By Clara NWACHUKWU
FOLLOWING the exit of ConocoPhillips, the American oil giant, from Nigeria after 46 years, there are concerns that this may have dampened the government’s drive to attract fresh foreign direct investment, FDI, into the petroleum sector.

Although companies have been invited to bid for the ConocoPhillips’ assets in the country, the Board of Directors, of the Nigerian National Petroleum Corporation, NNPC, the government’s concessionaire for petroleum assets is yet to meet on the subject, raising questions on the actual intention of government.

The U.S. oil group ConocoPhillips had contracted French bank, BNP Paribas, to sell off its assets in Nigeria. The new chief executive officer, CEO, Mr. Ryan Lance, confirmed at the group’s annual meeting in Houston last month that “We’re testing the market on our Nigerian assets,” even as he said that a deal was not imminent.

This is the second time an American company with over 40 years operational experience is closing shop in Nigeria.

Oil and gas services contractor Willbros Group Inc. in 2006, also packed its bags from Nigeria, and sold its assets for $155.3million to Ascot Offshore Nigeria Ltd.

Nigerian government sources attributed Wilbros’ exit to the global financial crises at the time, even as Ascot never recovered from the acquisition of the asset, and has allegedly been placed under receivership on account of its numerous debts.

Unceremonious exit

ConocoPhillips, the third largest integrated energy company in the U.S. and the fifth largest refiner in the world, is leaving Nigeria under very mysterious circumstances, leaving room for speculations about its exit from the country.

While some industry sources have alluded to dwindling returns on investment and poor performance of assets, others speculated on regulatory and industrial issues as well as the fiscal lacuna created by the non-passage of the Petroleum Industry Bill, PIB as possible reasons for the move. The move has also been attributed to the group’s global restructuring – leading to the disposal of its assets in Nigeria.

The Director, Department of Petroleum Resources, DPR, Osten Olorunsola, agreed that the exit coming at this period in time, “is not particularly good”, and admitted that the group “had said certain things but I think there are deeper reasons why they are polling out.”

He said this called for a deeper “understanding of exactly what the bigger picture is, we need to understand the motives behind their pull out. That we don’t know yet.”

The industry regulator dismissed speculations that part of the reasons of the group’ exit may have been connected with regulatory issues, and argued that for as long as there was operation, there would be issues.

“I’m not particularly aware of any issue they have with DPR, there are several other companies that are working around here. And where there is operation, there will always be issues. But the thing is to work the issues to a complete solution, that’s why I said I’m still waiting to know why they have left,” he said.

To avoid a spiral effect, Olorunsola said, “It’s a wrong signal and on the down side and that is why I say we have to know the exact reason so we don’t see a band wagon of that happening again.”

Assets in contention

ConocoPhillips in its over 46 years of operation in Nigeria acquired quite a number of oil and gas assets. These include onshore, offshore oil fields, and a 17 percent stake in Brass Liquefied Natural Gas, LNG facility.

Below is the group’s portfolio status and nature of its oil and gas assets in Nigeria, as at 2011 as posted on its official website: www.conocophillips.com

Co-venturers: Nigerian National Petroleum Corp. (60.0%), ConocoPhillips (20.0%)

An exploration programme on the OMLs, which will expire in June 2027, continues to focus on deep high-pressure natural gas. Twelve flow stations, the Obiafu-Obrikom NGL Plant and the Brass River tanker loading terminal all support production.

Kwale-Okpai Independent Power Plant

Operator: Eni (20.0%)

Partners: Nigerian National Petroleum Corp. (60.0%), ConocoPhillips (20.0%)

This 480-megawatt, gas-fired, combined-cycle power plant came on line in 2005. It supplies electricity to PHCN, Nigeria’s national electricity supplier.

Brass LNG

Partners: Nigerian National Petroleum Corp. (49.0%), ConocoPhillips (17.0%), Eni (17.0%), Total (17.0%)

ConocoPhillips and its partners signed a Shareholder Agreement in 2006 to progress the development of the Brass LNG facility in Nigeria’s central Niger Delta. The agreement covers front-end engineering and design studies for the facility.

Nigeria Exploration and Business Development

Licence Interest Operator

OMLs 60, 61, 62, 63 20% Eni

Recent Activity – Several prospects were proposed for drilling in 2011 and 2012. The most recent exploration well, the Tuomo C discovery was drilled in 2010

OML 131 47.5% ConocoPhilips

Recent Activity – Deepwater license covering 297,600 careas containing the hota structure, which was discovered in 1998. Unitisation of the Chota Field with the adjacent Bolia Field in OML 135 commenced during 2009 with hell chosen s pre-unit operator. Negotiations advanced in 2011.

OPL 214 20% ExxonMobil
Recent Activity – Deepwater licence covering 639,000 acres was acquired in 2007. The Uge Field, discovered in 2005 and successfully appraised in 2007, is in the development planning stage. The North Uge and Nza prospects will be drilled in 2012.

But with less than six months to go before the final investment decision, FID, on the Brass LNG project, it is suspected that the group’s sudden pull out will further delay the FID, which has been left hanging for years.

Furthermore, it is envisaged that ConocoPhillips’ decision to sell its assets in Nigeria is going to slow down talks on the unitisation of fields that the group has been pursing with Shell.

Shell’s Country Chair, Mr. Mutiu Sunmonu, told Sweetcrude that the Anglo-Dutch group was still studying the situation, and upon conclusion of its assessment will decide whether to take over some of the stakes or not.

Companies scrabble to acquire assets

Dismissing fears that ConocoPhilips’ exit will dampen investment drive in Nigeria, the Group General Manager, Group Public Affairs Division, NNPC, Dr. Levi Ajuonuma, saying, “There are so many other investors willing to buy up their assets and invest in Nigeria.”

He maintained that Nigeria remained the toast for investments in petroleum assets in terms of returns on investment. “So their exit will not have any impact on Nigeria in any way because we are not short of interested investors,” he said.

Confirming an invitation to bid for the assets, the Group Executive Chairman, Oando Group, Mr. Wale Tinubu, told Sweetcrude, “I can confirm that we have been invited to bid for the ConocoPhillips assets and we are going to bid for them.”

Oando appears optimistic of being successful in the bid, and indications are that this would be an added boost for the group’s portfolio expansion drive.

A number of other indigenous companies including Conoil, owned by business mogul, Mr. Mike Adenuga is equally interested in the ConocoPhillips assets. Last year, Conoil made unsuccessful attempts to acquire one of Shell’s oil blocks, OML 30. The company is unable to confirm its interests in this instance.

Some of the foreign companies that have indicated interest in the ConocoPhillips assets includes mainly the Asian players such as China’s Sinopec, Indian company ONGC, and South Korean firm, KNOC.

However, the assets sale could turn up a few surprises, aside from the politicking that usually trail such transactions in Nigeria.

For instance, NNPC’s spokesman confirmed that the Board would soon meet to decide on whether it will award operatorship of the ConocoPhillip block to its production arm, Nigeria Petroleum Development Company, NPDC.

“You know that government is keen to ensure that NPDC grows, by increasing its production portfolios. But when the Board meets all these issues will be sorted out,” Dr Ajuonuma told Sweetcrude.

But the industry regulator has dissociated itself from initial discussions in the negotiations.

DPR’s Olorunsola, who confirmed the opening of negotiations between the group and some interested buyers, told Sweetcrude that “this is a commercial discussion between ConocoPhillips who is selling and the potential buyers. We are aware, but no major input at this initial stages of the discussions.”

Moreover, there are speculations that in view of Mr. President’s interest in some of the assets, particularly the Brass LNG located in the president’s home state, Italian oil giant, Eni, may be compelled to take over Conoco’s 17 percent stake in the natural gas project.

Eni sources in Nigeria reveled to Sweetcrude, “Brass is a very fundamental project for Nigeria just like OPL 245, and the president is interested in the project, so we won’t be surprised if Eni takes up the stakes to fast track the take-off of the project.”

Brass LNG has denied receiving any notification from ConocoPhillips to dispose of its stake in the project, a company source said,

“We’ve not received any enquiry regarding their assets in Brass, so the group is still with us, they attend our board meetings.”

Similarly, it is speculated that the Nigerian unit of ExxonMobil Corporation, operator of Oil Prospecting Licence, OPL 214, might take over Conoco’s 20 percent stake in the oil block. But the public affairs unit could not confirm this, when contacted.

Analysts call for transaction transparency

No matter who acquires the disposed assets, industry analysts insist on transparency of the transaction, to rid Nigeria of the corruption and controversies that have continued to trail its oil and gas transitions.

President of the Trade Union Congress, TUC, Mr. Peter Esele, argued that there was the need to ensure that the company disposed of its assets in a transparent and legal manner. “We don’t want a repeat of what happened when Shell disposed of its onshore assets.

“Here is a country where the oil companies easily flout the laws, because when Shell sold its own assets, it never went to the NNPC until the transaction ran into hitches. Likewise, the NNPC should wake up to its responsibilities to ensure that ConocoPhillips does not take advantage of the lapses in the system to manipulate the transaction.”

Esele, who is also a member of the Special Task Force on PIB, dismissed speculations that ConocoPhillip’s exit may be linked to the delay in the passage of the PIB. According to him, “These are mere speculations, we know that the majors are fighting some areas in the PIB, but that is expected.

Yes, there is nothing positive about Conoco leaving Nigeria, but it is not only Nigeria that they are leaving so a number of reasons could be attributed to it, and only the company is in a position to say.”