The Nigerian government has taken back its approval for TotalEnergies to sell assets to Chappal Energies for $860 million
Nigerian regulators announced on Tuesday that TotalEnergies’ (TTEF.PA) new deal sale of a minority share in a Nigerian onshore oil producer had failed, which was a blow to the French oil major’s plan to pay off debt and sell off old, polluting assets.
As part of a recent wave of oil giant divestitures of onshore Nigerian oil assets, Total agreed in July 2024 to sell its 10% investment in Shell Petroleum Development Company of Nigeria Limited (SPDC) to Chappal Energies, a company based in Mauritius.
According to Eniola Akinkuoto, spokesman for the Nigerian Upstream Petroleum Regulatory Commission, the sale’s regulatory permission from last October has been revoked since the parties have not fulfilled the financial obligations necessary to close the deal.
“The ministerial approval came with stringent timetables and financial commitments to the Nigerian people. But after several extensions, neither party was able to fulfill their financial obligations, therefore the commission had to terminate the agreement,” Akinkuoto stated on Tuesday.
TotalEnergies and Chappal Energies choose not to respond.
According to a person with knowledge of the talks, Total was unable to meet its obligations to pay regulatory fines, cover expenses for environmental rehabilitation, and cover future liabilities since Chappal was unable to raise the $860 million.
Due to theft, sabotage, and operational problems that resulted in expensive repairs and hundreds of oil spills, the failed agreement left Total burdened with its investment in a company that has
For as much as $2.4 billion, Shell (SHEL.L) sold a group of five primarily local businesses its 30% ownership in SPDC in March.
In order to concentrate on newer, more lucrative ventures elsewhere, the U.S. giant Exxon Mobil (XOM.N), Italy’s Eni (ENI.MI), and Norway’s Equinor (EQNR.OL) have also sold Nigerian holdings in recent years.
With financial support from Mauritius Commercial Bank and commodities trader Trafigura, Chappal Energies, a company that specializes in producing oil and gas from distressed and mature upstream assets in the Niger Delta, successfully completed the $1.2 billion acquisition of Nigerian assets from Equinor last year.
Chappal has not revealed who is funding its planned acquisition of TotalEnergies.
Eni (five percent) and the Nigerian National Petroleum Corporation (55 percent) are additional SPDC shareholders.
The failure of Total’s exit is a blow to its plans to sell off more expensive, polluting assets and reduce some of its debt, which increased by 89% to $25.9 billion in the year ending in July.
In July, CEO Patrick Pouyanne informed investors that the Nigerian sale was one of three acquisitions that would reduce the company’s debt-to-equity ratio, which by the middle of the year had hit 28% including leases and hybrid loans, and generate $3.5 billion before year-end.
Following the unsuccessful sale, Total now has three gas field licenses, which provide 40% of its Nigeria LNG gas supply, and 15 licenses in primarily oil-producing fields, which generated the business approximately 14,000 barrels of oil equivalent per day in 2023.
