News

NIGERIAN GOVERNMENT SET TO DIVEST ITS INTERESTS IN OIL AND GAS ASSETS

Published: 12 Jun 2019

The Nigerian Government is looking to raise revenue this year from the sale of some of its stakes in joint venture oil assets and the review of Production Sharing Contracts with private firms, mostly international oil companies operating in the country. This is according to information contained in the 2019 approved budget public presentation which revealed that the Nigerian President - Muhammadu Buhari, had directed that immediate action be commenced to restructure the JV oil assets “so as to reduce government shareholding to not less than 40 per cent and that this exercise must be completed within the 2019 fiscal year.”

The nation’s oil and gas production structure is majorly split between JV onshore and in shallow water with foreign and local companies and PSC in deepwater offshore, to which many IOCs have shifted their focus in recent years. The Nigerian National Petroleum Corporation owns 55 per cent stake in its JV with Shell and 60 per cent stakes with others, including Chevron and ExxonMobil.

Under the JV arrangement, both the NNPC and private operators contribute to the funding of operations in the proportion of their equity holdings and generally receive the produced crude oil in the same ratio. While under the PSCs, the NNPC holds the concessions, and the contractors fund the development of the deepwater offshore blocks and recover their costs from the production after royalty payments.

It also bears noting that militancy in the Niger Delta has generally abated, resulting in increased production from an average of 1.91 million barrels per day in the fourth quarter of 2018 to an average of 1.96mbpd in Q1 2019.

Olayinka Alao

Firm: Renaissance Practice
Country: Nigeria

Practice Area: Energy & Natural Resources

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