Italy’s Eni (ENI.MI) has become the latest international energy giant to divest onshore assets in the West African country following agreement to sell its Nigerian onshore subsidiary to local company Oando (OANDO.LG), the two companies said on Monday.
With the deal on its Nigerian unit Agip Oil Company Ltd (NAOC), Eni takes another step in its long-term strategy to reduce oil exposure in favour of natural gas following its disposal in June of oil activities in Congo Republic.
The Italian group will keep its offshore activities in Nigeria. The acquisition of NAOC Ltd will nearly double Oando’s reserves to 996 million barrels of oil equivalent, the Nigerian company said. Oando added that the purchase would enable it to “significantly increase production” and “brings to bear the important role indigenous actors will play in the future of the Nigerian upstream sector”.
Neither company commented on the price. Investment bank Jefferies pegged the deal at more than $500 million. It is the latest move out of Nigeria’s onshore sector by an international oil major. Nearly all of them, notably Shell (SHEL.L) and Exxon Mobil Corp (XOM.N), have sales underway amid rampant oil theft and spills, perpetual clashes with communities and more focused exploration budgets.
Most oil majors have kept stakes in offshore assets in Nigeria, typically Africa’s largest oil exporter, which has struggled to pump in the past several years due to theft and years of under-investment. Some energy majors are loathe to pour cash into developing assets they want to sell.
The country, which relies on oil for the bulk of its much-needed foreign exchange, urgently needs investment in the sector, but other planned deals have hit legal and regulatory hurdles. Exxon’s proposed sale to local firm Seplat (SEPLAT.LG) is in regulatory limbo, and is opposed by state oil company NNPC Ltd, while court cases have complicated Shell’s asset sales.
NAOC Ltd, which focuses on oil and gas exploration and production, has interests in four onshore blocks, two onshore exploration leases and two power plants, Eni said. The deal is subject to local and regulatory authorisation. After the sale, Eni will retain the unit’s 5% stake in the Shell Production Development Company (SPDC) joint venture operated by Shell, it said.