Legal tussle has crippled the ambition of Chevron in closing sales of oil blocks worth about N162billion ($1 billion) with the potential buyers in Nigeria.
A Nigerian Federal High Court issued an interim injunction in December stopping Chevron from selling the blocks to Seplat and others after Brittania-U brought action against the U.S. major saying it had already agreed a deal to buy the assets, court documents showed.
Chevron is joining competitors ConocoPhillips, Royal Dutch Shell, France’s Total and Italy’s Eni in disposing of stakes in onshore and shallow water offshore fields in the Niger Delta region.
Nigeria has the potential to double its 2 million-2.5 million barrel per day oil output in the next five years but problems with oil theft, pipeline sabotage and regulatory uncertainty are putting off investment.
It was learnt that oil majors want to keep hold of the biggest producing fields, offshore assets and key pipelines and export terminals. But they are disposing of less profitable onshore blocks and fields that the government could strip from them if they remain undeveloped for ten years, notably in the restive Niger Delta.
Chevron has chosen its preferred bidders for the five blocks it put up for sale in June but the deals have not closed because rival firms have disputed its decision, with one taking the U.S. company to court, sources close to the deals said.
A Chevron spokeswoman said the company did not comment on ongoing transactions.
Nigerian firm, Brittania-U, run by former Chevron Executive, Catherine Uju Ifejika, was the highest bidder at over $1 billion for the biggest cluster of blocks – OML 52, 53 and 55 – and Chevron began discussions with the company over the sale, two banking sources close to the deal said.
Chevron decided to look at alternative bids after Brittania-U did not show sufficient evidence it could muster the amount promptly, banking and oil industry sources said.
Chevron then agreed to sell the biggest block, OML 53, to Seplat, which is partly owned by French oil explorer, Maurel & Prom and Swiss-based commodity trader Mercuria, while OML 52 would go to local firm Amni Petroleum and the smallest, OML 55, to Belema Oil, run by a local Delta community.
Chevron could earn between $700 million and $900 million for the three blocks, two sources involved in bids said.
The three blocks had proven reserves of 555 million barrels of oil equivalent, with the biggest block OML 53 holding 310 million of those reserves, two oil industry sources said, citing a Chevron memorandum given to bidders.
ConocoPhillips has waited for more than a year to close a $1.6 billion deal with Nigeria’s biggest energy company, Oando , for its business in Africa’s biggest oil producer because the local firm has taken more than a year to raise finance.
Oando plans to raise $193 million in a share issue to help finance the deal, banking sources said in December, and the company has said the acquisition will be completed early this year.
Chevron has also agreed to sell two smaller blocks – OML 83 and 85 – to Nigerian firm, First Exploration and Production with a bid of around $100 million but the deal has not been completed and rival bidders are also considering disputing this deal, the two banking sources said. They did not give details of which companies might challenge the sale.