The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) said the framework, which consists of seven cardinal pillars, would also guide other similar investments in the country.
The Nigerian government has developed a divestment framework to guide the assessment of applications for ministerial consent to Shell Petroleum Development Company of Nigeria Limited (SPDC).
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) Chief Executive, Gbenga Komolafe, said the framework, which consists of seven cardinal pillars, would also guide other similar interventions in the country.
Mr Komolafe disclosed this at the NUPRC-SPDC divestment workshop in Abuja on Monday.
In January, the Nigerian unit of London-based oil supermajor Shell Plc announced a deal with a consortium of five companies, setting the scene for the latter to acquire its onshore business in the country.
SPDC will get up to $2.4 billion from the transaction, including an initial sum of $1.3 billion.
A further payment of $1.1 billion relating to prior receivables and cash balances is expected at the consummation of the deal, Shell said in a statement at the time.
On Monday, Mr Komolafe said the SPDC currently operates the SPDC JV assets on behalf of its Joint Venture (JV) partners, namely NNPC Limited and Total Upstream Nigeria Limited, Nigeria Agip Oil Company and SPDC.
He explained that the SPDC JV OMLs were initially awarded Oil Exploration Licence -1(OEL-1) on 1 January 1949, covering the whole of southern Nigeria and Cameroon.
Ultimately, he said the assets were converted to OMLs on 1 April 1962 and renewed in 2014 and 2018 for 20 years.
To date, he said the assets have achieved a cumulative production of 5.35 billion barrels of crude oil, 165. Fifty-seven million barrels of condensate, 9.51 trillion cubic feet of Associated Gas and 3.75 trillion cubic feet of non-associated gas contributed immensely to the achievement of Nigeria’s crude and condensate output.
“The assets being considered have an estimated total reserve of 4.96 billion barrels of oil, 1.77 billion barrels of condensate, 28.16 trillion cubic feet of associated gas and 28.11 trillion cubic feet of non-associated gas.”
This, he said, makes a significant contribution to the nation’s hydrocarbon resources.
Additionally, he noted these assets hold P3 reserves estimated at 2.85 billion barrels of oil, 850.85 million barrels of condensate, 11.3 trillion cubic feet of associated gas and 12.26 trillion cubic feet of non-associated gas.
“Our goal is clear at this due diligence meeting: to identify a successor who not only possesses the requisite financial resources but also demonstrates the technical expertise to manage these assets throughout their lifecycle responsibly.
“Furthermore, we must ensure that the inherent environmental and end-of-life liabilities, i.e. decommissioning liabilities, are accurately identified and assigned to the party best equipped to bear the associated risks. This necessitates a comprehensive understanding of regulatory requirements, industry best practices, and the unique challenges inherent in oil and gas operations.
“The NUPRC is committed to free entry, free exit business principles aimed at encouraging investors in the sector. We understand the importance of providing a stable regulatory framework encourages investment and confidence. To this end, we have implemented robust measures to streamline regulatory procedures and eliminate unnecessary barriers to investment,” Mr Komolafe said.
He said the commission had developed a divestment framework consisting of seven cardinal pillars to guide the assessment of applications for ministerial consent to the SPDC and other similar divestments.
These pillars include technical capacity, financial, legal, decommissioning & abandonment (D&A), host community trust/environmental remediation fund, industrial relations and labour issues and data repatriation, he said.
The successor entity must demonstrate proven and verifiable capacity to operate the asset vigorously and in a business-like manner.
“The commission shall assess the prospective successor entity’s balance sheet and financial viability and verify readiness to undertake a defined work programme and fulfil required obligations on the assets.
“The acquiring entity must, in line with the interest of the nation, be ‘fit and proper’ persons in the eyes of the law. Clear evidence of the resolutions of legacy debts and legal encumbrances must be established, and appropriate mechanisms to manage residuals must be agreed upon.
“Applicable D&A costs must be diligently assessed and ensure settlement of outstanding obligations. Commission to ensure that potential exposure of the Nigerian government to decommissioning liabilities is averted,” he added.
He noted that the commission should assess the status of host community trust fund obligations and ensure the robustness of the successor entity’s adherence to decarbonisation plans and sound Environmental, Social & Governance (ESG) principles.
“The commission shall implement a robust assessment mechanism to avert undesirable labour union issues and disharmony arising from the divestment process. Concerned parties shall endorse a “Certificate of Settlement” to validate alignments reached on all labour issues (staff welfare, benefits, entitlements as well as disengagement, redundancies, retirement, etc.).”
The aim, he said, is to ensure the nation averts socio-economic disruptions arising from failure to resolve labour issues that might result because of post-divestment.
He further explained that the commission should ensure that all data mining during the asset’s operating life is repatriated to the National Data Repository (NDR) in line with extant regulations.
“Let me emphasise that the NUPRC wholeheartedly welcomes investment in the Nigerian upstream petroleum sector. We recognise the critical role investment plays in driving innovation, creating employment opportunities, and ultimately fueling economic prosperity for our nation and its people.
“Therefore, we are always eager to welcome local and international investors who choose to invest in the Nigerian upstream petroleum sector. We are fully committed to facilitating and supporting investment initiatives that align with our national development goals.
“However, we emphasise that cooperation with the investment process is essential. I urge SPDC and Renaissance to engage proactively, adhere to regulatory requirements, and work collaboratively with the NUPRC to ensure the successful conclusion of the Shell divestment,” he said.