Nigerian State Oil Company Raises Reservations With Eni Sale

Nigeria’s state oil company has raised reservations about Eni SpA’s sale of a subsidiary to local producer Oando Plc which could complicate the transaction.

(Bloomberg) — Nigeria’s state oil company has raised reservations about Eni SpA’s sale of a subsidiary to local producer Oando Plc which could complicate the transaction.

The Italian firm announced on Sept. 4 an agreement to sell to Oando one of its units that has a 20% operating stake in four onshore oil and gas blocks. The deal is the latest in a string of asset sales concluded by international producers in onshore and shallow-water areas of the Niger Delta.

The failure to obtain the Nigerian National Petroleum Co.’s prior authorization for the sale “constitutes a grave breach” of the contract governing the joint venture that holds the four permits, the state-owned company said in a letter to the Eni subsidiary, which was dated Sept 4. and confirmed by Bloomberg. The NNPC “reserves its rights in relation to the said breach” including an entitlement to invalidate the agreement, the letter said.

The letter is “not an objection to the transaction,” NNPC spokesman Garba Deen Muhammad said by text message on Wednesday. It is “only drawing attention to certain important clauses” in the joint venture agreement that “might have been overlooked in error,” he said. “Adherence to those clauses will protect the transaction now and in the future.”

Oando already had a 20% interest in the licenses before the deal was agreed, while the NNPC holds a 60% stake. An Oando spokeswoman declined to comment on the letter because it was addressed to Eni. She said the companies had agreed the sale of shares in a subsidiary rather than the assignment of an interest in the joint venture. 

Eni denied committing any breach of the joint venture agreement in selling the subsidiary to Oando. While NNPC has pre-emption rights, Eni had no obligation to inform the state firm in advance of the announcement, the Rome-based company said in a statement Thursday. “Preemption procedures and other consents will be duly and carefully followed,” it said. 

Oando said in a statement on Sept. 4 that completion of the transaction is subject to ministerial consent and other regulatory approvals. The Nigerian Upstream Petroleum Regulatory Commission and a spokesman for President Bola Tinubu didn’t immediately respond to requests for comment.

Oil majors have been offloading onshore and shallow water blocks — located in a challenging operating environment where infrastructure damage from crude theft is a regular occurrence — to domestic producers for more than a decade. The trend is accelerating as international firms focus on deep-water projects in the West African country.

Shell Plc and Exxon Mobil Corp. are also working to finalize sales that stalled under former President Muhammadu Buhari, who was succeeded by Tinubu in late May. A lawsuit over alleged pollution in the Delta is holding up Shell’s deal, while the NNPC has opposed Exxon’s agreement with Seplat Energy Plc and asserted a right to acquire the permits itself.

Even if the transaction between Eni and Oando is valid, that does not automatically mean the buyer will inherit the operatorship of the four licenses, the NNPC said in the letter. That will be a matter for discussion between the NNPC and Oando, it said. 

–With assistance from Alberto Brambilla.

(Adds Eni statement in sixth paragraph)

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