TotalEnergies sells SPDC stake, joins IOCs to exit Nigerian onshore

French oil major TotalEnergies EP Nigeria announced that it has signed a sale and purchase agreement with Chappal Energies to sell its 10% interest in Shell Petroleum Development Company of Nigeria (SPDC) Joint Ventures.

The onshore assets will be sold to the indigenous oil company for US$ 860 million as the agreement is set to be finalised by December 31, 2024. This represents the oil company’s strategic move to divest from Nigeria’s onshore segment in favour of a more secure offshore environment.

The transaction involves acquiring a 10% stake in 15 oil mining leases and owning the Forcados and Bonny export terminals, both critical assets within the SPDC joint venture.

As stated, Chappal’s financing will come from an entity affiliated with TotalEnergies or a financial institution chosen by the French company. Trading firm Trafigura and a consortium of global banks are also contributing funds.

Nicolas Terraz, president of exploration and production at TotalEnergies said the French firm continues to actively manage its portfolio in Nigeria, in line with its strategy to focus on its offshore oil and gas assets.

“After the launch of the Ubeta gas development on OML58 license last month, this divestment of our interest in SPDC JV licenses allows us to focus our onshore Nigeria presence solely on the integrated gas value chain and is designed to ensure the continuity of feed gas supply to Nigeria LNG in the future.”

Gas Outlook earlier reported that Shell had also reached an agreement to sell SPDC to Renaissance, a consortium of five mostly local companies, for up to $2.4 billion. The consortium comprises four exploration and production companies based in Nigeria and an international energy group.

However, experts raised concerns about communities that have experienced environmental degradation as a result of oil spillage in the Niger Delta, questioning the ethics of abandoning environmental damage. They added the need for stakeholders across government and business to engage in constructive dialogue to chart a path towards a more resilient and inclusive energy future for Nigeria.

The National Oil Spill Detection and Response Agency (NOSDRA), in a report noted there were 10,463 spill occurrences in the Niger Delta between 2011 and 2022, which resulted in the release of 507,135 barrels of oil into the environment.

Onshore assets sales

Etulan Adu, a production engineer at Eni, told Gas Outlook that the sale would give the company additional funds to pay down debt, expand into new areas, or invest in alternative energy. He said for the host community, the sale of the assets would impact the local economy and job prospects in operational zones where TotalEnergies is based.

“The buyer’s goals and the assets they want to use may need modifications to employment numbers, business procedures, and community engagement programs. The effects that the new owner’s activities will have on the environment and society, as well as any modifications to the previously implemented corporate social responsibility initiatives, could also be of concern.”

Adu also said the sales of the assets reflect the dynamics and evolution of Nigeria’s economic climate, especially in the oil industry. “The uncertainties and changes in regulatory policies, security challenges, oil theft, reputation and operational complexities would have influenced the decision of TotalEnergies to divest their onshore assets.”

Abandoning environmental damage

Adu noted that local communities in the Niger Delta who have witnessed environmental damage due to oil spills have legitimate concerns which need to be properly and quickly addressed. He said the Niger Delta area has seen massive oil spills over decades because of oil and gas operations that have severely impacted the livelihoods and health of the rural population by causing widespread air, water, and land pollution.

“The ethical implications of abandoning environmental damage in the Niger Delta are essential, raising concerns about corporate responsibility, environmental management, and justice for all. It is unethical for companies to exploit resources in a way that harms communities and the environment, only to depart the damaged regions without accepting responsibility for cleanup and restoration.”

Dr. Ayodele Oni, a partner at Bloomfield Law Practice also told Gas Outlook that the Petroleum Industry Act (PIA) has established provisions for environmental remediation and Decommissioning and Abandonment (D&A) obligations, including the introduction of dedicated funds for these purposes. He said importantly, it also articulates how these responsibilities can be transferred to new licensees or leaseholders.

“The previous operators can still be called upon by the regulator to fulfil D&A duties on divested assets, as long as the new asset holders do not assume these responsibilities.”

Oni said that given the history of environmental degradation in oil-producing regions, it is understandable that host communities may fear that the divestiture of ageing assets is a tactic employed by IOCs to evade spill and D&A liabilities, potentially jeopardising the environmental safety of the communities.

“However, under the PIA, such scenarios should be mitigated, provided that its D&A and environmental remediation stipulations are effectively executed. Before any transaction is finalised, the commission is expected to perform due diligence to ensure that the acquiring party can handle these liabilities.

“The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) is also actively working to ensure thorough due diligence throughout this transition. Thus, it is hoped that, with diligent oversight from the NUPRC, such community concerns can be allayed,” he added.

Stakeholder engagement

Sonia Ebiki, head of legal at MG Vowgas Group, said stakeholders across government and business must engage in constructive dialogue to navigate the fallout of the French oil company’s probable departure. She told Gas Outlook that Nigeria needs to chart a path towards a more resilient and inclusive energy future.

She said that constructive dialogue can help align interests, ensure that environmental remediation is undertaken, and promote policies that support sustainable development.

“This collaboration is essential to create a resilient energy sector that balances economic growth with environmental protection and social inclusion. Stakeholders can work towards a future where the benefits of Nigeria’s oil resources are equitably shared and sustainably managed,” she ended.

Adu said that ensuring a resilient energy future is fundamental in the wake of IOCs’ probable departure from Nigeria. He said industry stakeholders must involve local communities in decision-making processes.

“Nigeria can overcome the obstacles posed by major international oil companies’ exits by encouraging constructive communication and collaboration among stakeholders across government and industry. This will pave the way for a more resilient, inclusive, and sustainable energy future that benefits all its population,” he concluded.