NNPC Will Protect Nigeria’s Interest in Divesting Oil Companies: GMD Kyari

The Nigerian National Petroleum Corporation (NNPC) on Monday assured that it would protect the interest of Nigeria in any transaction involving international oil companies interested in divesting from the country.

Group Managing Director of the corporation, Mr Mele Kyari, who spoke at the opening ceremony of the 2021 Society for Petroleum Engineers (SPE) Annual International Conference and Exhibition, also said the NNPC cannot stop any of the oil concerns from deciding to sell off any of their assets as far as the rules are followed.

The event which took place in Lagos had the theme: “The Future of Energy – a Trilogy of Determinants; Climate Change, Public Health, and the Global Oil Market.”

Kyari was obviously speaking against the backdrop of reports at the weekend of plans by Royal Dutch Shell, to fully sell off its subsidiary, Shell Petroleum Development Company (SPDC) because the company’s future plans no longer align with the operations of the Nigerian subsidiary.

The company did not deny the planned sale, but said consultations were still ongoing, although still at the early stages.

However, the NNPC listed a plethora of outstanding issues that have to be totally resolved before major oil companies can successfully divest their interests overseas.

According to the NNPC, they are: abandonment and relinquishment costs; severance of operator staff; third party contract liabilities; competency of the buyer; post-purchase technical, operational, and financial capabilities, especially in the era of activist investor’s sentiments against funding of fossil fuel projects and alignment with Nigeria national strategic interest.

Therefore, the NNPC boss noted that having learnt from previous experiences, the corporation was developing requisite divestment policies that will provide clear guidelines and criteria for exiting of partners’ interest in all its Joint Venture (JV) and Production Sharing Contracts (PSC) arrangements.

In a paper he delivered at the event , Kyari noted that while divestments create challenges for the NNPC, the corporation would ensure that it gets the right and competent investors to take position and add value to the assets, going forward.

Kyari stated that NNPC would make clear distinctions between divestment of shares and operatorship agreements under various joint operating agreements by leveraging its rights of pre-emption as well as evaluating the operational competency and track records of new partners.

“NNPC as a national oil company is leading multiple initiatives to address this and other issues. As we celebrate the passage of the Petroleum Industry Bill (PIB), we have moved our focus to improving security architecture through collaboration with major stakeholders.

“The Nigerian Upstream Cost Optimisation Programme (NUCOP) is working with operators and service contractors to challenge cost of operations and increase profitability and growth in the Nigerian oil and gas sector.

“On the other side, we are seeing a wave of divestment by oil majors operating Nigeria. NNPC as a national oil company cannot stop partners from divesting their interest, even though it creates challenge for us in ensuring that we get right and competent investors to take position and add value to the assets.”

Furthermore, he said the NNPC would ensure that Nigeria’s national strategic interest was safeguarded, by developing a comprehensive divestment policy that would provide clear guidelines and criteria for divestment of partner’s interest.8In addition, Kyari said the NNPC was set to play a key role in the global transition to low-carbon energy in the near future, stressing that the country’s tremendous natural gas reserve has become its greatest enabler to smooth transition to a carbon-free future.

He noted that Nigeria was deepening its natural gas utilisation under the National Gas Expansion Programme (NGEP) to earn more carbon credit and create a net zero carbon environment in line with its drive of becoming an energy company of global excellence.

He explained that the NNPC was extending its natural gas infrastructure backbone through the OB3 and Ajaokuta-Kaduna-Kano (AKK) gas pipelines to deepen domestic gas utilisation, support industrial growth and job creation.

According to him, although the world was yet to reach consensus on the focus of the energy transition, the NNPC has continued to see new investment patterns toward low-carbon energy sources and technologies, such as wind, solar, hydrogen, natural gas and bio-fuels, with wider business implication on the oil and gas industry.

As an oil dependent economy, he said the global transition to non-fossil sources of energy would mean declining revenue, foreign exchange and funding of projects particularly in the context of green finance.

However, he argued that looking at both climate and population change dynamics, anticipated economic growth and rising global population especially in Asia and Africa will increase energy consumption beyond what renewable energy sources can meet by 2050.

He also said the NNPC would soon unveil a Comprehensive Divestment Policy (CDP) that would guide the entire divestment process.

According to Kyari, the NNPC would in subsequent deals, tweak its rules of engagement by making clear distinctions between divestment of shares and operatorship agreements under various joint operating agreements, while leveraging its rights of pre-emption as well as evaluating the operational competency and track records of new partners.

Kyari reckoned that the imperatives of energy transition and the influence of activist investors on the global energy industry are making oil and gas companies diversify their portfolio to low-carbon investments by whetting the appetite for investment in cleaner energy sources like; wind, solar, hydrogen, natural gas and bio-fuels.

Kyari stated that the corporation would declare its first dividend to Nigerians soon. He said the NNPC is currently preparing to release its 2020 financial statements in the third quarter of this year.

Kyari said, “Everything we are doing must align with the wider national interest. And therefore, NNPC, being the representatives of all of us and, is, of course, a very potential global player – this is our ambition and we are getting there.

“And I can tell you, within the next month or two maximum, we will publish our statement of accounts for 2020. And I can also confirm to you that for the first time in our history, we will declare dividend to the Nigerian people.”

Emmanuel Addeh in Abuja and Peter Uzoho in Abuja

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