Energy Transition Enabler For Oil Divestments In Nigeria, Says Report

A new report  by Africa Oil Week and Wood Mackenzie has said the global transition to cleaner energy will drive sales of oil and gas assets in Nigeria and other sub-Saharan African countries.

It also said the energy transition will push more assets onto the market, but sellers may be stuck with unwanted assets.

The report titled ‘Sub-Saharan Africa M&A: What could be sold?’,noted that COVID-19 pandemic and the oil price crash led to a significant slowdown in merger and acquisition deals in the sub-region last year.

It added:“Deal spend was only $ 1.1bn compared with $ 5.7bn in 2019 and $1.7bn in 2018,” it said, adding that pre-production assets accounted for 80 per cent of volumes traded.Portfolio resilience is key: the majors’ combined value falls 145 per cent under a $30 per barrel long-term oil price – Leaner portfolios needed to withstand future downturns”

It  airs its view on de-carbonisation, saying  by 2030, average SSA emissions intensity would be 38 tCO2e/kboe versus a global average of 28 tCO2e/kboe.

It said: “Investment will focus on key strategic or advantaged assets, leaving mature or non-core assets prime candidates for divestment.But there are multiple barriers to M&A in the region. As oil prices recover in the short term, bid-ask spreads may widen as sellers try to extract maximum value.”

It said above-ground risks, oil price risks and access to finance on reasonable terms would continue to shrink the pool of buyers.

According to the report, private equity-backed exploration and production companies, African-focused E&Ps as well as Asian and African national oil companies are likely acquirers.

The report added:“The energy transition: ambitious emissions reduction targets will drive divestments. Shell has the highest SSA average emissions of the majors due to its legacy assets in Nigeria.Carbon emission is increasingly key when screening assets for divestment. Low-value, high-emissions assets will be prioritised for sale.”