Over one week after it was reported that President Muhammadu Buhari had withdrawn his ministerial assent to Seplat Energy’s bid to acquire shares in ExxonMobil’s local subsidiary, no formal letter has emanated from the presidency indicating otherwise.
LEADERSHIP’s findings show that Seplat Energy Plc. is pushing ahead with the deal armed with the consent letters signed and forwarded to the company on August 8, 2022. Already, experts and industry commentators are divided in opinion following the purported consent reversal. Seplat Energy Plc said it is undaunted by reports of Buhari’s assent withdrawal of its bid to acquire ExxonMobil’s asset shares.
The company said it is courageously moving towards achieving that goal as it had not received any notification rejecting its proposed acquisition of Mobil Producing Nigeria. “Seplat Energy has received no official notification of such a decision and is seeking clarification from the relevant authorities,’ it adds. We will continue to work with all parties to achieve a successful outcome to the proposed acquisition and we will provide an update in due course,” a source withing Seplat said.
Last Wednesday, Seplat said it was aware of news and social media reports alleging ‘impropriety’ in the process of securing ministerial consent for the Mobil Producing Nigeria Unlimited deal, but that it was ‘wholly untrue’.
Industry experts have warned that misapplication of laws which tend to deny Seplat the opportunity could discourage investment in Nigeria in the wake of industry reform meant to grow the sector.
A $1.28 billion bid by Seplat Energy Plc for shares in Exxon’s local subsidiary was initially backed by President Buhari despite opposition from the Nigeria National Petroleum Company (NNPC) Limited, Exxon’s partner on the blocks with a total capacity of 95,000 barrels of oil equivalent a day.
Buhari, who also doubles as oil minister, was reported to have reversed his decision, citing a lack of coordination among government agencies after the regulator, the Nigerian Upstream Petroleum Regulatory Commission, NUPRC, publicly rejected his approval.
The deal would have been established as the first major transaction to be announced since Nigeria passed the Petroleum Industry Bill, PIB, aimed at bolstering oil and gas investments after two decades of uncertainty.
The government is trying to reverse dwindling production and attract major investment into the sector that generates more than 90 per cent of export earnings.
Investors that have acquired Seplat’s shares following the approval of the deal will now be concerned about how this ends. Mariam Olabode, oil and gas analyst at Lagos-based Afrivest West Africa, said by phone: “The issue of oil theft, vandalism and insecurity along the pipelines is still there and they remain a concern to investors,” she said. “Now, we have this acquisition dispute.”
Potentially worse is the public contradiction between Nigeria’s president and its oil regulator having “a knock-on effect on other deals that are waiting on the outcome here,” said Gail Anderson, research director at consultancy Wood Mackenzie Ltd, reports Bloomberg.
Barrister Monday Ubani, former second Vice President, Nigerian Bar Association, NBA, and former chairman, Ikeja branch of NBA, said the country is known for policy inconsistencies but warned that this could be very disappointing especially to investors.
Ubani told the LEADERSHIP that the president’s back-and-forth directive on the issue could be misinterpreted, as he has no power, even as the minister of petroleum, to circumvent the law.
He argued however that if the deal by Seplat and ExxonMobil was consummated under the previous Petroleum Act, and if no section of the Petroleum Industry Act, PIA, overrides the agreement, it would then be a misapplication of the existing law. “I believe in the sanctity of contract and rule of law but it is important that no one is seen as going outside the prescription of the law,” he argued.
A senior advocate of Nigeria, SAN, in reaction to our request for proper interpretation of the PIA in relation to the matter, said, “I’m conflicted. I can’t express an opinion on the subject matter.” He did not want his name to be published. This is not the first display of indecisiveness in Nigeria’s oil sector under Buhari.
Early last year, petroleum licences belonging to Chinese-owned Addax Petroleum Corp were revoked, restored and revoked again this year. Rampant crude theft and insecurity in the Niger River Delta, where most of the oil is produced, has cut production to an all-time low, with the country unable to meet its set OPEC quotas. Meanwhile, oil majors are planning to exit part of their investments in Africa’s most populous country.
Oil majors will now look at their exit strategies before investing and possibly negotiate it from the outset, said Ayodele Oni, partner at Bloomfield Law Practice in Lagos. “The optics are not very good for the country.”
LEADERSHIP recalls that in what was almost a victory for Seplat after months of waiting, Buhari, on August 8, 2022, reportedly gave the nod to the Mobil-Seplat deal. The decision was made public via a press statement signed by his special adviser on media and publicity, Femi Adesina.
The statement said Buhari signed off the deal because of his commitment to driving investments in the oil and gas sector under the Petroleum Industry Act. According to the statement, “In his capacity as Minister of Petroleum Resources, and in consonance with the country’s drive for Foreign Direct Investment in the energy sector, President Muhammadu Buhari has consented to the acquisition of Exxon Mobil shares in the United States of America by Seplat Energy Offshore Limited.
Exxon Mobil had entered into a landmark Sale and Purchase Agreement with Seplat Energy to acquire the entire share capital of Mobil Producing Nigeria Unlimited from Exxon Mobil Corporation, Mobil Development Nigeria Inc, and Mobil Exploration Nigeria Inc, both registered in Delaware, USA.
Considering the extensive benefits of the transaction to the Nigerian energy sector and the larger economy, President Buhari had given ministerial consent to the deal. The president directed that the approval be conveyed to all the parties involved.
Exxon Mobil/Seplat are expected to carry out operatorship of all the oil mining licences in the related shallow water assets towards production optimisation to support Nigeria’s OPEC quota in the short term as well as ensure accelerated development and monetisation of the gas resources in the assets for the Nigerian economy.
President Buhari also directed that all environmental and abandonment liabilities be adequately mitigated by Exxon Mobil and Seplat. A source with deep knowledge of the industry told our correspondent that the deal had been sealed before the PIA and that Seplat, quoted both in London Stock Exchange and Nigerian Stock Exchange, engaged international lawyers with understanding of existing petroleum laws in Nigeria before embarking on the journey.
“Seplat fully engaged lawyers from the U.K., Switzerland and Netherlands to understudy the law and advise accordingly and the ongoing argument simply exposes a country without respect to sanctity of contracts and agreement,” the source said.
The commission chief executive officer of NUPRC, Gbenga Komolafe, said that the initial ministerial refusal of consent to the assignment conveyed to Mobil on the Seplat-Mobil deal stands despite Seplat’s swift amplification of the reported presidential consent, adding that the provisions of the PIA 2021 conferred on the Commission the powers of sole regulator of the upstream sub-sector of the industry.
“As it were, the issue at stake is purely a regulatory matter and the Commission had earlier communicated the decline of ministerial assent to ExxonMobil in this regard. As such, the Commission further affirms that the status quo remains. The Commission is committed to ensuring a predictable and conducive regulatory environment at all times in the Nigerian upstream sector.
“Let me just put it simply: as a Commission, we work strictly in line with the position of the law, and basically, we don’t react on the basis of news doing the rounds, but we work strictly in line with the law. And by virtue of the provisions of the petroleum industry act, under section 95, subsection 10, 14 and 15, the Commission’s powers in this regard are clearly stated.
“So, regarding the issue, my clarification will just be an affirmation that the position of the Commission stands in respect of the decline of the assets (sale), without prejudice to any other position.
“So, the position of the Commission as the authority involved in the regulation of the upstream, which had earlier been communicated to Mobil, stands. As far as the commission is concerned, nothing has changed. The status quo remains as far as we are concerned,” he said.