NNPC to roll out new policy on asset divestments

Sopuruchi Onwuka

Federal government will no longer allow its divesting partners to unilaterally select their successors or determine roles in the operations of production agreements for the new investors.

Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Mallam Mele Kyari, who addressed delegates at the 2021 Nigerian Annual International Conference and Exhibition (NAICE) of the Nigerian Council of the Society of Petroleum Engineers (SPE), declared that emerging challenges of funding, low emission operations and cost efficiency impose stringent considerations for accepting new entrants into its operating agreements.

The Oracle Today reports that NNPC holds overriding interests in all joint venture, production sharing contracts, marginal field production and sole risk agreements in the Nigerian petroleum industry. It is also the concessionaire of all operated petroleum assets in the country.

Following a wave of capital recovery and repatriation by the corporation’s traditional partners, NNPC is currently faced with funding, technical and other issues with a new set of partners that swapped positions with deep pocket, technically savvy and experienced global players that gave their interests for cash.

The divestments which started with Shell introduced mainly indigenous upstarts into the corporation’s ancient joint ventures, leading to weak funding and delays in projects execution as most of the asset buyers are still in debt.

Mallam Kyari stated that whereas NNPC would not influence business decisions for the players, it would readily take steps to protect national interest in the operated assets.

He said the wave of divestments by major international oil companies that constitute its traditional partners creates challenges for the corporation in ensuring that capable and efficient players take the positions and add value to the operated assets.

Mallam Kyari declared at the event that government was developing a Comprehensive Divestment Policy to provide clear guidelines and clear criteria for divestment of partners’ interests in order to safeguard Nigeria’s national strategic interests in the industry.

“Going forward, NNPC will make clear distinctions between divestments and operatorship agreements under various joint operating agreements, while leveraging its rights of pre-emption as well as evaluating the operational competency and track record of new partners,” he clarified.

He said the new divestment policy would pay particular attention to abandonment and relinquishment costs, severance of operator staff, third party contract liabilities and the competency of the buyer.

Other areas of focus under the new policy, according to Mallam Kyari, are post purchase technical, operational and capabilities especially in the era of activist investors’ sentiments against funding of fossil fuel projects.

He also pointed at need to align divestment processes with Nigeria’s national strategic interests.

He reiterated the new mandate on the petroleum industry to position development and application of the nation’s huge natural gas resources as credible enabler for smooth transition to low carbon energy. He restated the determination of NNPC to play key role in the global transition to low carbon energy in the near future.

Mallam Kyari pointed that government’s Natural Gas Expansion Programme (NGEP) would not just deepen domestic utilization but also earn the country significant carbon credits and create a net zero carbon environment “in line with our drive of becoming energy company of global excellence.”

He pointed at the corporation’s OB3 and AKK pipeline projects as key channels into deeper domestic gas utilization, enhanced industrial growth and improves job creation.

According to him, the goal “is to take the right quantities of gas to every part of Nigeria at the right quality and the right price.”

He stressed that NNPC was looking beyond its business mandates in order to deploy technology in creating better systems and optimized processes to support performance, accountability and value creation.

“As a national company, we remained committed to working with stakeholders to maintain firm position in today’s and future energy industry,” he reiterated.