Eni set out its deal to sell its onshore unit to Nigeria’s Oando earlier this week but has swiftly run into problems, raising some similarities with Seplat Energy’s difficulties.
The Italian company set out its plan on September 4. The deal, for an undisclosed amount, will see Oando acquire Nigeria Agip Oil Co. (NAOC), which has production of around 24,000 barrels of oil equivalent per day.
Nigerian National Petroleum Corp. (NNPC) has not approved the sale, local newspapers reported. The news agency, citing a letter from NNPC, said the sale was a “grave breach” of the contract on the joint venture.
NNPC “reserves its rights” over the breach. Failure to obtain approval allows NNPC E&P Ltd (NEPL) to “invalidate the purported assignment” to Oando.
NNPC has a 60% stake in the joint venture, while Oando and NAOC each have 20%.
Oando defended the sale on the basis that the agreement involved the sale of shares in a subsidiary, rather than reassigning an interest in the joint venture. The transaction does not cover NAOC’s 20% stake in the venture, but NAOC itself.
NNPC appeared to downplay the letter to NAOC. In a statement, the company said that it was “not correct” to report NNPC was opposed to the sale of NAOC to Oando.
“NEPL is only drawing attention to certain important clauses in the Joint Operating Agreement (JOA) between it, NAOC and OOL; which might have been overlooked in error. Adherence to those clauses will protect the transaction, now and in the future.”
The Exxon comparison
NNPC had raised some similar concerns on Seplat’s acquisition of ExxonMobil’s Mobil Producing Nigeria Unlimited (MPNU) in July 2022. Seplat said the agreement was on the acquisition of MPNU. The unit itself was not a party to the deal.
NNPC appeared interested in acquiring MPNU for itself.
Oando acquired its 20% stake in the joint venture in 2014, when it paid $1.5 billion to buy out ConocoPhillips’ interest.
The sale would also see Oando take control of the Brass terminal.
“We do not expect that the concerns raised by NNPC … will cause a collapse of the deal,” said SBM Intelligence’s Seyi Awojulugbe. “However, it will likely result in an extension of the timeline to complete the deal.”
This Day reported that the Pengassan union had halted operations at Brass and other assets, as of September 5. The union objected to the sale over an alleged lack of proper consultation.
“NAOC management only told workers about the sale on September 4, the day the deal was made public, having denied plans for any such sale when worker representatives asked at a meeting in July”, Pengassan said.
Reports suggested the Pengassan action had restricted gas flow to Nigeria LNG (NLNG) and the local supply of power.
SBM’s Awojulugbe said the union was concerned over “employee rationalisation and layoffs. However, we expect this will be resolved in the coming days.”
Updated at 3:12 pm with comments from SBM’s Awojulugbe.