The American major believed that after a year of searching it had found a private Nigerian buyer for its lease on these two offshore blocks, but the NNPC has other ideas.
The process of selling Chevron‘s 40% stake in oil mining leases (OML) 86 and 88 was initiated in November 2019 via a confidential brochure produced by Scotiabank and shared with a select group of clients . In late January, the petroleum marketing company Conoil owned by the Nigerian billionaire Mike Adenuga declared that it was on the verge of acquiring this 40%, but according to our sources the Nigeria National Petroleum Corp (NNPC) has opted to exercise its right of pre-emption. As it already has a 60% interest in these two offshore blocks, the state-owned company would become the sole owner if the acquisition of the Chevron share goes through. The NNPC did not indicate its interest when the sale was first announced, preferring to bide its time and see how the Covid-19 pandemic would impact on market prices.
Significant gas potential
Although the blocks only contain a further 50 million barrels of oil, they possess substantial reserves of gas spread across several deposits (7.7 trillion cubic feet). As of late 2019, the site was still producing 5,500 bpd of crude but volumes will have dropped in the course of 2020. It should be straightforward to develop and transport the gas via Shell‘s “Gas Transmission System 3” pipeline, which is already supplying six NLNG liquefaction trains on Bonny Island (construction of a seventh train has been underway for the last year). Another attraction of OMLs 86 and 88 is that the two operating licences were renewed in 2015 for a period of twenty years, meaning that whoever acquires Chevron’s 40% will be able to continue producing until 2034 without having to enter into any negotiations with the Department of Petroleum Resources (DPR).
Chevron is one of the three largest producers in Nigeria, achieving a daily output of some 194,000 barrels and 233 million cubic feet in 2019 before the arrival of Covid-19.
