Sopuruchi Onwuka

The ongoing business divestment programme that has beset the Nigerian upstream petroleum industry is throwing up a number of concerns over actualization of the prime national economic aspirations through deliberate positioning of capable Nigerian companies for eventual crew change, especially in the deepwater industry terrain.

The concerns heighten as another rookie player takes equity space in the industry following divestment of non-operating stakes previously held by Norwegian Equinor.

In a head-raising $1.2 billion investment that concluded last year, relatively indistinguishable Chappal Energies launched a surprise entry into the Nigerian petroleum industry; taking prime advantage of the prevailing divestment of commercial interests in a number of assets hitherto held by international oil companies.

Specifically, Chappal made headlines with the acquisition of significant stakes divested by Equinor, formally Statoil, in the Nigerian deepwater oil blocks hosted in Oil Mining Leases (OMLs) 128 and 129; using bizarre special purpose entities like Project Odinmin in the stealthy move which left other contenders for the assets totally bemused.

With the Equinor’s stake acquisition, Chappal now holds remarkable 53.85% ownership in the Ataliba operational area in OML 128, and a 20.21% stake in the Agbami deepwater field operated by Chevron on behalf of the carried license holder, Folorunsho Alakija’s FAMFA Oil.

The deal also confers Chappal with 26.93% in OML 129 which hosts non operating interest in the Nnwa-Doro gas field, and a 53.85% operating interest in the undeveloped Bilah and Sehki fields.

In less than a year after snatching the Equinor’s stakes in the deepwater assets, Chappal also grabbed the 10 percent stake hitherto held by TotalEnergies in Shell Petroleum Development Company (SPDC) Limited. The $860 million acquisition deal confers Chappal with proportionate 10% interest in 15 OMLs and associated industry facilities and infrastructure owned by the SPDC joint venture.

The OMLs, according to the company, host over 40 producing fields with a network of pipelines, flow stations, processing facilities and two major terminals.

The Oracle Today reports that Shell which hitherto operated the NNPC/Shell/Total/Agip joint venture with 30 percent commercial interest is offering up its stake in the business to the Renaissance Consortium, leaving partners like TotalEnergies and Eni with little option than to also divest their respective stakes in the joint venture.

And the entry of Mauritius the registered foreign company, Chappal, into the scenario has raised serious anxiety about the upshot of ongoing efforts to build indigenous capacity for eventual displacement of foreign multinational firms as the global energy industry undergoes green transformation and demand diversification.

Thus, there has been high expectation that managing entry of new players into the Nigerian deepwater terrain which is perceived to form the next biggest hub of the domestic oil and gas play should demonstrate strong policy coordination in realizing the key objectives of the Nigerian Content law as it pertains to prioritizing indigenous access to assets.

According to the Nigerian Oil and Gas Industry Content Development (NOGICD) Act of 2010, the country’s acreage administrators are under obligation to consider indigenous companies ahead of foreign firms in the event of contest for petroleum assets.

And in the case of the prevailing divestments, NOGICD Act has, right from inception, formed the guiding principle adopted by the divesting multinationals to concede their commercial stakes and operating rights exclusively to capable indigenous companies in line with the spirit of the law.   

The divestment moves which started around 2008 with audacious steps by some notable indigenous industry stalwarts with demonstrated capacity for value generation were based on direct commercial negotiations that received regulatory approval upon consummation.

Since then, analysts have stridently pointed at the urgent need to position indigenous companies for the inevitable replacement of foreign operators that are currently under pressure from home governments to support the prevailing global campaign to migrate energy demands from fossil fuels.

Therefore, it is in the emerging complexities that accompany the prevailing intervention of the regulator in the divestment deals that it becomes difficult to interpret the role of government as non-disruptive to its own targets on local content development.

Before the latest interferences by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) in the divestment process, significant progress was made by indigenous divestment pioneers whose commercial drive and dexterity have today saved Nigeria from production shocks that would have resulted from worsening situations in the operating environment where output by foreign firms was steadily plummeting.  

According to latest statistics from the NUPRC, divestment deals currently rife in the onshore and shallow water petroleum industry have already transferred significant production responsibility to indigenous companies that have showed strong operating capacity.

Chairman of the Independent Producers Group (IPPG), Mr Abdulrasaq Isa, declared at the 2025 Nigerian International Energy Summit (NIES) that members of the group which comprises mostly indigenous players currently account for over about 50 percent of national average daily output of petroleum liquids. And the significant jump in the volumes produced by the indigenous players result from their bold unsolicited offers to relieve frustrated multinational oil firms from the vulnerable onshore, swamp and shallow water locations.

And in mirroring the trends already seen onshore and shallow water, the foreign fringe players like Equinor have started their exit from the Nigerian deepwater. And as the foreign multinationals begin to respond ESG commitments, industry experts have advocated early positioning of strong and proven indigenous companies for smooth transition of control.

It is therefore in the foreground of the urgent need to install indigenous peer leaders in the deepwater that emergence upstream upstarts like Chappal Energies has raised worry over their invisible capacity for operating responsibility in the deepwater, especially in the face of prevailing portfolio rationalization by big multinational firms.

So the entry of Mauritius based upstart in the divestment fray also raised a lot of questions about its capacity to make palpable contribution to delivering on prime national economic aspirations for the petroleum industry.

The questions become very pungent in view of the amorphous nature and current form of the company which registered as a foreign company even when it is purported to be owned by Nigerians. The company also appears to lack technical leadership as the principal officials and founders are not core industry professionals.

Thus, from being a foreign company to lacking reputable technical leadership, concerns over the role of Chappal in the industry are also based in the foreground of already woeful impact of indigenous operating companies that are currently carried in exploration and production ventures.

Chappal, which has no notable operating pedigree anywhere in the global petroleum industry, becomes the third indigenous company in coveted deepwater without any potential to generate any operating impact in the immediate to near future when the industry is expected to navigate total change from international to indigenous control.  

With the growing number of indigenous and quasi-indigenous companies occupying positions in the prolific terrain, concerns are high that the increasingly low operating capacity would predictably transform them into liabilities that pose vulnerability to the Nigeria’s petroleum industry future.

Expectations have been that regulation in the industry would set capacity yardsticks for companies that pursue asset acquisitions in the deepwater terrain. Such standards have already been established by capable indigenous players that are effectively changing out the international oil companies from the conventional operations in the Niger Delta where divestments have produced positive results.   

Engr Abdurasaq Isa states that apart from taking responsibility for about half of the Nigerian petroleum liquids production, the divestment programme has enabled indigenous companies to also produce greater volumes of natural gas output.

Thus, the deliberate choice of indigenous companies by divesting multinational oil firms for transfer of business interests and asset operating rights is perceived as not just a logical support for local capacity development but also a justifiable recompense to placate local economies from where huge capital is exported through divestments.

Since 2010 when Shell and partners sold their stakes in select brownfield assets hosted in operated joint venture, divestment has remained an acceptable entry port for indigenous companies to showcase efficient operating capacity and also take positions for greater responsibility in resource valorisation.

Through successful divestments that saw international oil companies pull over $12 billion from the Nigerian economy, indigenous companies like Seplat, Oando, First E&P, NEPL, Aradel, ND Western, WalterSmith and others have taken responsibility for increasingly growing production outputs, infrastructure development and downstream processing investments in the petroleum industry.

While plaudits continue to pour in for the leading indigenous exploration and production champions, very sad tales come from some indigenous companies whose performances in managing assigned assets continue to question the integrity of some asset acquisition deals.

And questions continue to rise about the processes that secured asset acquisition approvals even with hard posture of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) which is dreaded as the hardest obstacle to closing divestment deals. It thus continues to beat logical imaginations on how some strange industry neophytes with little or no pedigree beat back indigenous legends to clinch prized assets even in the deepwater where only the best of expertise are expected to venture.

It follows therefore that the palpable pattern of approving the new set of asset acquisition deals in the country clearly defies the avowed pillars propounded by the NUPRC that places long term national economic agenda in the forefront of approval considerations.

Whereas the Commission Chief Executive (CCE) of the NUPRC, Engr Gbenga Komolafe, tries to explain that entry barriers have been lowered to attract investments in the industry, discernible analysts consistently call on the government to fiercely pursue policies that emphasize capacity-driven Nigerian Content implementation.

The Oracle Today reports that replacing current crop of deepwater players with mere equity investors comes with great risk to the sustainability of the industry especially now that the foreign multinational players have already lifted up a foot from the onshore locations towards eventual exit from the country.