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​ExxonMobil-Seplat Shares Deal: Has NNPC Misfired?

ARTICLE by Josiah Adewale

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Exxonmobil-Seplat Shares Deal

An exciting deal

The business wor​​ld and corporate Nigeria, especially the oil and gas industry, was literally lit and agog following the announcement by Seplat Energy Plc., a leading indigenous energy company listed on the Nigerian Exchange and the London Stock Exchange, and Exxon Mobil Corporation, Delaware, USA (ExxonMobil) that they had entered into an agreement for the Seplat to acquire the entire share capital of Mobil Producing Nigeria Unlimited (MPNU) from the latter, subject, however, to the usual Ministerial Consent.

The President, ExxonMobil Upstream Oil and Gas, Liam Mallon, said the company sold its equity interest in its shallow-water business, Mobil Producing Nigeria Unlimited (MPNU), to Seplat Energy through Seplat’s wholly-owned Seplat Offshore.

Rendering highlights of the deal, which is the first of its kind since the coming on stream of the Petroleum Industry Act (PIA), Seplat, on its part, put the purchase price at $1,283 million plus up to $300 million contingent consideration.

The transaction, it said, would create one of the largest independent energy companies on both the Nigeria Stock Exchange and London Stock Exchange as well as bolster Seplat Energy’s ability to drive increased growth, profitability and overall stakeholder prosperity, delivering 186 per cent increase in production from 51,000 bpd to 146,000 bpd or 170 per cent increase in 2P liquids reserves, from 241 MMbbl to 650 MMbbl.

In addition, it was expected to deliver a 14 per cent increase in 2P gas reserves from 1,501 Bscf to 1,712 Bscf, plus significant undeveloped gas potential of 2,910 Bscf (JV: 7,275 Bscf).

Nigerians are excited as they await the final Ministerial Consent to bring such strategically important national assets fully into Nigerian ownership alongside the Nigerian National Petroleum Corporation, NNPC, the exiting Joint Venture Partner. This is in line with government’s objective to achieve a pragmatic, progressive and just energy transition for Nigeria.

In its incisive analysis, Wood Mackenzie (WoodMac), a global and reputable intelligence provider that empowers decision-makers with unique insights on the world’s natural resources, lauded the deal saying it was a win-win for Seplat, ExxonMobil, and the Nigerian government, offering huge upside for oil and gas.

Very instructively, Mackenzie added: “Because this is a corporate acquisition, NNPC has no rights to pre-empt a deal under the Joint Operating Agreement (JOA), which governs the JV. This means that ministerial consent would be the only hurdle remaining, although nothing can be taken for granted.

A Misinterpretation of Joint Venture Agreement

Unfortunately, amid this local and international acclaim, the NNPC appears strangely more interested in throwing spanner in the works. In a move to block the transaction, the NNPC, as widely reported in the media, has through its Group Managing Director (GMD), Mele Kyari, written to MPNU, notifying it of its intention to exercise a Right of Pre-emption over the deal.

“We are aware that you reached an agreement to divest from onshore and shallow waters JVs…. Clearly we are interested”, the GMD was quoted as stating.

Meanwhile, a recently published article in support of NNPC’s action quoted purported oil industry source of affirming NNPC’s rights under the law, to exercise such pre-emptive powers.

NNPC hinges its move on a June 28, 1990 Joint Operating Agreement between it and Mobil Producing Nigeria as it pertains to ‘Participating Interest”.

Regarding transfer and assignment of interest, Article 19.4 provides: Subject to sub-clauses 19.1 and 19.2, if any Party has received an offer from a third Party, which it desires to accept, for the assignment or transfer of its participating hereunder (the “Transferring Party”), it shall give the other Party prior right and option in writing to purchase such Participating Interest as provided in sub-clauses 19. 4.1 to 19 .4.2.

Sub-clause 19.4.1 provides: The Transferring Party shall first give notices to the other Party, specifying therein the name and address of the aforementioned third Party and the terms and conditions (including monetary and other consideration) of the proposed assignment and transfer.

Sub-clause 19 .4.2 states: “Upon receipt of the notice referred to in Sub-clause 19. 2.1, the other Party may within thirty (30) days thereafter, request in writing the assignment and transfer of such Participating Interests to it, in which event the assignment or transfer shall be made to it on the same or equivalent terms”.

Meanwhile, these provisions could not be read or understood in isolation of the definition of a “Participating Interest” by the same Agreement.

Article 1.24 states: “Participating Interest means the undivided by percentage interest from time to time held by the Parties in the concession (s), the Joint Property and rights and obligations under this Agreement, namely: sixty per cent (60%), in case of NNPC; and forty (40 per cent), in the case of Mobil”.

Thus, these provisions clearly show that the NNPC is absolutely mixing things up because the transaction that happened between Seplat and ExxonMobil, Delaware, USA, was nothing close to a transfer of a “Participating Interest”.

No! Seplat did not deal with Mobil Nigeria producing Unlimited (MNPU). Rather, it transacted business with ExxonMobil, Delaware, the parent company, which acted within its rights, as it pleased and in line with its business/investment strategy, to dispose of all its shares in MNPU, which owns the said assets in Nigeria.

This is the major fact NNPC needs to get right so it could stop convoluting a very simple matter and making Nigeria a laughing stock before the international business community, as it visibly has no Right of First Refusal (RFR) to exercise on this transaction.

Matters arising

In any case, the ExxonMobil-Seplat transaction is not the first in the industry in recent times. Many have wondered why the NNPC did not exercise the same pre-emption action in the divestments by SPDC.

Of recent, the NNPC, and analysts pushing its case have argued that with its transition into a registered profit-making and limited liability company vide the PIA, it was out to reshape and optimise its portfolio by acquiring assets with high performance, low vulnerability and huge gas potential. For this reason, it prioritises the acquisition of divested assets under MPNU JV over those in Shell Petroleum Development Company (SPDC) JV.

In other words, NNPC‘s sudden interest in the deal and taking over the entire JV (if it had the legal backing) is all about the attractiveness of the assets in question. As a government-backed entity, is it not supposed to be more interested in taking over perceived more vulnerable assets with higher security and production issues? If it is only interested in ‘juicy’ fleshes of the oil and gas industry, who does it expect to deal with the hard bones?

Worse, it is not even as if the NNPC is known to run these things by itself. Most Nigerians know how and where these portfolios end up.

Besides, the NNPC does not enjoy popularity as one of the managers. If the NNPC were to be an airline, it is to be wondered how many Nigerians would be confident to fly in its planes. If NNPC were a hospital, how many Nigerians would surrender their lives to it to manage?

As the sole importer of fuel, Nigerians are still dealing with not only intermittent biting fuel scarcity, but they are also yet to recover from the importation of toxic fuel that have wrecked vehicles and put households through hardships.

Worse, the NNPC is yet to tell Nigerians how the nation’s daily fuel consumption jumped from about 30 million litres about seven years ago to about 102 million litres and above.

Under NNPC’s watch, the refineries have degenerated from producing enough for local consumption, to producing little, and now nothing.

In 2020, NNPC recorded N10.27 Billion in operational expenses without refining a single drop of fuel. It is unable to fix any of the refineries, even with the award of a USD1.5 Billion contract last year to fix the Port Harcourt refinery.

The NNPC has been struggling to meet its statutory obligations to the Federation Account in recent years. Despite the surge in oil prices in the international market, it was unable to remit anything to the Federation Account in January 2022, making it the second time within a year, as it was the case in April 2021.

In fact, with a deficit of approximately N2 Trillion out of its projected N2.511 Trillion, NNPC was only able to disburse N542 billion as against the N2.511 Trillion it was budgeted to contribute. The Nigeria Governors Forum have protested the development.

Therefore, many Nigerians have wondered why a debt-burdened NNPC is so quick to accumulate more debts vide the $5 billion corporate finance commitment from the African Export-Import Bank (Afreximbank) to “acquire, invest and operate energy-producing assets in Nigeria as part of NNPC’s growth strategy following its incorporation as a limited liability company”. It is important to note that unlike other businesses that would secure their loans by their assets, NNPC rides on government’s back.

The question of prioritisation of gas

Meanwhile, it is reported that NNPC’s interest in taking 100 possession of the assets in question was informed by its efforts not to risk a another partner on the NNPC MPNU JV that might not see the monetisation of the assets gas component as a priority.

This should not even be considered given Seplat’s profile in gas investment and its leading role in Nigeria’s energy transition.

It produced 20,758 boepd gas in 2021 and supplies 30 per cent of gas to power Nigeria. It became the first company to record a 50-50 venture with the NNPC through the Seplat/NNPC gas plant project – ANOH Gas Processing Company (AGPC) where Seplat easily raised $260 Million through a consortium of banks to fund its part of $650 Million financing for the ANOH Gas Processing Plant.

Against these backdrops, it is understandable why industry players believe that the NNPC has not only misfired, but is also overreaching itself, playing up those needless interferences that discourage investors. It should retreat.

*Adewale is an energy analyst

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AVEVA Showcases the Connected Industrial Economy at EGYPS 2023

Report by SANDRA ANI

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AVEVA
Nayef Bou Chaaya, Vice President Middle East, Africa and Turkey, AVEVA

…AVEVA highlights world-leading digital solutions to help oil and gas companies in Egypt, North Africa and the Mediterranean achieve decarbonization and value-chain innovation on the path to net-zero

AVEVA, a global leader in industrial software, driving digital transformation and sustainability, returns to the Egypt Petroleum Show (EGYPS) 2023 with the latest digital solutions for responsible use of the world’s resources.

Alongside Schneider Electric, AVEVA will showcase how connected industrial ecosystems harness data to support innovation and improve business performance for sustainability in the energy industry.

AVEVA brings its unparalleled portfolio of world-class digital software to EGYPS 2023, including popular asset performance management solutions and value chain optimization products, as well as the market-leading AVEVA digital twin technology. In addition, show delegates will be able to experience firsthand how  AVEVA Unified Operations Center offers a 360-degree view of plant operations with greater visibility of energy sources, consumption and greenhouse emissions data.

With businesses beginning to realize the productivity, efficiency and scalability benefits of cloud computing, the industrial software-as-a-service platform AVEVA Connect has demonstrated its value in driving innovation, growth and sustainability for the energy sector. The platform now hosts AVEVA Production Accounting, which addresses the pressing issue of unaccounted losses for refineries, petrochemical plants, and other processing facilities. 

Nayef Bou Chaaya, AVEVA Vice President, Middle East, Africa and Turkey, said, “After a successful presence at COP27 where we demonstrated the essential role of data-led technologies in supporting climate innovation and industrial decarbonization, I’m delighted the AVEVA team is returning to Egypt.

“At EGYPS 2023, we will showcase how our unrivalled suite of cutting-edge products can support the creation of a resilient, net-zero energy future, while enabling customers to implement their sustainability roadmaps at a challenging economic moment,” he added.

Sharing data to unlock innovation in a low-carbon economy

Digital technologies speed up innovation and value generation by eliminating internal and external silos. When operational data is infused with artificial intelligence (AI) in the cloud and shared across the connected industrial ecosystem, it creates a digital thread of contextualized, real-time, information so teams can collaborate in a smarter and more connected way.

Applications such as the industrial digital twin are already proving how companies can realize unprecedented economies, synergies and benefits for their own organizations and for society at large. The connected industrial economy further leverages these strengths by sparking industrial ingenuity and facilitating co-operation in a world where businesses face innumerable headwinds.

Bob Parker, Senior Vice President at leading analyst firm IDC said, at AVEVA WORLD 2022 “A rapidly evolving digital economy is unparalleled in depth and scope after being accelerated by the pandemic. Asset-intensive industry segments of the old economy including oil and gas (…), are under new pressure on operations to be increasingly resilient. This requires higher levels of asset instrumentation and capabilities that use the data gathered to speed up decision-making and innovation. Ultimately, this is leading to the rise of connected industrial ecosystems.”

Delegates visiting the AVEVA and Schneider Electric stand at EGYPS 2023 will experience firsthand how they can combine engineering data with real-time and transactional data to unlock actionable insights, redefine processes, enable deeper collaboration, and reduce value leaks while raising productivity – all in real time. They will be able to learn how to converge engineering, operations, and other data in context for end-to-end enterprise visibility using a single 360-degree view of plant operations. The latest asset performance management solutions will also be demonstrated at the event.

AVEVA experts will share how the connected industrial economy presents unprecedented opportunities for the energy sector at stand 2C30 at EGYPS 2023. The event is being held at the Egypt International Exhibition in Cairo from February 13-15, 2023.

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Steps to Achieve ‘The Decade of Gas’

Article By: Elvis Eromosele

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Decade of Gas Nigeria
Gas flaring (Image: DW)

Nigeria is a study in contradiction. It has the largest proven gas reserve in Africa yet faces a significant challenge in providing access to gas for a majority of its citizens and businesses.

On top of this, it occupies an unenviable position as one of the top seven gas-flaring countries in the world, according to the World Bank. The tale would be unbelievable if it was fiction. 

Sadly, the reality is grim. Oil-producing companies burn off millions of cubic litres of natural gas during oil production.

They use a fancy term, gas flaring, to describe it. It doesn’t however take remove from the fact that the action, gas flaring, is a glaring waste of a wasting resource. It also impacts negatively on the environment, human health and the cost of gas. It needs to be stopped. 

Over the last couple of years, governments have sought to curtail incidents of gas flaring, increase the use of gas and boost revenue from it, all with varying degrees of success. 

To highlight the commitment of the federal government to boost the domestic use of gas among Nigerians as the primary energy source President Muhammadu Buhari declared the ‘Decade of Gas’ (January 1, 2021, to 2030). An integral part of the process is the development of gas infrastructure, with the construction of the 614km Ajaokuta-Kaduna-Kano gas pipeline the number one starting point. 

The goal is simple, to increase the domestic utilisation of LPG and CNG, commercialise gas flares, develop industrial gas markets and increase gas-to-power. Related policies which are already in the works include the National Gas Expansion Programme and the Autogas policy. 

Experts argue, however, that despite the government’s best efforts to increase the distribution of liquified petroleum gas (LPG), also known as cooking gas, a large number of Nigerians still rely on firewood and charcoal for cooking with the attendant damage to the environment and impact on the climate.

Now one of the main reasons for this is the lack of infrastructure and distribution networks for LPG. Many areas in the country do not have access to gas pipelines, making it difficult for residents to obtain cooking gas.

We’ll require a study to explore the risk associated with the current gas tank retail marketing method. Additionally, the cost of LPG is prohibitively high for low-income households, who make up the bulk of the population.

Figures from the National Bureau of Statistics (NBS) show how deep the poverty is – 63 per cent of persons living in Nigeria (133 million people) are multidimensionally poor. It’s a grim picture. 

GlobalData reports that by flaring, rather than utilising gas for power generation or other domestic needs, Nigeria and other nations involved in such acts, could lose up to $82 billion a year globally. Other countries in this unholy group include Algeria, Angola, Indonesia, Iran, Iraq, Libya, Malaysia, Mexico, Russia, the US and Venezuela. They accounted for over 87 per cent of all flared gas in 2020. 

Independent sources reveal that Nigeria flared an average of 11.1m3/bbl of gas in 2021. The issue here is that the Nigeria Gas Flare Commercialisation Programme (NGFCP), which seeks to curb the act, has loopholes along with low and weakly enforced penalties. It needs to be tightened and strengthened to make it more effective. 

Nigeria had 208.62 trillion cubic feet (TCF) of gas reserve as of January 2022, according to the Commission Chief Executive (CCE) of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, an engineer. However, the development of gas, especially for domestic use, is still relatively low.

The price is still in the skies for many potential users. Right now, the concern is that with the rising cost of cooking gas, the domestic utilisation of LPG may decline. It remains to be seen how this will impact the achievement of the ‘Decade of Gas’ objectives.  

There are several steps that the government can take to increase access to cooking gas for Nigerians. As a concerned citizen and cooking gas user, here are my thoughts on five things that the government can do to improve access to natural gas:

Firstly, the government must invest in building pipelines and distribution networks to reach residential and business areas and improve access to LPG.

Secondly, while the country has significant natural gas reserves a lack of investment in the sector has led to low production of LPG. It is time for the government to encourage investment in the sector to increase domestic production and thus curb the importation of LPG.

In addition, to demonstrate the resolve to improve the use of gas among citizens, the government can look at providing subsidies for LPG to make it more affordable for low-income households. This will make it more accessible to those who currently are unable to afford it.

Furthermore, since reports indicate that Nigerians are unaware of the benefits of using LPG as a cooking fuel, the government can launch a campaign to educate citizens on the benefits of LPG and how to safely use it.

Finally, the government must create an enabling environment to encourage private sector participation and investment in the LPG industry. This will increase the availability of LPG and possibly help drive down prices.

With the implementation of these measures, Nigeria can truly increase access to cooking gas for a majority of its citizens and reduce the country’s dependence on firewood and charcoal. This will not only improve the quality of life for citizens, but it will also help the environment by reducing deforestation and air pollution caused by the burning of firewood.

Eromosele, a Corporate Communication professional and public affairs analyst lives in Lagos.

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AVEVA Showcases Role of Digital Technologies in Achieving Zero-Carbon Economy at COP27

Industrial software leader returns to annual UN Climate Change Conference to show how digital technologies are driving responsible use of global resources to build net-zero economies

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AVEVA
L-r: Lisa Wee, Global Head of Sustainability, Nayef Bou Chaaya, Vice-President – Middle East, Africa & Turkey and Amish Sabharwal, Executive Vice-President – Engineering and Simulation.

AVEVA, a global leader in industrial software, driving digital transformation and sustainability, will highlight how digital technologies can support public-private partnerships and unlock innovation to close the implementation gap on climate change at COP27.

The United Nations Climate Change Conference 2022 is being held on November 6-18 in Sharm El Sheikh, Egypt. A sponsor of the parallel Climate Action Innovation Zone, AVEVA believes trusted data-led technologies are essential to decarbonization, driving responsible use of the world’s resources and delivering innovative, climate-forward products in the net-zero economy. AVEVA is one of the first 50 companies in the world1 to have its net-zero commitments validated by the Science Based Targets initiative (SBTi).

AVEVA’s presence at COP27 will be led by some of its most prominent climate advocates: Amish Sabharwal, Executive Vice-President – Engineering and Simulation and member of AVEVA’s Executive Leadership Team; Lisa Wee, Global Head of Sustainability; and Nayef Bou Chaaya, Vice-President – Middle East, Africa & Turkey.

During a number of thought-provoking sessions at the Sustainable Innovation Forum 2022, being held alongside COP27, the AVEVA executives will use real-life examples to showcase how digital technologies are unlocking opportunities in the net-zero economy.

Global opportunities in climate change mitigation

Sabharwal will join a plenary panel on November 10. Alongside UN executives, he will seek to explain why climate change mitigation represents our biggest opportunity yet.

Amish Sabharwal-AVEVA
Amish Sabharwal, Executive Vice-President – Engineering and Simulation and member of AVEVA’s Executive Leadership Team

“UN data shows that immediate action can halve greenhouse gas emissions (GHG emissions) by 2030 and put us on track to achieving our goal of keeping global temperature increases to 1.5°C above pre-industrial levels. At the same time, we are facing our biggest opportunity yet. Climate change is accelerating the fourth industrial revolution and nowhere is that more obvious than in the communities and industries here in Africa.,” Sabharwal said. “The decisions we take at COP27 and beyond will put the global economy on track to building resilient net-zero economies that drive the adaptation and mitigation agenda. Digital technologies are integral to building the new industries and supply chains that will deliver sustainable growth and create new jobs.”

Sabharwal added: “Closing the implementation gap on the world’s ambitious decarbonization commitments presents a major source of economic opportunity for businesses and communities.”

Move towards sustainability handprint thinking

On November 9, broadcaster Nik Gowing will interview Wee in the context of her role as a climate leader. 

Lisa Wee, Vice-President of Sustainability, AVEVA
Lisa Wee, Vice-President of Sustainability, AVEVA

She will share insights from the frontline of climate change mitigation and offer real-life examples of how AVEVA and its partners are paying it forward by co-innovating climate-responsive technological solutions to help usher in a zero-carbon economy.

“At AVEVA we recognize that we can drive exponential impact through the products we bring to market while supporting our customers on their decarbonization journey,” Wee said. “Now, our thinking has moved beyond measuring and managing our carbon footprint to considering our sustainability handprint. This positive contribution to sustainability through business activities and partnerships is a way of paying it forward to secure a better future for humanity and our planet.”

Role of partnerships in decarbonization

Also on November 9, Bou Chaaya will amplify the discussion around innovation in the face of climate change in a high-level spotlight session, with case studies of how global organizations are responding to – and taking advantage of – the opportunities arising from the focus on net-zero targets.

Nayef Bou Chaaya Vice President Middle East and Africa AVEVA
Nayef Bou Chaaya Vice President Middle East and Africa AVEVA

“Public-private partnerships can speed up delivery of the next-generation of low-carbon technologies by 2030 and break down silos in the development of new low-emission products to meet the world’s net-zero goals,” Bou Chaaya said. “AVEVA’s expertise has already demonstrated the role of digital technology in developing and scaling green grids and accelerating sustainable development through smart cities and smart water applications. We are convinced of the importance of driving private-sector collaboration on scope 3 upstream and downstream mitigation activities. We believe an open and connected industrial economy based on free-flowing data networks will be essential to hasten and scale up those sectors that are hardest to decarbonize.”

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