Yemisi Izuora
The Nigerian National Petroleum Company Limited, NNPCL, has raised reservations about Eni SpA’s sale of a subsidiary to local producer Oando Plc which could complicate the transaction.
The Italian firm announced on September 4 an agreement to sell to Oando one of its units that has a 20 per cent operating stake in four onshore oil and gas blocks. The deal is the latest in a string of asset sales concluded by international producers in onshore and shallow-water areas of the Niger Delta.
Eni’s failure to obtain NNPCL’s prior authorization for the sale ‘constitutes a grave breach’., spokesman of the Company said.
The failure to obtain the Nigerian National Petroleum Co.’s prior authorization for the sale “constitutes a grave breach” of the contract governing the joint venture that holds the four permits, it noted in a letter to the Eni subsidiary, which was dated September 4.
The NNPCL, “reserves its rights in relation to the said breach” including an entitlement to invalidate the agreement, the letter said.
The letter is “not an objection to the transaction,” NNPCL spokesman Garba Deen Muhammad said.
It is “only drawing attention to certain important clauses” in the joint venture agreement that “might have been overlooked in error,” he said. “Adherence to those clauses will protect the transaction now and in the future.”
Oando already had a 20 per cent interest in the licenses before the deal was agreed, while the NNPC holds a 60 per cent stake.
Eni denied committing any breach of the joint venture agreement in selling the subsidiary to Oando. While NNPCL has pre-emption rights, Eni had no obligation to inform the NNPCL in advance of the announcement, it said in a statement Thursday. “Preemption procedures and other consents will be duly and carefully followed,” it said.
Oando said in a statement on September 4 that completion of the transaction is subject to Ministerial consent and other regulatory approvals.
Oil majors have been offloading onshore and shallow water blocks located in a challenging operating environment where infrastructure damage from crude theft is a regular occurrence to domestic producers for more than a decade.
The trend is accelerating as international firms focus on deep-water projects in Nigeria.
Shell Plc and Exxon Mobil Corp. are also working to finalize sales that stalled under former President Muhammadu Buhari. A lawsuit over alleged pollution in the Delta is holding up Shell’s deal, while the NNPC has opposed Exxon’s agreement with Seplat Energy Plc and asserted a right to acquire the permits itself.
Even if the transaction between Eni and Oando is valid, that does not automatically mean the buyer will inherit the operatorship of the four licenses, the NNPCL said in the letter. That will be a matter for discussion between the NNPCL and Oando, it said.
However, NNPCL in trying to correct the seeming wrong impression has denied reports insinuating that it is opposing the sale of the Nigerian Agip Oil Company Limited (NAOC) shares to Oando Plc.
The NNPCL said in a statement on Thursday that the report in some quarters that it is against the sale is far from the truth.
“This is not correct,” Garba Deen Muhammad, the Chief Corporate Communications Officer, said in a statement.
“It has come to our notice that a routine communication in the form of a letter written by NNPC E&P Limited (NEPL) to its JV Partner, Nigerian Agip Oil Company Limited (NAOC) is being interpreted to suggest that NNPC Ltd. is opposed to the sale of NAOC shares to Oando PLC. This is not correct.
“NNPC Ltd. wishes to state that the letter was sent by NEPL, an NNPC Ltd. subsidiary.
“However, nowhere was opposition or objection to the transaction mentioned in the letter,
“NEPL is only drawing attention to certain important clauses in the Joint Operating Agreement (JOA) between it, NAOC and OOL; which might have been overlooked in error. Adherence to those clauses will protect the transaction, now and in the future,” the NNPC spokesman said.
