Exodus from Nigeria’s onshore arena continues with another oil major selling operated assets to go after deepwater and LNG plays

Italy’s energy giant Eni has cleared all the regulatory hurdles that stood in the way of selling Nigerian Agip Oil Company Ltd (NAOC), its wholly-owned subsidiary focused on onshore oil and gas exploration and production and power generation in Nigeria. The green light for this sale comes as European oil majors increasingly turn their backs on operated, and sometimes even non-operated, onshore businesses in the country to hone in on offshore oil and gas assets and liquefied natural gas (LNG) opportunities.

Eni inked an agreement with Oando, Nigeria’s indigenous energy solutions provider, in September 2023 for the sale of NAOC, which has interests in four Nigerian onshore blocks – OML 60, 61, 62, 63 – it operates on behalf of NAOC joint venture (JV), consisting of NAOC (operator, 20%), Oando (20%), and NNPC E&P Limited (60%); the Okpai 1 and 2 power plants with a total nameplate capacity of 960 MW, and two onshore exploration leases – OPL 282 and OPL 135 (90% and 48% stakes, respectively) for which it also holds the operator role.

On the other hand, NAOC’s participating interest in the Shell Production Development Company joint venture (SPDC JV) is not part of the divestment and will be retained in Eni’s portfolio. SPDC JV is currently operated by Shell (30%), with TotalEnergies (10%), NAOC (5%), and NNPC (55%) as partners. However, the list of partners in this JV is set to change soon, since TotalEnergies recently made a move to offload interests in SPDC JV seven months after Shell did the same.

Shell disclosed arrangements in January 2024 to divest its interest in SPDC, with a net book value of around $2.8 billion, to Renaissance, a consortium of five companies – ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin – to turn all its attention to deepwater and integrated gas businesses in the African country.

TotalEnergies’ decision, made on similar grounds, will fetch $860 million and enable the buyer, Chappal Energies, to get the French giant’s 10% participating interest and all its rights and obligations in 15 licenses of SPDC JV, producing mainly oil, which represented approximately 14,000 barrels equivalent per day for its share in 2023.

In addition, Chappal Energies also put the wheels in motion to buy Equinor’s Nigerian business, including a stake in a Chevron-operated oil field, in November 2023, which allows the Norwegian giant to optimize its international oil and gas portfolio and direct attention to core areas.

Having already obtained all other relevant local and regulatory authorities’ authorizations, the formal consent from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) gives Eni the all-clear to proceed to the completion of the transaction for the sale of NAOC to Oando, listed on both the Nigerian and Johannesburg Stock Exchange.

Moreover, the Italian heavyweight, which intends to remain committed to the African country’s energy sector through investments in deepwater projects and Nigeria LNG, is developing plans for economic diversification such as assessing the potential production of agri-feedstock for Enilive biorefineries and various nature- and technology-based projects, like clean cooking initiatives, to offset emissions. As a result, the firm will maintain its presence in Nigeria through Nigerian Agip Exploration (NAE) and Agip Energy and Natural Resources (AENR).

While Eni’s attention is on operated offshore activities, participation in operated-by-others assets, both onshore and offshore, and Nigeria LNG will remain in its portfolio too. This is consistent with the firm’s 2023-2026 plan, with the upstream segment expected to supplement the core organically led growth with inorganic high-grading activity, adding resources with incremental value while divesting resources that can offer greater value and opportunities to new owners.

The Italian player has a substantial portfolio of assets in Nigeria’s exploration and production arena, with an equity production of approximately 40,000 barrels of oil equivalent per day net of NAOC contribution and holds a 10.4% interest in Nigeria LNG.

Eni is also active in other African countries, including Cote d’Ivoire, where recently converted FPSO and FSO are expected to move soon to work on the company’s oil and gas development, which is said to be the largest discovery in the country and the first net-zero Scope 1 and 2 emissions upstream project on the African continent.

Congo made its way to the LNG exporters’ club in February 2024, after the Italian energy titan’s first FLNG unit, known as Tango with 0.6 million tons per annum (mtpa) capacity, began its LNG deliveries. With a capacity of 2.4 mtpa, the second unit, currently under construction, is slated to be in operation by the end of 2025.