Equinor, Exxon Mobil, Shell, and other oil majors have sold or are planning to sell their Nigerian assets to local companies.
The divestment trend, which has accelerated in recent years, is attributed to concerns over security in the Niger Delta and a global push towards cleaner energy.
Critics argue that these divestments may not lead to better environmental practices, as local companies taking over might have less stringent emissions controls.
The oil and gas multinational divestment from the Niger Delta that kicked off over a decade has now hit fever pitch. Hordes of oil and gas majors have exited the Nigerian market in the current year, with their timing curious considering they are leaving a few years after the country opened its doors wider exploration courtesy of the Petroleum Industry Act (PIA) 2021.
The latest development came in November when Norwegian oil and gas giant Equinor ASA (NYSE:EQNR) finalized the sale of Equinor Nigeria Energy Company (ENEC) to local firm, Chappal Energy. The sale brings to a close the company’s three-decade-long partnership with Africa’s largest oil producer, during which Equinor pumped more than a billion barrels of crude from the Agbami Field. Prior to that, Chinese company Addax sold its four oil blocks to Nigerian state oil company, NNPC. In September, the Italian energy multinational Eni S.p.A.(NYSE:E) announced plans to sell its onshore operations to local entity Oando.
Additionally, back in February, U.S. oil and gas supermajor Exxon Mobil Corp. (NYSE:XOM) announced plans to sell its equity interest in Mobil Producing Nigeria Unlimited, which holds more than 90 shallow-water and onshore platforms as well as 300 producing wells, to Seplat Energy Plc. for approximately USD1.3 billion. Former President and Oil Minister Muhammadu Buhari initially approved the deal before reversing his decision. A final decision is yet to be made. Exxon, however, announced it will continue with its deep-water operations, “ExxonMobil will maintain a significant deep-water presence in Nigeria, including interests in the Erha, Usan and Bonga developments via Esso Exploration and Production Nigeria Limited and Esso Exploration and Production Nigeria (Deepwater) Limited”, the company said in a statement.
Escaping Justice?
But the most dramatic divestment drive in the Niger Delta has been by none other than Anglo-Dutch supermajor Shell Plc (NYSE:SHEL). Since 2010, Shell Petroleum Development Company of Nigeria (SPDC), has sold off several of its stakes in onshore oil fields in the Niger Delta with little fanfare. In its 2014 annual company report, Shell revealed that it had sold eight Oil Mining Leases in Nigeria between 2010 and 2014. During last year’s report, Shell revealed it had already sold 50% of its Nigerian oil assets. In April 2022, Shell confirmed it was selling its interest in several onshore and shallow water fields, producing over 20,000 barrels of oil equivalent per day.
The million-dollar question at this point is why all these transnational oil companies are packing their bags after six decades of exploiting Nigeria’s massive oil and gas resources.Well, two things, according to the IOCs: insecurity and climate concerns.
“We cannot solve community problems in the Niger Delta; that’s for the Nigerian government perhaps to solve. We can do our best, but at some point in time, we also have to conclude that this is an exposure that doesn’t fit with our risk appetite anymore,” Shell Chief Executive Officer Ben van Beurden told shareholders while speaking at the company’s annual general meeting in May 2021.
Similarly, in April 2022, TotalEnergies’ (NYSE:TTE) Chief Executive Officer, Patrick Pouyanne, talked about “disruption of local communities are sources of great concerns” as the reason for the company’s divestment.
For ExxonMobil, it’s simply a question of priority in investment, “This sale will allow us to prioritize competitively advantaged investments in our strategic assets, and it supports the Nigerian government’s efforts to grow its oil and gas operations,” Liam Mallon, President, ExxonMobil Upstream Oil and Gas, said in the sales statement.
Chevron Corp. (NYSE:CVX) and Eni offered similar justification as their bigger peer.
Although these companies have mostly cited insecurity and prioritizing their other assets as the key reasons for exiting the Niger Delta, the climate angle could be just as important. After all, as the world continues grappling with climate change, oil majors have been selling off polluting assets around the globe. To wit, Shell has repeatedly said in annual reports that divestments in Nigeria and elsewhere have been playing an important role in decreasing the company’s greenhouse gas emissions.
But not everybody is buying these claims. In its recent report, ” Dirty Exit”, We the People claims the divestments are simply a criminal flight designed to escape justice after decades of massive pollution in the Niger Delta.
” Since that landmark ruling about Shell’s parent company having to answer for the crimes done by their Nigeria branch, there has been a new wave of lawsuits in Nigeria and the home countries of oil companies demanding justice for abuses. For most of the communities in the Niger Delta, there is finally a real prospect of holding oil companies accountable for decades of destruction,” the report explains.
Ironically, the Washington Post has reported that communities left behind after these oil giants sell their Niger Delta assets have fared even worse with local companies doing an even more shoddy job on emissions control.
By Alex Kimani for Oilprice.com
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