EXCLUSIVE: Memo Reveals How Sylva Attempted To Undermine NUPRC’s Regulatory Power In Seplat’s $1.28bn Deal With Mobil

 

A leaked memo written by the Minister of State for Petroleum Resources, Timipre Sylva, and exclusively obtained by THE WHISTLER has revealed how the Minister attempted to undermine the regulatory power of the National Upstream Petroleum Regulatory Commission in the $1.28bn Seplat deal with ExxonMobil.

The memo, dated August 9 with reference number HMS/MPR/005/Vol1/105 was titled, “Re: Grant of Ministerial Consent to the acquisition of
Exxonmobil Companies shares in the USA by Seplat Energy Offshore Limited.”

It was personally signed by the Minister and addressed to NUPRC’s Chief Executive, Gbenga Komolafe.

Seplat Energy Plc had in February this year announced an agreement to acquire the entire share capital of Mobil Producing Nigeria Unlimited from Exxon Mobil Corporation, Delaware for $1.28bn.

The transaction involved the acquisition of ExxonMobil Nigeria’s entire offshore shallow water business. According to the deal, ExxonMobil Nigeria’s shallow water business is an established, high-quality operation with a highly skilled local operating team and a track record of safe operations.

The Nigerian National Petroleum Company Limited has a pre-emptive right over the asset and had last month won a court decision temporarily blocking Exxon Mobil Corporation from selling assets in Nigeria to Seplat Energy Plc.

A Judge in Abuja had granted NNPC an “order of interim injunction” on July 6, 2022, barring Exxon Mobil “from completing any divestment” in a unit that ultimately operates four licenses in Nigeria.
Despite the verdict of the Court, reports emerged on Monday that President Muhammadu Buhari had approved that the deal be consummated by Mobil and Seplat.

The Presidency’s announcement of the approval of the deal took many industry players by surprise because the transaction had initially been declined on July 5 this year by the President who is himself the Minister of Petroleum Resources.

As soon as the announcement for the approval of the deal was made last Monday, Komolafe had clarified that the Commission, in line with the provisions of the Petroleum Industry Act 2021 is the sole regulator in dealing with such matters in the Nigerian upstream sector.

In a statement personally signed by him, the NUPRC Boss stated that the issue at stake is purely a regulatory matter and the Commission had earlier communicated the decline of Ministerial assent to ExxonMobil in this regard.

In line with the decline of Ministerial assent, he said the Commission is calling on all parties involved in the deal to maintain status quo which in this case referred to the decline of Ministerial Assent.

In reaching the decision, NUPRC said it relied on Section 95, sub-section 10 of the PIA which states: “Where the application for an assignment or a transfer of a petroleum prospecting license of petroleum mining lease is refused, the commission shall inform the applicant of the reasons for the refusal and may give reasonable time within which further representations may be made by the applicant or by third parties in respect of the application.”

Sub-section 14 of Section 95 also states: “For the purpose of this section, change of control means any person or persons acting jointly or in concert, to acquire direct or indirect beneficial ownership of a percentage of the voting power of the outstanding voting securities of the holder, by contract or otherwise, that exceeds 50 per cent at any time.”

Similarly, sub-section 15 states: “A holder of a petroleum exploration license shall not assign, novate or transfer his license or any right, power or interest without prior written consent of the Commission.”

Also, Section 95, sub-section 8 states, “Where the consent of the minister is granted in respect of the application for a transfer, the Commission shall promptly record the transfer in the appropriate register.”

Sub-section 9 adds, “The Commission shall communicate the refusal or approval of an application for an assignment, novation or transfer of a license or lease in writing to the applicant.”

But shortly after Komolafe issued the statement affirming the no-consent position of the Commission as a regulator in the deal, Sylva issued the memo faulting the move.

In the letter, the Minister in a move intended to undermine the regulatory power drew the attention of Komolafe to the fact that NUPRC is still an agency under the Ministry of Petroleum Resources.

He claimed that the regulatory power given to the Commission under the PIA 2021 is also embedded in the Minister’s role as stated in Section 3(b) of the PIA 2021.

In the letter, Sylva went further to claim that contrary to what was stated by Komolafe, the Ministerial Consent was granted in exercise of the powers conferred on the Buhari who is himself the Minister of Petroleum Resources by the provisions of Paragraphs 14-16 of the First Schedule to the Petroleum Act, 1969.

He argued that this is because the assets upon which the deal is based are Oil Mining Leases (OMLs) which have not been converted to the regime established by the Petroleum Industry Act, 2021 (PIA 2021), but remain under the regime of the Petroleum Act, 1969, a legislation that has been preserved and grandfathered by Section 311 (9) of the PIA.

The Minister told the Commission in the letter that even if the Ministerial Consent was made pursuant to the regime established by the PIA 2021, the Act is also clear on the consent required of the minister on assignment of interest.

Quoting Section 95(2), of the PIA 2021, Sylva stated in his memo that ‘the consent of the Minister shall be granted upon recommendation by the Commission’, adding that Section 95(7a) states that ‘where the Minister rejects the recommendation of the Commission the Minister shall provide the reasons for such rejection.’

Drawing from these provisions of the PIA 2021, Sylva told the regulator in his memo that a recommendation by the Commission is not cast in stone and as such, Buhari who is the Minister of Petroleum Resources is not entirely bound by the recommendation of the Commission in the deal.

The letter reads, “You will recall that under cover of the referenced letter, I conveyed the Ministerial Consent by Mr. President and Honourable Minister of Petroleum Resources (HMPR) dated 29th July 2022, in relation to the sale of the shares of Mobil Producing Nigeria Unlimited (MPNU) by ExxonMobil Corporation companies, Mobil Development Nigeria Inc. (MDNI) and Mobil Exploration Nigeria Inc. (MENI), both of which are registered in Delaware, USA, to Seplat Energy Offshore Limited – a wholly owned subsidiary of Seplat Energy Plc.

“My attention has been drawn to the unfortunate incident of press conferences that you granted on 8th and 9th August 2022, in electronic and print media, rejecting the approval of Mr. President and Ministerial Consent on the grounds that it did not comply with the Petroleum Industry Act, 2021 (PIA 2021), after the Presidency had issued a press release on Mr. President’s approval.

“The CCE is aware of an extant Presidential directive that all memoranda from his office should be passed through the Board of NUPRC to the Office of the Honourable Minister of State for Petroleum Resources, for onward transmission to Mr. President. The CCE had in the past adhered to this directive, except in cases in which, for whatever interest, he chose not to.

“For the avoidance of doubt the NUPRC is still an agency under the Ministry of Petroleum Resources, and the regulatory power given to the Commission under the PIA 2021 is also embedded in the Honourable Minister’s role as stated in Section 3(b) of the PIA 2021, which is to ‘exercise general supervision over the affairs and operations of the petroleum industry in accordance with the provisions of this Act

“Contrary to what you stated, the Ministerial Consent was granted in exercise of the powers conferred on the Honourable Minister of Petroleum Resources by the provisions of Paragraphs 14-16 of the First Schedule to the Petroleum Act, 1969.

“This is because the assets are Oil Mining Leases (OMLs) which have not been converted to the regime established by the Petroleum Industry Act, 2021 (PIA 2021), but remain under the regime of the Petroleum Act, 1969, a legislation that has been preserved and grandfathered by Section 311 (9) of the PIA.

It added, “Even if the Ministerial Consent was made pursuant to the regime established by the PIA 2021 , the Act is also clear on the consent required of the minister on assignment of interest. Section 95(2), PIA 2021 states that ‘the consent of the Minister shall be granted upon recommendation by the Commission’, while Section 95(7a) states: ‘where the Minister rejects the recommendation of the Commission the Minister shall provide the reasons for such rejection’.

“The above sections of the PIA 2021 state unequivocally that a recommendation by the Commission is not cast in stone.

“The approval of Mr. President, who doubles as the Honourable Minister of Petroleum Resources, therefore supersedes any other position on the subject matter.

“The CCE is hereby directed, as a matter of urgency, to implement Mr. President’s approval conveyed under cover of my letter dated 8th August 2022 on the above subject.

“While awaiting your confirmation of full compliance as directed above, please accept the renewed assurances of my highest considerations.”

Barely 24 hours after the letter was written by Sylva, President Buhari reversed his approval of Seplat Energy’s purchase of ExxonMobil’s Assets, and backed the decision of the Commission.

The President ‘s Spokesperson Garba Shehu had said that the President had taken a decision that the position of the Nigerian Upstream Petroleum Regulatory Commission be supported.

He said the earlier confusion was because “various agencies involved in (the) decision had not coordinated well among themselves.”

“It has become clear that the various agencies involved in the decision had not coordinated well among themselves and having looked at all of the facts with all of the ramifications, the president decided the position of the regulator is to be supported.”

Sources within the Presidency had told THE WHISTLER on Monday that there are extant laws governing such transactions, arguing that this statutory mandate lies within the purview of the Nigeria Upstream Petroleum Regulatory Commission.