NNPC Seek To ‘Pre-empt Mobil On Asset Sale To Seplat.’

According to reports, the Nigerian National Petroleum Company (NNPC) Limited may have thrown a wrench in the highly publicized deal that would have seen Seplat Energy, an indigenous oil company, buy ExxonMobil’s oil shares.

The first deal between ExxonMobil’s Nigerian unit, Mobil Oil Producing Nigeria Unlimited (MPNU), and industry leaders since the signing of the Petroleum Industry Act (PIA) in August last year has received praise.

According to reports, the Sale and Purchase Agreement (SPA) to acquire MPNU’s entire share capital was for $1.283 billion, plus up to $300 million in contingent consideration.

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Platforms Africa, a news, business, and leadership publication, reported that the state-owned oil giant had exercised its Right of First Refusal (RFR) on the asset sale.

According to reports, the RFR is included in the Joint Operating Agreement (JOA) of the Joint Venture (JV), which represents NNPC’s position on the planned sale of the shares to Seplat Energy Plc.
Attempts to reach NNPC for comment on the matter were unsuccessful at first, but a top source in the oil company said, “We will address it at the appropriate time.”

However, an anonymous industry source said last night that NNPC’s action could lead to a legal battle between Seplat and the national oil company. According to the source, NNPC does not have the authority to stop Seplat from buying the shares of the multinational oil company.

“Seplat bought ExxonMobil’s shares, not assets,” the source said. While NNPC has pre-emption rights over asset sales, it does not have such rights over stock sales.”

Furthermore, the source explained that, with its current structure, NNPC was no longer a regulator, as it had been in the past, and that “so, the regulator is the one who can intervene in the matter.”

“However, they must check the Production Sharing Contract (PSC) because if they say they are taking over ExxonMobil, they are taking over employees, pensions, and liabilities, not assets,” the source added.

According to reports, NNPC had already informed Mobil Producing Nigeria Unlimited of its intention to exercise the right of pre-emption on ExxonMobil’s planned sale of its entire onshore and shallow water asset in Nigeria.
However, according to a reliable source, the politics surrounding the deal’s cancellation could significantly derail the new vigor that the Petroleum Industry Act (PIA) was supposed to bring to the industry.
It was learned that the NNPC planned to enter into a “strategic management contract” with a company owned by a northerner who works in the oil and gas industry.

According to industry sources, the state-owned oil company, which is the majority shareholder in the joint venture with ExxonMobil, may have exercised its right of first refusal on the assets as part of a new era in which the NNPC Limited’s sole focus will be on long-term profitability.

Following ExxonMobil’s decision to receive bids for their share of the JV, the Mele Kyari-led company had previously communicated its intention to exercise its rights and match any offer made by interested parties for the assets, according to the platform.

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Following that, Seplat Energy submitted a winning bid for the assets, and ExxonMobil and Seplat Energy reached an agreement.
The right of pre-emption gives parties in a joint venture the legal right to be the first to be considered for any planned sale or takeover of assets in the JVs if either party decides to sell them.

Platforms Africa obtained a copy of a letter signed by NNPC’s Group Managing Director, Kyari, and addressed to ExxonMobil, which stated that the company’s share of the assets would be taken over.
“We are aware that you have agreed to divest from onshore and shallow waters joint ventures,” the letter stated, adding, “Clearly, we are interested.”

ExxonMobil had previously stated that the deals were subject to approval and the new NNPC position, implying that the entire sale and purchase agreement between ExxonMobil and Seplat Energy had to be terminated.

Seplat Energy, the winning bidder, had put up more than $1.2 billion for the deal to buy MPNU’s entire share capital plus contingent consideration, and was awaiting ministerial approval before the latest development.

This meant that the state-owned oil company could not pay less than $1.2 billion if it exercised its right of first refusal.

According to the letter, NNPC reiterated that it had already transformed from a corporation to a profit-driven company, and that it now had the capacity to purchase ExxonMobil’s share of the joint venture.
The NNPC recently announced a $5 billion funding agreement with Afreximbank to expand its upstream asset investment in new and existing assets.

The publishers of Africa Oil and Gas Report recently expressed concern about the national oil company’s attempt to crowd out private investors, saying that enough room should be created for some level of investment diversity. That alarm has now proven to be a wakeup call on what appears to be a grab-all attitude.

In response to NNPC’s assertion of pre-emption rights, the magazine’s publisher, Toyin Akinosho, who spoke on Arise News Channel, urged NNPC to make room for entrepreneurs, claiming that the company already has a lot on its plate and is struggling to cope.

“NNPC is in a joint venture with companies that produce at least 45 percent of our crude,” Akinosho said. They already have a lot of material. “Of all the assets in the industry, the assets they operate are the least optimized.”
He wondered why the national oil company was allegedly stifling investment in the sector, while accusing it of grabbing assets all over the country. According to him, the types of partners to whom NNPC may hand over assets are never the most experienced in the field, and the entire idea is to “gift” the assets to a third party.

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“Any excuse that ‘this is being taken over in the interest of the state’ is false. It has implemented Finance and Technical Service Agreements (FTSAs) with companies that it chooses to work the assets in the last three years,” he added.