Russian oil firms lock horns over lucrative OML29

OML 29, which holds the site of Nigeria’s first oil discovery, Oloibiri field in addition to Nembe Creek field, Santa Barbara and Odeama Creek fields, all producing is now at the center of a brawl between two Russian firms; Lukoil and L1 Energy.

Lukoil is Russia’s second largest oil company. The company was formed in 1991 when three state-run, western Siberian companies merged. That meant vertically integrating the three branches of the industry – exploration, refining, and distribution that were strictly
separate under the old Soviet system

Headquartered in Moscow, Lukoil is the second largest public company (next to ExxonMobil) in terms of proven oil and gas reserves. The company has operations in more than 40 countries around the world. During the Obasanjo administration, Lukoil indicated interest in leading a consortium of international and indigenous investors to acquire and turn around the 210,000 bpd capacity Port Harcourt refinery that was then slated for privatisation but the deal fell flat due to public outcry. Recently, Lukoil outbid Rosneft and Gazpromneft-Noyabrskneftegaz at auction for Siberian oilfields with a $1.66 billion.

For the OML 29 bid, Lukoil has held discussions with a consortium made up of Nigerian crude oil traders; Taleveras headed by Igho Samani and Benedict Peters’ IS45.OML 29

L1 Energy was founded less than a year ago as a subsidiary of LetterOne Holding with the proceeds from Fridman’s sale of his stake in TNK-BP and boasts of more than $20 billion disposable investment fund for oil and gas assets. Their target is to make five or six investments over the coming years with a global focus on either full takeovers or acquisitions of major strategic stakes that allow significant influence.

Behind the $20 billion fund is billionaire Mikhail Fridman. German Khan former CEO of TNK-BP will run the fund and he is assisted in turn by the former boss of Carlyle’s energy team, Joao Saraiva e Silva who will divide his time between L1 and Pamplona, another fund set up by Fridman.

The fund’s advisors include some prominent oil executives, including former BP CEO Lord Browne. Browne is now a partner at Riverstone energy-focused equity fund. Also on the board is Andrew Gould, chairman of BG Group and former CEO of Schlumberger, as well as Jim Hackett, former chairman of Anadarko Petroleum Corp.

L1 Energy’s incursion into Nigeria has already altered the equation for the OML 29 bid with various Nigerian companies scrambling to partner it since the firm cannot submit a bid without a Nigerian partner.

Though L1 has not chosen any partner yet, but had held discussions with Yinka Folawiyo & Sons, Nestoil, Seplat and South Atlantic Petroleum (Sapetro) chaired by Theophilus Danjuma. OML 29 is currently operated by Shell Petroleum Development Company (SPDC). The field started oil production between late 1957 and early 1958 and the first oil production from the field came at the rate of 4,928 barrels per day. The production increased thereafter as more wells were completed and put onto production.

BusinessDay