Adedapo Adesanya
By Adedapo Adesanya
Oando has projected to double its production to 50,000 barrels per day of oil equivalent with the closure of its landmark deal with Eni, which it says is imminent.
This was disclosed by the oil and gas firm’s Chief Operating Officer, Mr Alex Irune, to S&P Global Commodity Insights at the weekend, noting that the firm intends to scale up to 100,000 barrels per day by 2029, thanks to new drilling and security improvements.
The Nigerian company’s bid to buy the Italian major’s entire Nigerian upstream business reflects a major shift in Africa’s biggest oil producer, with local firms replacing departing International Oil Companies (IOCs).
Business Post had reported that the deal had come under scrutiny, including from local workers.
However, Mr Irune disagreed that approvals had been an issue.
“What we are seeing is a careful, considered approach to ensuring that the country isn’t materially impacted in a negative way, ensuring the indigenous players are able to straddle the horse and ride it into the horizon,” he said.
Through the deal, Oando will become one of Nigeria’s biggest domestic producers which is currently “working through the obligations under the Share Purchase Agreement” and is “on track” to close the deal this quarter, Mr Irune said.
The estimated $500 million acquisition covers four oil-producing blocks OMLs 60, 61, 62 and 63, which comprise a joint venture alongside the Brass terminal, onshore exploration concessions and power plants.
Eni currently holds a 20 per cent operating stake in the JV alongside Oando with 20 per cent and state-owned Nigerian National Petroleum Company Limited (NNPC) with 60 per cent.
Oando, which is run by Mr Adewale Tinubu is currently producing 25,000 barrels per day and following the deal, its JV stake will rise to 40 per cent.
Production rises over the next five years will be achieved through drilling programmes on marginal fields, particularly Qua Iboe (OML 13) and Ebendo (OML 56).
“We’ll be drilling four to five wells on these two fields over the next 18 months. Both fields have easy access to export terminals, including the Escravos pipeline system in the case of OML 56,” he emphasised.
The Eni agreement was first signed in September. It follows home-grown Seplat’s battle to take over ExxonMobil’s onshore business.
Meanwhile, Shell has agreed to sell its onshore assets to a consortium of mostly local companies and Equinor has signed a deal to divest its assets to Mauritius-based Chappal Energies.
The trend indicates an IOC exodus from mature African basins and a shift towards frontiers like Namibia and Guyana, less carbon-intensive projects and less risky offshore developments.
This raises questions about Nigeria’s ability to boost the sector that has been plagued by underinvestment, inadequate exploration and the scourge of crude theft in the Niger Delta.
To this effect, Mr Irune insists that local firms were well-equipped to rejuvenate the sector.
“The government is certainly in support of this transition and keen to see indigenous players step into those roles and deliver,” he said. “If you look at the local companies that have stepped forward…there’s no doubt that the indigenous capacity exists,” he added.
Asked about the apparent delays in approvals, Mr Irune added: “Acquisitions of this nature are relatively novel and for the first time the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has set a framework for divestment where there are certain criteria that you must get through to qualify, and that process takes its course.”
At the same time, local ownership could actually reduce theft, which was costing Nigeria 400,000 barrels per day in August 2023, according to the government’s security adviser, by giving communities a bigger stake in the success of the industry.
“My personal opinion is having indigenous players will definitely improve issues around fairness and this need to engage in sabotage and theft,” he said.
He said with this smaller companies can build a more cohesive and collaborative oil sector.
“We’re not going to be ‘siloed’ global companies with headquarters in Houston. Nigeria is our headquarters,” he pointed out.
