London — Nigerian state oil firm NNPC Ltd says a subsidiary of Italy’s Eni did not obtain its consent prior to announcing a deal to sell onshore oil assets to local firm Oando PLC, a failure that could have breached terms of a joint operating agreement, according to a letter seen by Reuters.
The letter casts doubt on the speed of the transaction, announced on Monday, and underscores the difficulty international oil majors have faced in their years-long efforts to sell onshore oil and gas assets in Nigeria.
In the letter, dated Sept. 4, NNPC said that Eni subsidiary Nigerian Agip Oil Company Ltd (NAOC) did not seek its consent before it announced the deal, and that its consent was mandatory before transferring participating interest in a joint venture.
NNPC called failure to obtain prior written consent “a grave breach” of the joint operating agreement (JOA).
The state oil firm’s subsidiary NNPC Exploration and Production Limited (NEPL) holds a 60% stake in a NAOC joint venture.
Eni, which makes all comment on issues related to its NAOC Ltd subsidiary, said there had been no breach of the joint venture contract.
“NNPC has a pre-emption right on the JV shares, but Eni doesn’t have any contractual obligation to inform beforehand NNPC about the deal, also because the information was price sensitive for the potential buyer,” it said.
It said that pre-emption procedures and other consents will be “duly and carefully followed” at the applicable time.
NNPC spokesperson Garba Deen Muhammad confirmed that NEPL sent the letter to NAOC, but said the letter did not indicate an objection to the transaction.
“NEPL is only drawing attention to certain important clauses in the JOA, which might have been overlooked in error. Adherence to those clauses will protect the transaction now and in the future,” he said.
Oando declined to comment on the letter, but said “we trust that, as requested by NEPL, NAOC will engage accordingly to ensure that their concerns are addressed”.
Oando also said that Eni had not assigned its 20% interest in the NAOC JV to Oando but had signed an agreement to sell 100% of the shares of NAOC Ltd, subject to all relevant regulatory and partner approvals and due diligence.
Oil executives say the conclusion of asset sales is crucial to boosting investment into onshore oil and gas assets, but legal and regulatory issues have snagged other deals, notably Exxon Mobil Corp’s (XOM.N) asset sale to local firm Seplat.
Nigeria, typically Africa’s largest oil exporter, has struggled to pump in the past several years due to theft and years of under-investment. Nearly all international oil majors, including Shell (SHEL.L) and Exxon, have onshore sales underway amid the theft and oil spills, perpetual clashes with communities and more focused exploration budgets.
*Libby George, Francesca Landini; editing: Emelia Sithole-Matarise & David Evans – Reuters