Eni’s Problems in Nigeria Aren’t As Big As They Seem
Yes, Nigeria’s state oil firm (NNPC) has admitted that it stopped making payments sto Eni three months ago; and yes, the NNPC is planning to let some of Eni’s oil licenses expire and taken them over itself. Should shareholders be concerned?
No, and here’s why, according to our experts on the ground:
The licenses aren’t core, and the spending issues are par for the course for this type of JV set-up.
On July 24, the NNPC’s newly appointed Group Managing Director, Mele Kyari, received a delegation from Eni and its Nigerian unit, Agip, led by Executive Vice Chairman for Sub-Saharan Africa, Brusco Guido. During those discussions, the issue of expired oil-exploration and production licenses held by international energy companies came up, with Eni making a case for renewal. Kyari told the Eni team that there was no immediate plan to renew the licenses.
Nigeria issues two main types of oil licenses: 1) the Oil Prospecting Lease (OPL), usually issued for about five to seven years for exploratory drillings and other activities in the search stage; 2) the Oil Mining Lease (OML) for exploitation (production and export), usually lasting for about 20 years. While it is not clear whether the licenses in question are OPLs or OMLs, they are among more than two dozen licenses that have expired in recent years.
Last year, the Department of Petroleum Resources renewed…