TotalEnergies sells minority stake to Chappal Energies

TotalEnergies has made headlines with the sale of its minority share in a major Nigerian onshore oil joint venture to Mauritius-based Chappal Energies for a whopping $860 million. This move comes amidst accusations of price gouging by International Oil Companies (IOCs) from the Management of Dangote Industries. Ayodele Oni, Partner at Bloomfield Law Practice, shed some light on these developments in a recent interview with CNBC Africa. The deal involves TotalEnergies EP Nigeria selling 10% of its participating interest in 15 Shell Petroleum Development Company JV licenses to Chappal Energies while retaining full economic interest in the licenses. But what does this mean? According to Ayodele, selling participating interest allows one party to transfer regulatory obligations and certain rights to another while still retaining financial benefits, known as economic interest. This separation strategy is not uncommon in the industry. While some may have concerns about the deal, Ayodele sees it as a strategic move by IOCs to focus on deep offshore assets and new fields, as older onshore assets may pose challenges in the long run. Additionally, factors like energy transition and portfolio rationalization are driving these divestments. However, TotalEnergies has decided to keep its Nigeria gas assets, citing their importance for future LNG expansion in the country. Gas is touted as the 'transition fuel' in the shift towards renewables, making it a lucrative prospect for IOCs. The outlook for gas, especially LNG, remains strong, with continued demand expected for the foreseeable future. As IOCs depart from onshore assets, local players are stepping in to fill the vacuum. While challenges like indigenous community issues and financing persist, there are profitability projections for these players. The new Petroleum Industry Act aims to enhance community relations and could benefit local companies taking over from IOCs. Overall, the consensus is that the vacant spots left by IOCs present opportunities for local players, albeit with challenges. The shift towards gas assets in Nigeria signifies a changing landscape in the country's oil and gas sector. As IOCs realign their portfolios, the spotlight is now on gas as a key player in the energy transition. The deal between TotalEnergies and Chappal Energies marks a significant milestone in this evolving industry.