FG to earn N2.7tn from oil blocks

Proceeds from the sale of oil blocks in the country are expected to hit $16.5bn (N2.7tn) by December as the International Oil Companies continue to divest their stakes of shallow water assets.

Already, Shell, Chevron, Total and Agip have sold parts of their stakes in the Nigerian oil and gas industry, raking in $6.7bn. This is expected to reach $8.5bn by the time Oando Energy Resources concludes a $1.7bn ConocoPhillips acquisition this year.

Investment analysts and advisors close to the transactions said another $8bn would be made by the IOCs this year from 13 oil blocks already being put up for sale with bidding round nearly completed.

The Director, CBO Capital Partners, an advisory and investment management firm based in Lagos, Mr. Chuka Mordi, said, “The scaling back of western oil operations in recent years has been a particular theme in Nigerian M&A.

 With a total completed deal size of over $6.7bn between 2010 and 2013 and approximately 13 transactions in the pipeline, the potential is significant.

“The completion of the ConocoPhillips deal before the end of this year will raise that figure to more than $8.5bn over three years.

 Once the 13 transactions have been completed, a value of between $4bn and $8bn could be created.”

The IOCs operating in Nigeria began assets divestment 36 months ago when the United Kingdom gas group, BG Group, in 2009, pulled  back funding for the Olokola LNG project on which it partnered with Chevron, Shell and the Nigerian National Petroleum Corporation, and sold rights in three oil prospecting licences – 332, 286 and 284.

Other IOCs have since relinquished their stakes in shallow water oil blocks and more are currently being put up for sale.

 For instance, Chevron is close to finalising the sale of five shallow water blocks (OML 52, OML 53, OML 55, OML 83 and OML 85), which are estimated to hold as much as 250 million barrels of oil reserves and are valued at $1.5bn.

 Indigenous operators are currently responsible for 226,000 barrels out of the country’s daily output of 2.4 million barrels of oil per day. 

This, he reasoned, would change the rules of engagement in the oil and gas industry.

 There is an absolute necessity for our indigenous capacity to grow.”

 

The Federal Government had in 2003 awarded 24 marginal fields to 31 players but only eight have started producing oil as of December 2013.

Seventeen fields are not producing as a result of financial and technical constraints and the duo of Mr. Chuka Mordi and Bex Nwawudu, both directors at the CBO Capital Partners, have put the development cost of these oil fields at between $40m and $70.