A former Deputy managing director of Shell Petroleum Development Company,(SPDC), Egbert Imomoh, has stated reasons why international oil companies (IOCs) are divesting from Nigeria.
According to Egbert Imomoh, who spoke on “Divestment of IOCs from Nigeria, Drivers and potential consequences” at the Centre For Petroleum’s Luncheon/Talk, said, a combination of factors are responsible for the spate of divestments by the international oil companies in Nigeria.
Chief among them is the inability of the companies to extract full values from existing assets. Some of the assets are held down for several months and years because of series of disturbances to the operations of the companies either by communities or militant activities or even outright sabotage.
There have been instances where community unrest, hacks on pipelines carrying crude oil have resulted to spillage which forced companies to declare force majeure for months. These also have resulted into losing some of the assets and in some case even lives.
Another factor has been the inability of government to fund its joint venture operations thereby creating issues that have to make it partners to suspend actions on viable projects. The resultant effect of this is that both the government and its joint venture partners loss money, especially when the projects they budgeted for could not continue because of the failure of the government to bring its own counterparts fund.
The Federal Government forinstance through the Nigerian National Petroleum Corporation (NNPC) recently made payment totalling $300,964,270 out of the Joint Venture (JV) cash call arrears owed some International Oil Companies (IOCs) as at August, 2021.Despite this payment, she still has an outstanding balance of $1,163, 832,114 to be paid to the IOCs.
Crude Oil theft has been a major concern for the IOCs as they have lost significant amount of crude in their operations. Nigeria lost about $42 billion to crude theft as well as domestic and refined petroleum products losses between 2009 and 2018, according to the Nigeria Extractive Industries Transparency Initiative (NEITI).
There is also the challenge of the energy transition for international oil companies (IOCs) as pressure from shareholders are on them to focus attention on renewable. There are growing political, societal and financial market pressure to accelerate decarbonization.
This poses a major challenge for IOCs, whose current business models and technologies are incompatible with full decarbonization, but whose future depends on them being part of the solution.
Zero emission target and Covid 19 are also affecting the companies as the World Bank has stated expressly that the decisions it makes now will determine the course of the next 30 years and beyond: “emissions must fall by half by 2030 and reach net-zero emissions no later than 2050 to reach the 1.5 Celsius goal.”
“Science is clear: if we fail to meet these goals, the disruption to economies, societies and people caused by COVID-19 will pale in comparison to what the climate crisis holds in store. And so, our shared responsibility is equally clear: redouble our efforts to recover from the economic and social crisis and get on track to achieve the SDGs [Sustainable Development Goals] and build a sustainable, inclusive and resilient future.”
“Today was a stark warning for Big Oil, with executives “being held to account by investors and lawmakers.” said Bess Joffe, of the Church Commissioners for England, which manages the Church of England’s investment fund as: ExxonMobil lost at least two board seats to an activist hedge fund, shareholders at Chevron endorsed a call to further reduce its emissions and a court deemed Royal Dutch Shell’s emissions targets insufficient.
By Olusola Bello
