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ConocoPhillips deal propels Oando to Nigeria's top league
July 30, 2014 / 7:20 PM / 3 years ago

ConocoPhillips deal propels Oando to Nigeria's top league

PARIS (Reuters) - Nigerian oil company Oando (OANDO.LG) completed a $1.5 billion deal to buy ConocoPhillips’s assets in Nigeria on Wednesday, catapulting it to be one of the top players in the West African country’s emerging indigenous oil and gas exploration industry.

ConocoPhillips (COP.N) has waited for more than a year to close the deal with Oando, which is listed in Lagos, Toronto OER.TO and Johannesburg, because the local firm struggled to raise finance and had to navigate local bureaucracy.

But for Oando’s chairman, the deal means as much for the young Nigerian company as for the country as a whole.

“It’s a significant transaction: it’s the largest single upstream acquisition done in Nigerian industry by an indigenous company,” Wale Tinubu told Reuters in an interview in Paris, where a ceremony was held on Wednesday.

“In the long term it will be good for the country, in terms of being able to retain value in the country, as opposed to the exploitation or the exports of profits outside the country,” he added.

Since 2010, Nigeria has had a policy of encouraging more direct ownership of its oil and gas by Nigerians, either through the state oil company or local private firms. That has raised concerns among foreign oil majors they may lose smaller assets if they do not sell now, industry experts say.

ConocoPhillips is joining competitors Royal Dutch Shell (RDSa.L), France’s Total (TOTF.PA) and Italy’s Eni (ENI.MI) in disposing of stakes in onshore and shallow water offshore fields in the swampy Niger Delta region.

Oando’s chairman said encouraging the local industry did not mean there was no place left for international majors, however.

“The offshore belongs to the international oil companies. There’s so much oil offshore! I think we need that capital, we need that expertise to develop offshore,” he said.

Tinubu said the company was interested in doing similar deals with oil majors to grow more in the next 2 to 3 years.

“We’re looking for similar assets, with sizeable, proven and developed reserves, with their own export facilities.”

Asked if Oando could bid for the OML 138 block that France’s Total failed to sell to Sinopec, the chairman said:

“It’s a good asset but the price was quite high. $24 per barrel, I think it’s a bit too expensive.”

A LOT OF SELF-HELP

Tinubu said he believed a bigger indigenous participation in the country’s oil and gas industry will also help Nigeria deal with issues such as oil theft, pipeline sabotage and regulatory uncertainty that are putting off investment.

“If you live in an emerging market, or in an place like Nigeria, you realize that a lot of self-help is required,” he said. “Everybody has private guards, everybody builds their own fences, there’s a neighborhood watch. ”

“That same principle will apply to oil and gas assets, with more fragmented pieces owned by indigenous companies who provide protection for these assets,” he said.

If it fixes these issues, OPEC-member Nigeria has the potential to double its 2 million-2.5 million barrel per day oil output in the next five years, analysts said.

Tinubu said he was aiming to bring Oando’s production to 100,000 barrels of oil equivalent per day from the current 46,700 boepd.

Rival firm Seplat, which raised $500 million in a debut stock market listing in Lagos (SEPLAT.LG) and London (SEPL.L) in April, produces about 23,000 barrels per day, while London-listed Afren AFRE.L produces about 47,000, according to Oanda’s estimates.

Asked if he expected consolidation in the Nigerian industry in the future, Tinubu said:

“If you ask me, I think there will be 3 to 5 champions coming from Nigeria. And you will find a lot of small, profitable players,” he said.

Reporting by Michel Rose, editing by David Evans

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