For a smooth and responsible transition, the Nigerian government is adamant about adhering to a Divestment Framework based on the Petroleum Industry Act (PIA). The framework consists of seven pillars: labour relations, community participation, financial sustainability, legal compliance, decommissioning obligations, technical capacity, and data repatriation. ExxonMobil/Seplat and Shell/Renaissance Group are two examples of firms that have received clearance to sell their assets, while other companies, including Eni’s Nigerian Agip Oil Company Ltd., are still being investigated.
It is observed that while some businesses have reached out to solve environmental and community challenges, others have not done enough to meet their responsibilities. These deals come with substantial financial commitments, some of which might be worth over $1 billion. Niger Delta oil leaks are another serious problem; according to Shell, 94% of spills in 2023 were caused by illicit activity. These spills are primarily the consequence of theft and sabotage. Supportive organizations and the government both stress that businesses ought to make amends for impacted communities and clean up polluted areas.
There are vital financial responsibilities connected to these divestitures.
While local businesses view the divestment process as a chance to take greater control over the oil and gas industry, there are worries that the government should make sure that only qualified and competent organizations purchase these assets in order to safeguard Nigeria’s interests as a whole. The history of oil asset divestment in Nigeria is closely linked to the slow change in the global energy scene, as International Oil Companies (IOCs) are focusing more and more on lowering their carbon footprint and getting rid of their onshore and shallow water assets, especially in areas with difficult operating conditions like the Niger Delta.
Owing to concerns about oil theft, sabotage, and regulatory uncertainty, a number of IoCs, notably Shell, ExxonMobil, and Chevron, have started selling off their onshore holdings in Nigeria since the early 2010s. The Nigerian government views this as a chance to boost local involvement in the oil industry by allowing indigenous enterprises to assume ownership of these assets. There are significant financial responsibilities connected to these divestitures. Divestment-seeking companies are required to fulfill their decommissioning responsibilities, which include safely dismantling and removing oil Infrastructure and returning the environment to its pre-oil condition.
Concerns have been raised on abilities to manage assets sustainably.
According to estimates, Nigeria’s oil and gas infrastructure decommissioning might cost more than $6 billion. Many of these assets also have outstanding legal claims and legacy debts attached to them. One major obstacle to the completion of these agreements is the potential settlement of judgment debts associated with environmental damage and oil spills, which might amount to hundreds of millions of dollars. IoCs like Shell and ExxonMobil contend that by selling their shallow water and onshore properties, they are able to concentrate on their offshore activities, which are less vulnerable to environmental and Security threats.
Divestment is a calculated decision for these corporations since they are under growing pressure from environmental organizations and shareholders to lower their environmental liabilities and carbon emissions. They are criticized, meanwhile, for abandoning important social and environmental problems for the new asset owners and the local community to handle. The purchase of these assets is viewed by regional businesses as a chance to expand their involvement in the profitable oil and gas industry. Concerns have been raised concerning their abilities to manage these assets sustainably, though, as they are frequently hindered by a lack of resources and expertise.
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Seplat Energy and Oando Plc are two examples of companies that have proven their capabilities and obtained funding, but other companies might find it difficult to comply with the strict operational and regulatory standards set by the PIA. Distressed by decades of oil contamination, communities in the Niger Delta are cautious about the divestment process. Many worry that the transfer of assets can make things worse if there isn’t enough compensation or environmental cleaning. Legal proceedings and petitions have become more commonplace in these communities as a means of ensuring that their complaints are heard prior to any ownership transfer.