THE approval by President Muhammadu Buhari of the acquisition of ExxonMobil’s assets by Seplat Energy is a violation of the provisions of the new Petroleum Industry Act ( PIA), two oil industry experts have said.
Buhari had, in a statement issued by his spokesman, Femi Adesina, on Monday, August 8, 2022, granted consent to Seplat’s acquisition of a unit of ExxonMobil’s assets.
But, in a swift reaction, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) issued a statement overruling Buhari’s consent, saying it had the sole authority to deal with such matters in the Nigerian upstream sector.
In the NUPRC statement issued late last night by its Chief Executive, Gbenga Komolafe, the agency directed that the status quo be maintained.
The statement read, “The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) affirms that the statua quo remains in respect of ExxonMobil/Seplat share acquisition.
“Responding to media enquiries on latest developments about the transaction, the Chief Executive of the NUPRC, Engineer Gbenga Komolafe, clarified that the Commission, in line with the provisions of the Petroleum Industry Act 2021, is the sole regulator in dealing with such matters in the Nigerian upstream sector.
“As it were, the issue at stake is purely a regulatory matter and the Commission had earlier communicated the decline of Ministerial assent to Exxonmobil in this regard. As such, the commission further affirms that the status quo remains.”
Industry watchers knowledgeable about the oil and gas sector warned that the clash between the Presidency and the NUPRC could create violations of the PIA and deal a blow on investors’ confidence.
“We must always revert to the law and what it says, especially on who has the right of denial and right of approval. In the old system, the President had all the rights, but under the PIA, power is vested on the regulatory commission,” An oil sector governance expert, Henry Ademola Adigun, told THE ICIR.
Adigun described the clash on approval of the ExxonMobil-Seplat deal as “corruption” rather than mere “power play”, stressing that the development revealed an absence of leadership.
“The reason we have this kind of scenario is because we have a President who doesn’t understand the issue, and people are playing on his weakness.
“What is playing out could be lack of understanding of the law and possibility of power play. Section 95 of the Petroleum Industry Act explained acquisition and merger in the oil and gas industry,” he said.
Another oil and gas analyst, Mustapha Wahab, said the conflict did not inspire confidence for investors.
Quoting the relevant sections of the law, Wahab said, “Section 95 of the Petroleum Industry Act (PIA) says a holder of petroleum exploration or mining licence cannot transfer their interest to another party, without a prior written consent of the Minister. In another sub-section, it says without the written consent of the Commission.
“Further down, it says that the consent of the Minister shall be granted. What this means is that the Minister has powers but based on the recommendations of the regulatory commission.”
He added that the NUPRC had already made it clear to Seplat that it would not allow the acquisition to scale through, but wondered how the company went ahead of the NUPRC to get to the President for such an all-important announcement.
“This is what has shown some level of power play,” Wahab said.
Buhari was said to have granted the consent in his capacity as the Minister of Petroleum Resources, and in consonance with the country’s drive for foreign direct investment (FDI) in the energy sector.
However, with the counter-directive by the NUPRC that the status quo be maintained, the deal would seem to be on hold now pending any further directive.
At the time of filing this report, the Presidency was yet to issue a statement on the position that Adesina made public.
Checks on the sections that Komolafe highlighted indicated that Section 95, sub-section 10 states, “Where the application for an assignment or a transfer of a petroleum prospecting licence of petroleum mining lease is refused, the commission shall inform the applicant of the reasons for the refusal and may give reasonable time within which further representations may be made by the applicant or by third parties in respect of the application.”
In sub-section 14 of same section 95, the PIA states, “For the purpose of this section, change of control means any person or persons acting jointly or in concert, to acquire direct or indirect beneficial ownership of a percentage of the voting power of the outstanding voting securities of the holder, by contract or otherwise, that exceeds 50 per cent at any time.”
It continued in sub-section 15 thus, “A holder of a petroleum exploration licence shall not assign, novate or transfer his licence or any right, power or interest without prior written consent of the commission.”
Also, Section 95, sub-section 8 of the Act states, “Where the consent of the minister is granted in respect of the application for a transfer, the Commission shall promptly record the transfer in the appropriate register,” while sub-section 9 states, “The Commission shall communicate the refusal or approval of an application for an assignment, novation or transfer of a licence or lease in writing to the applicant.”
Seplat Energy had earlier in the year reached an agreement with American multinational firm ExxonMobil to acquire the company’s subsidiary, Mobil Producing Nigeria Unlimited, and its business operations in a $1.2 billion deal.
Seplat Energy, according to the agreement, would acquire the company’s 40 per cent stake in four oil mining licences comprising over 90 shallow water and onshore platforms and 300 producing wells. Seplat Energy would also acquire one of the largest export facilities in Nigeria, the Qua Iboe terminal, and natural gas recovery plants at EAP and Oslo.
Mobil Producing Nigeria Unlimited would remain with its deepwater projects.
The transaction was the first deal to be announced in Nigeria after the enactment of the PIA.
Harrison Edeh is a journalist with the International Centre for Investigative Reporting, always determined to drive advocacy for good governance through holding public officials and businesses accountable.