Asset Divestment: TALP Recommends ‘Single Window Clearance System’ to Streamline Approval Process
By Ndubuisi Micheal Obineme
Following the lingering approval process for asset divestments in Nigeria, Aderemi Ogunbanjo, the Energy and Natural Resources Partner at Tope Adebayo LP has recommended a ‘Single Window Clearance System’ as the best strategy to streamline the approval process.
The International Oil Companies (IOCs) asset divestments have become a major trend in the Nigerian oil and gas industry, triggered by challenges such as oil theft, operational and legal issues coming from oil spills, alongside the Nigerian government’s efforts to promote local ownership of upstream assets through its local content policies.
A report published by Wood Mackenzie revealed that asset divestments in the Nigerian oil and gas industry have reached $21 billion, with a pending $1.2 billion ExxonMobil asset sale which started in 2022 and is yet to be officially approved by the Nigerian government.
Some of the notable divestments in Nigeria in recent years are Shell’s divestment of its operated Joint Venture (JV) Licences held by its Nigerian onshore subsidiary, the Shell Petroleum Development Company (SPDC) to Renaissance, a consortium of five companies comprising four Exploration and Production (E&P) companies based in Nigeria and an international energy group. This includes a 30% interest in its 19 Oil Mining Leases (OMLs).
Others include Mobil Producing Nigeria Limited’s (MPNU) divestment of its entire share capital from Exxon Mobil Corporation to Seplat Energy, Equinor Nigeria Energy Company’s (ENEC) divestment of its 53.85% interests in OML 128, and its 20.1% interests in the Agbami oil field operated by Chevron to Chappel Energies, an indigenous firm, most recently, TotalEnergies indicated interest in divesting its 10% stake in its onshore operations with SPDC to indigenous buyers following SPDC’s divestiture in January.
Notably, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the regulator of technical, operational, and commercial activities in Nigeria’s upstream petroleum industry, has made public the terms and conditions required for asset divestment approval, noting that the companies also known as the ‘successor entity’ interested in acquiring the assets from IOCs must have the Technical Capacity, Financial Capability, Fulfilment of Legal Requirements, Decommissioning and Abandonment Plan, Host Community Trust Fund, Industrial Relations and Data Repatriation.
The terms and conditions for asset divestments involve an extensive review and due diligence processes to be carried out by the Nigerian Federal Government and the industry regulators. This has led to delays in approving the IOC’s asset divestment deals, especially on the ExxonMobil-Seplat deal which started in 2022 and hasn’t reached final approval so far due to some legal and other issues surrounding the divestment deals.
Speaking in an exclusive interview with The Energy Republic, Aderemi underscored the need for the Nigerian Government and industry regulators to adopt a ‘Single Window Clearance System’ to simplify the processes, which would also create a transparent system as well as facilitate a smoother approval of asset divestment in Nigeria.
Aderemi revealed that asset divestment processes can be streamlined into a single-window clearance system where all necessary approvals/consents from the various regulators like the Minister, the Commission, the Nigerian Content Development and Monitoring Board (NCDMB), the Federal Competition and Consumer Protection Commission (FCCPC), the Federal Ministry of Environment, the Federal Inland Revenue Service (FIRS) can be coordinated and processed simultaneously so that existing legal constraints inherent in these processes will be addressed.
She said the single-window clearance system will also streamline the regulatory procedures, noting that asset divestment shouldn’t take more than six (6) months or a maximum of one (1) year for approval if all parties involved comply with the Petroleum Industry Act (PIA).
According to her, “A single-window clearance system typically involves a centralized online portal or a single point of contact where all necessary applications, approvals, and documentation related to government approvals can be submitted and processed.
“This portal simplifies and speeds up the process by consolidating multiple bureaucratic steps into one interface. The system aims to reduce the complexity and time required for obtaining government approvals by streamlining procedures and eliminating the need to interact with multiple government departments and agencies separately,” she stated.
“Countries like Brazil, Indonesia, and Mexico have already adopted the single-window system for processing approvals and permits in their oil and gas sectors and this system has been used by various countries in the past for processing government approvals in other sensitive sectors such as the real estate and construction sector.
In her words, she said that the recently signed Presidential Directive on Reduction of Petroleum Sector Contracting Costs and Timelines 2024, is a welcome development, adding that the Directive has created a single level of approval process in terms of simplifying the contract approval procedures at every stage for PSCs and JOAs.
The Presidential Directive on Reduction of Petroleum Sector Contracting Costs and Timelines 2024, directed the NNPC Limited, the Nigerian Upstream Investment Management Services Limited (NUIMS), in collaboration with the Nigerian Content Development and Monitoring Board (NCDMB), and industry stakeholders to create a single level of approval process in the Nigerian oil and gas industry.
“If adopted for asset divestment, it will provide predictability, and reduce bureaucratic delays,” she added.
