of Nigeria Limited (SPDC) as the company divest its operations from Nigeria.

It was learnt that the assets being considered have an estimated total reserve of 4.96 billion barrels of oil, 1.77 billion barrels of condensate, 28.16 trillion cubic feet of associated gas and 28.11 trillion cubic feet of nonassociated gas.

 

The Commission’s Chief Executive, Engr. Gbenga Komolafe, listed the criteria on Monday, during a meeting with potential investors and other stakeholders in Abuja, stressing that the goal of the workshop is to identify a successor who not only possesses the requisite financial resources but also demonstrates the technical expertise to responsibly manage these assets throughout their lifecycle.

 

“This makes a significant contribution to the nation’s hydrocarbon resources. Additionally, these assets hold P3 reserves estimated at 2.85 billion barrels of oil, 850.85 million barrels of condensate, 11.3 trillion cubic feet of associated gas and 12.26 trillion cubic feet of Non-Associated Gas.

 

“Furthermore, we must ensure that the inherent environmental and end-of-life liabilities i.e. decommissioning liabilities, are accurately identified, and assigned to the party best equipped to bear the associated risks.

 

“This necessitates a comprehensive understanding of regulatory requirements, industry best practices, and the unique challenges inherent in oil and gas operations”.

The workshop was organised to discuss and work together on the proposed divestment of the participating interests held by the Shell Petroleum Development Company of Nigerian Limited (SPDC) in the SPDC JV Assets, through a sale by its shareholders of all the issued shares of SPDC to Renaissance Africa Energy Company Limited (Renaissance).

 

The SPDC JV assets are currently operated by the SPDC on behalf of its Joint Venture (JV) partners namely NNPCL Limited and Total Upstream Nigeria Limited, Nigeria Agip Oil Company and SPDC. The SPDC JV OMLs were originally awarded as Oil Exploration Licence -1(OEL-1) on 1 January 1949 covering the whole of southern Nigeria and Cameroon.

 

Ultimately, the assets were converted to OMLs on 1 April 1962 and subsequently renewed in 2014 and 2018 for 20 years.

 

To date, the assets have achieved a cumulative production of 5.35 billion barrels of crude oil, 165. 57 million barrels of condensate, 9.51 trillion cubic feet of Associated Gas and 3.75 trillion cubic feet of Non-Associated Gas, contributing immensely to the achievement of Nigeria’s crude and condensate output.

 

The assets being considered have an estimated total reserve of 4.96 billion barrels of oil, 1.77 billion barrels of condensate, 28.16 trillion cubic feet of associated gas and 28.11 trillion cubic feet of non-associated gas.

 

This makes a significant contribution to the nation’s hydrocarbon resources. Additionally, these assets hold P3 reserves estimated at 2.85 billion barrels of oil, 850.85 million barrels of condensate, 11.3 trillion cubic feet of associated gas and 12.26 trillion cubic feet of Non-Associated Gas.

 

Speaking at the event, Komolafe said the Commission has developed a Divestment Framework consisting of seven cardinal pillars to guide the assessment of applications for Ministerial consent to the SPDC Divestment and other similar divestments.

These pillars include technical capacity where the successor entity must demonstrate proven and verifiable capacity to operate the asset vigorously and in a business-like manner; as well as financial criteria where the Commission would assess the prospective successor entity’s balance sheet and financial viability and verify readiness to undertake a defined work programme and fulfil required obligations on the assets.

 

He said, “The acquiring entity must in line with the interest of the nation be ‘fit and proper’ persons in the eyes of the law. Clear evidence of the resolutions of legacy debts and legal encumbrances must be established and appropriate mechanisms to manage residuals agreed upon.

“Decommissioning & Abandonment (D&A): Applicable D&A costs must be diligently assessed and ensure settlement of outstanding obligations. Commission to ensure that potential exposure of the Nigerian government to decommissioning liabilities is averted.

 

“Host Community Trust / Environmental Remediation Fund: The Commission shall assess the status of Host Community Trust Fund obligations and ensure the robustness of the successor entity’s adherence to decarbonisation plans and sound Environmental Social & Governance (ESG) principles.

 

“Industrial Relations and Labour Issues: The Commission shall Implement a robust assessment mechanism to avert undesirable labour union issues and disharmony arising from the divestment process. Concerned parties shall endorse a “Certificate of Settlement” to validate alignments reached on all labour issues (staff welfare, benefits, entitlements as well as disengagement, redundancies, retirement etc.). The aim is to ensure the nation averts socioeconomic disruptions arising from failure to resolve labour issues that might result because of post-divestment.

 

“Data Repatriation: The Commission shall ensure that all data mined during the operating life of the asset are repatriated to the National Data Repository (NDR) in line with extant regulations.”

 

Komolafe appealed for cooperation with the investment process as he urged SPDC and Renaissance to engage proactively, adhere to regulatory requirements, and work collaboratively with the NUPRC to ensure the successful conclusion of the Shell Divestment.

 

The NUPRC Boss hailed President Bola Tinubu for his support and commitment to ensuring the attraction of investment and development of the Nigeria’s oil and gas sector.

 

However, the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, has  disclosed that it has commenced the process for the 2024 oil bid round with 12 oil blocks on offer and seven deep offshore blocks from last year’s bid round.

The Commission Chief Executive, Engr. Gbenga Komolafe who disclosed this at the inaugural NEITI House Dialogue in Abuja, said the process will be concluded by January next year.

The new green field oil blocks on offer include six acreages located on continental shelf, four deep offshore blocks and two onshore blocks in the Niger Delta.

Engr. Komolafe explained that the Commission has put in place regulations to create a conducive investment environment by ensuring regulatory certainty, vacating entry barriers and promoting global competitiveness.

He said: “The licencing round that we are putting in place is designed to enhance the quality data set and it is going to be conducted in a fair, and competitive bidding process in a non-discriminating manner”.

He noted that some of the criteria required for acquiring the blocks include technical competence, financial capacity and viability.

He also disclosed that the Commission generated N4.344 trillion in revenues in 2023, a rise of 15 percent from N3.78 trillion generated in 2022.

Speaking at the dialogue, the Executive Secretary, Nigeria Extractive Industries Transparency Initiative, NEITI, Dr Orji Ogbonnaya Orji explained that the NEITI House Quarterly Dialogue will host notable policy makers in Nigeria’s extractive industries and related sectors, who will address issues that are of interest and topical to the industry.