Paragraph 1: Divestment of TotalEnergies’ Stake in OML 118
TotalEnergies, a global multi-energy company, has announced the sale of its 12.5% non-operated interest in the Oil Mining Lease 118 (OML 118) Production Sharing Contract (PSC) to Shell Nigeria Exploration and Production Company Ltd (SNEPCo). This transaction, valued at $510 million, marks a strategic shift in TotalEnergies’ portfolio management, as the company seeks to prioritize assets with lower technical costs, reduced emissions, and a lower cash breakeven point. The OML 118 PSC, located deep offshore in the Niger Delta, contains the prolific Bonga oil field and the developing Bonga North field. While the Bonga field commenced production in 2005, Bonga North is slated to begin operations in 2024, further enhancing the asset’s production capacity.
Paragraph 2: Strategic Rationale Behind the Divestment
TotalEnergies’ decision to divest its stake in OML 118 aligns with the company’s overarching strategy of high-grading its upstream portfolio. This strategy involves concentrating on assets that offer superior economic returns while minimizing environmental impact. By divesting from non-operated assets like OML 118, TotalEnergies can streamline its operations, reduce its exposure to higher-cost and higher-emission projects, and free up capital for investments in more strategically aligned opportunities. This approach allows TotalEnergies to optimize its portfolio by focusing on assets where it has greater operational control and can drive efficiency improvements.
Paragraph 3: OML 118 Production and Ownership Structure
The OML 118 PSC is a significant oil-producing asset, with TotalEnergies’ share of production estimated at approximately 11,000 barrels of oil equivalent per day in 2024. This substantial output underscores the asset’s importance to Nigeria’s oil industry. The PSC is currently operated by SNEPCo, which holds a 55% interest. Other partners in the venture include Esso Exploration and Production Nigeria (20%) and Nigerian Agip Exploration (12.5%), along with TotalEnergies EP Nigeria (12.5% prior to the divestment). The transaction effectively transfers TotalEnergies’ ownership stake to SNEPCo, further consolidating Shell’s position in the OML 118 project.
Paragraph 4: Implications of the Divestment for TotalEnergies
The sale of TotalEnergies’ stake in OML 118 represents a significant step in the company’s portfolio optimization strategy. By exiting this non-operated asset, TotalEnergies can redirect its resources towards more profitable and environmentally sustainable projects. The proceeds from the sale can be used to fund investments in renewable energy, energy efficiency initiatives, or the development of other high-potential oil and gas assets. The move also allows TotalEnergies to reduce its operational footprint and focus on areas where it has a stronger competitive advantage, such as its operated gas and offshore oil assets.
Paragraph 5: TotalEnergies’ Focus on Gas and Offshore Oil Assets in Nigeria
TotalEnergies remains committed to its operations in Nigeria, particularly in the gas and offshore oil sectors. The company is actively progressing the development of the Ubeta project, which is designed to bolster gas supply to the Nigeria Liquefied Natural Gas (NLNG) facility. This project underscores TotalEnergies’ focus on meeting the growing demand for natural gas, a cleaner-burning fossil fuel that plays a crucial role in the global energy transition. By prioritizing gas projects like Ubeta, TotalEnergies aims to contribute to a more sustainable energy mix while also supporting Nigeria’s economic growth.
Paragraph 6: Transaction Completion and Regulatory Approvals
The completion of the transaction between TotalEnergies and SNEPCo is contingent upon the fulfillment of customary closing conditions, including obtaining necessary regulatory approvals from the Nigerian government. These approvals are essential to ensure that the transaction complies with all applicable laws and regulations governing the oil and gas sector in Nigeria. Once these conditions are met, the transfer of ownership will be finalized, marking a significant shift in the ownership structure of the OML 118 PSC. This divestment reflects the evolving dynamics of the global energy landscape and the strategic choices made by oil and gas companies to adapt to changing market conditions and investor priorities.
