Oil and Gas: Asset sales now subject to ministerial powers
The Department of Petroleum Resources [DPR] vide a letter dated December 20, 2013 has advised all oil companies operating in the upstream sector that any future divestment of assets will be subject to the consent of the Minister of Petroleum Resources. This new directive is a fall out of the ongoing dispute Chevron Nigeria Limited and Brittania-U Limited over a bid for the sale of Oil Mining Licenses [OML’s] 52, 53 and 55, now the subject of litigation. By the directive, consent will only be granted where the Minister is satisfied that:
i) the proposed assignee is of good reputation, or is a member of a group of companies of good reputation or is owned by a company or companies of good reputation.
ii) there is likely to be available to the proposed assignees sufficient technical knowledge, experience and financial resources to work the license or lease which is being assigned; and
iii) the proposed assignee is in all other respects acceptable to the Federal Government of Nigeria.
Henceforth, divesting companies are now required to subject all the pre-qualified participants in any sale exercise to prior evaluation and due diligence by Government through the DPR.
Although the existing Petroleum Act makes provisions for Ministerial Consent, including the power to impose a fee or a premium, the law has been adhered to in its breach. Recently, Chevron Nigeria Limited offered to sell 40% of OML’s 52, 53 and 55 and, although Brittania-U Limited had offered the highest bid of $1.6billion, it was not offered the assets. Rather, Chevron opted to sell to Seplat Development Corporation for a lesser sum. Following this development, Brittania-U Limited proceeded to Court and obtained an injunction against Chevron and the other purchasing parties.
With the new directive, it is unlikely that a situation like the Chevron / Brittania-U imbroglio will arise in the future.
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