CHEVRON CORPORATION BACKS OUT OF SALE OF CHEVRON NIGERIA TO DANTATA

When on 19 September, 2008 the media relations unit of Chevron Corporation USA circulated a press announcing that its subsidiary, Chevron Africa Holdings Limited had agree to sell Chevron Nigeria Holding to Corlay Global SA, the press release carried a caveat in compliance with the Cautionary Statement Relevant to Forward-Looking Information for the Purpose of “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995.

The cautionary statement informed readers that:

“Some of the items discussed in this press release are forward-looking statements about Chevron’s activities in Nigeria. Words such as “anticipates,” “expects,” “intends,” “plans,” “targets,” “projects,” “believes,” “seeks,” “estimates” and similar expressions are intended to identify such forward-looking statements. The statements are based upon management’s current expectations, estimates and projections; are not guarantees of future performance; and are subject to certain risks, uncertainties and other factors, some of which are beyond the company’s control and are difficult to predict. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this press release. Unless legally required, Chevron undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise.”

The caveat may just be appropriate because in the wake of the announcement of the agreement of sale of the downstream operations of Chevron Nigeria to Sayyu Dantata’s MRS, the intensity of the legal battle which had dogged the process of bidding for the 60 percent holding of Chevron Corporation held through Chevron Africa, moved some more notches and in the light of this, it is believed that the Chevron is considering appropriate channels to announce a reversal of its announcement.

Femi Otedola, Zenon Oil and Gas and Africa Petroleum Chairman had secured an injunction at a Lagos Federal High Court restraining Chevron from selling the 60 percent holdings without recourse to his 19 percent minority holding which, he claimed, may be jeopardized if the contested 60 percent holding was sold to another bidder who may lack the required expertise and resources to profitably operate the business.

Despite the injunction, Chevron parent office in San Ramon in the United States of America had gone ahead to announce the agreement to sell to Dantata’s company in defiance of the court order. Industry insiders reasoned that the announcement might have been a pre-emptive move to undermine the legal process in Nigeria. But beyond this consideration, industry insiders have argued that Chevron must have been emboldened to make the announcement in consideration of the influence of the backer of Sayyu, a profiled wealthy industrialist whom Chevron believes could pull the right strings in Nigeria to side-step the court proceedings and to also get the backing of the political power base in the country to talk Otedola into surrendering his claims to Chevron.

As was expected, Otedola initiated, through his lawyers, contempt proceedings against Chevron at the Federal High Court but last week Wednesday, he dramatically applied to withdraw the contempt proceeding in the court. This had sent some confusing signals to a growing population of the bid for Chevron.

A source close to Otedola, however, informed that the withdrawal of the contempt charge was strategic.

“The contempt proceeding had to be withdrawn because it may turn out to be a distraction from the main issue of the case.” The source said.

Another source believes that application to stop the contempt proceeding in court may not be unconnected with new revelations that Chevron Corporation, the parent company of Chevron Nigeria may have, indeed, stalled the process of transfer of the 60 percent holding in Chevron Nigeria to Dantata’s MRS in part, because of the on-going legal tango, and in part, because the required sum of money to consummate the purchase have not been made to it.

“The fact is that most Nigerian banks that are supposed to finance the acquisition have backed out, so it’s as if it is difficult to raise the fund locally.”

Any one of the two reasons for the reported abortion of the sale agreement might have thrown the spanners into what the initiators of the MRS bid for Chevron had planned by way of making the Nigerian public pay indirectly for the funding of the 60 percent shares of Chevron Nigeria.

“The strategy to my mind is simple. If the banks financed the acquisition of Chevron, it would have been easy for Sayyu and his backer to pay back the banks simply by selling 25 percent of the holding of Chevron to Nigerian investors through the Nigerian Stock Exchange. This way, they will still hold majority holdings in the company and they would have used money raised from ordinary Nigerians to pay back the money the banks used to finance the initial acquisition.” The source reasoned.

Meanwhile, Chevron has also made public its intention to sell its downstream operations trading under the Caltex brand name in Kenya.   According to AP, the front runners eyeing Chevron’s elaborate retail network include State-owned National Oil Corporation of Kenya and Gulf Africa Petroleum Corporation (Gapco). The two control a paltry 3.65 per cent and 2.65 per cent retail market share respectively.

Speculation is also rife that the cash-rich Oil Libya is equally an interested party, perhaps seeking a foothold in the Mombasa-based Kenya Petroleum Refinery Limited (KPRL), which has been much sought after by big multinationals, and is partly owned by Caltex.

The law, as spelt out under the Kenya’s Energy Act, requires Chevron to notify the Energy Regulatory Commission (ERC) of its intention to divest or transfer the licence to another oil marketer.

Previously, only the Treasury was notified in the event of divestiture by any firm.

“If the sale of Chevron will be through competitive bidding, this process may take some time to be concluded,” said Mr Peter Nduru, Head of Petroleum at ERC.

Treasury is reportedly pushing for Chevron to sell off only its Kenyan business unit to National Oil, despite plans by the global petroleum giant to sell its Kenya and Uganda operations as one bundle.

The AP report, however, observed that unlike in Kenya, this sale transaction on Chevron Nigeria was closed quickly when Chevron Nigeria hurriedly announced the agreement to sell to MRS.