Total resumes $2.5bn Usan deepwater oil block sale

FRANCE TOTAL UTS ENERGY17 September 2014, Lagos – France’s Total SA, Europe’s second largest oil company, has put one of its offshore Nigerian oil fields up for sale for the second time, the company said, after a 2012 deal with Sinopec Corp of China failed.

Total has hired BNP Paribas to find buyers for its Usan deepwater oil field located in Oil Mining Lease (OML) 138, which could be worth about $2.5 billion, according to sources familiar with the matter.

“We have selected an advisor to pursue the sale process of Usan,” a spokeswoman for Total was quoted by Reuters as stating.
BNP Paribas declined to comment.

Usan is not expected to be an easy sale for Total because deepwater exploration requires significant investment and the new owner’s returns could be limited if Nigeria raises taxes on foreign investor profits following the passage of the Petroleum Industry Bill (PIB).

Before deciding to sell the asset, which is about 100 km off the Nigerian coast, Total was planning to drill several horizontal deepwater wells and build a deep offshore drilling rig.

“Anything in Nigeria is a tough sell,” said a London-based sector banker. “And anything with capex (capital expenditure) is even tougher these days. Very few players would be willing to acquire assets that have big investment commitments attached.”

Total said in November 2012 it had sold its 20 per cent interest in the field to China’s Sinopec for about $2.5 billion in cash. It is not known why the sale failed.

The Nigerian National Petroleum Corporation (NNPC) is the OML 138 concession holder. Other partners include Chevron, ExxonMobil and Nexen, which is owned by Chinese state company CNOOC Ltd.

Total is working on several asset disposals to meet a $10 billion 2015 cash flow generation target. The French group is seeking to raise about $2.5 billion through the sale of its Super Glu maker Bostik, Reuters reported.

A deal for the Usan field may have to involve a local company because Nigeria, Africa’s top oil producer, is renewing efforts to recoup the benefits from its oil and gas sector.
But few Nigerian players would have the money and ability to complete the necessary drilling and building works, several sector bankers said.
This means Total’s hopes may lie again in the hands of Asian buyers like China’s CNOOC, which already has an interest in the Usan field, or India’s ONGC and Indian Oil.
International oil and gas majors are not expected to show interest because most of them are under pressure from shareholders to cut capital expenditure and improve dividends. Most are seeking to divest from Nigerian onshore fields instead.

Earlier this year, ConocoPhillips sold its indigenous operations to Nigerian oil company Oando for $1.5 billion.

Chevron is also in the process of selling assets in Nigeria and Shell is still in the process of selling four oil fields in the country.

Taleveras and Transcorp are among the best-placed Nigerian potential buyers because they have the strongest financial firepower, said one of the sources.

A sector banker said state-backed NNPC could also be interested, though it already has a number of commitments with foreign investors, Oando is digesting the ConocoPhillips deal and Seplat, another indigenous operator, is focused on Chevron’s assets.

“(Total) needs a couple of local players with deep pockets. The international banks aren’t showing as much interest as they were, and the local banks no longer have capacity to raise that kind of debt,” said a local industry source.

Commodity traders and miners such as Glencore or Mercuria could also be interested, in theory, as they have been actively hunting for oil and gas assets to diversify from volatile mining operations, said several sector bankers.

But trading houses may not have the required expertise to operate deepwater assets, said one of the bankers.

Glencore and Mercuria were among the short-listed bidders for Shell’s Nigerian energy assets worth about $3 billion, but they lost out to the Taleveras/Aiteo Group, a more aggressive bidder.

RBC Capital Markets said in a report this week that Total was likely to miss production and cash flow targets for next year as it grapples with project disruptions. Total will update the market at a mid-year outlook investors’ day on September 22.



– Reuters

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