Project counsel for Nigeria’s changing energy industry

What were TEMPLARS’ main activities in 2021?
Oghogho AKPATA: The key highlight of 2021 was the acquisition by Heirs Holding Oil & Gas Limited of a 45% participating interest in Nigerian oil mining lease 17 and associated facilities from joint-venture partners Shell, TotalEnergies and Agip, as well as the multi-tranche USD 1.1-billion financing for the acquisition and working capital requirements for the assets.
The transaction is precedent setting in its use of a multi-tiered debt financing structure, in the variety of the makeup of the lending group and in being the first divestment in Nigeria by Shell, TotalEnergies and Agip to feature a deferred purchase-price component. We shepherded this billion-dollar transaction, the largest in the Nigerian market to close in 2021, from its conception to its closing.
Another significant transaction which started in 2021 was the acquisition of a 25% interest in the holding company of Axxela by one of the leading conglomerate investment and trading houses listed on the Tokyo Stock Exchange (i.e., the Sojitz Corporation). We advised the Sojitz Corporation from inception through transaction structuring to closing.
Also, in what was a particularly complex and novel transaction, we advised Access Bank on the first-ever additional Tier 1 Eurobond issuance by a Nigerian bank and the second out of Africa. The innovative ground-breaking debt instruments counted as regulatory capital and entailed the crafting of a new framework for this unique species of bank capital in Nigeria.

Which segment of the industry will bring you more business opportunities in 2022?
OA: We are going to see a lot of divestments of onshore upstream assets by international oil companies. We are currently advising Sinopec on its divestment of certain upstream interests in Nigeria.
The antitrust space has recently become active. The Federal Competition and Consumer Protection Commission was established about four years ago, and the corpus of antitrust rules and regulations has introduced new transaction considerations. As such, we have been exposed to a significant volume of competition law considerations and transactional advisory needs. We expect a steady buildup of the momentum.
In the regulatory environment, industry players and potential investors must be guided appropriately because of the recent change to the regulatory framework for the exploitation and commercialisation of hydrocarbons. After what may be termed an age-long journey, the Petroleum Industry Act finally became law in August 2021. Stakeholders and investors are still grappling with the reforms introduced by this piece of legislation.
Expectedly, the reforms have created new opportunities such as regulatory advisory services, legal and operational restructuring of existing commercial ventures, renegotiation of existing production-sharing contracts and, in some cases, threatened disputes, particularly in relation to the operationalisation of existing stabilisation clauses. We have been actively engaged in these workstreams and we expect these engagements to continue.

What are TEMPLARS’ main activities in the petrochemicals sector?
Yemisi AWONUGA: We are advising the Nigerian Sovereign Investment Authority and OCP S.A. on the proposed development of a large-scale industrial platform comprised of an ammonia plant and a phosphate-based fertiliser plant in Nigeria. The proposed integrated platform will play a critical role for both the domestic and export markets and will go a long way in actualising Nigeria’s import substitution plan. It is revolutionary given the extent of support and collaboration between the two governments involved (i.e., Nigeria and Morocco).

What type of skills are needed for this kind of project?
YA: To deliver such a pioneering project, you must engage a legal team that appreciates the legal and commercial nuances of negotiating and documenting a chain of agreements for an integrated project with several interface risks. The pricing methodology for the upstream feedstock supply and the downstream offtake chain must be clearly understood. Structuring the project vehicle, generating bankable agreements, safeguarding the investments of the universe of investors and navigating the maze of permitting and licensing require the support of commercially astute and experienced lawyers.
We advised on the Indorama Petrochemical project and other integrated projects in this space. So, we are confident of our expertise and the multidisciplinary skills required to birth and steer the project to maturation.

What is TEMPLARS’ value proposition?
OA: We understand and advise clients on projects from conception to closing. For example, and on the average, a lawyer’s role is often perceived as being limited to the documentation of the agreements. As such, a significant number of local firms may not be opportune to participate in the conceptualisation and de-risking of a development project. This is not the narrative with Templars as we have built and earned our reputation as the firm with a complete cycle view. As such, acting as project counsel, we are always seated as a valued member of the project development team. Our insights are valued from day one. With our eye on the ultimate objective of the client, our value proposition lies in the ability to proffer solutions that tick the commercial, compliance, risk averseness and fail-proof boxes. When it concerns engagements by international companies, the norm is for the foreign firms to deliver a substantial part of the work scope with very limited involvement of local counsel. This is not our story! At TEMPLARS, we have over the years developed comprehensive competencies to consistently add value at every stage of the process.
For instance, we are advising the government of Equatorial Guinea on the development of an LPG commercialisation plan. We were part of the pricing conversations and formulation.

How is Templars serving Nigeria’s energy transition?
YA: Thanks to the declaration of the Decade of Gas by the Nigerian government, we are actively involved in ground-breaking gas commercialisation projects in our industry. We are currently advising on the first floating LNG (FLNG) project in Nigeria. We have been involved in this project from when the project promoter conceptualised the idea and practically speaking, we are drafting and negotiating agreements as early as pre-FEED engagements with JGC, one of the world’s leading FLNG contractors. We are discussing the allocation of intellectual property risk with Samsung Heavy Industries because they are also participating in the FLNG project as technical partners.
The project is the first of its kind and has several components such as gas feedstock supply, EPC, financing, offtake and project implementation. Our engagement will transcend the completion of the project as we will continue to act as a sounding board to the project sponsor post-completion as a trusted adviser.
We are currently conducting a study for a development finance institution on the regulatory enablers for the development of gas-to-chemicals clusters for stranded industrial zones.
In the Lagos Free Trade Zone, we have completed a project for the prospective development of a gas distribution network which will bring gas from the Niger Delta to Lagos. This project is expected to have a monumental impact on the stranded zone at completion.

What is TEMPLARS’ current footprint in the power sector?
YA: We are advising the Oyo state government on the development of an 11-MW hybrid power plant (with gas and solar components) by Elektron Energy. We are the team lead in a consortium of three consulting firms (i.e., leading a consortium of three companies along with PwC and Vista Advisory). Energy security is a key priority of the Oyo state government, and the solar component of the hybrid plan seeks to complement the Oyo State’s commitment to energy security in a sustainable manner. When working with a state government, it is always essential to understand the A to Z of your project; identify the risks such as change of government, payment risks, continued commitment and infrastructure maintenance culture. Robust risk identification, allocation and mitigation will assist significantly in creating a bankable structure. The leadership is also key. The state commissioner of energy’s insights and appreciation of power projects assisted immensely in de-risking and closing the deal. Nigeria should foster the synergy between the private and public sectors further in the future. Hopefully, this will be a model that people will adopt incrementally.

What are the main financial challenges linked to carbon-intensive projects in a greener world?
OA: Initially, it was a matter of dumping fossil fuels while moving to green energy sources, but we understand that there will always be an energy mix. International institutions may not fund oil developments, but brownfields projects that need money for incremental development and enhancement will continue to be financed – such as deep offshore assets, which continue to draw the interest of the Nigerian National Petroleum Corporation and of IOCs.
The pressure that has been imposed on the Western world should not be imposed on African countries because in terms of global emissions, we emit nothing in comparison. The decision to have COP27 in Egypt shows a higher commitment to understanding our financial and environmental situation.
People are repackaging their project finance deals to be sure that there is at least one green carbon content in terms of compliance with environmental standards, ensuring that even when someone participates in traditional projects, the waste is generated and dealt with in an environmentally friendly way.
The prospects of local companies will not be affected as long as they get financed locally. The main challenge will arise when indigenous companies require considerably more funds to finance larger projects because they will need international financial institutions to back such projects.
These entities, however, currently have mandates from their shareholders and regulators to reduce funding for fossil fuels. As a result, the main impacts will be seen in greenfield developments in the upstream segment, which are mostly capital intensive. In addition, the narrative around gas seems to be changing given the leaning to treat it as a clean energy source, especially as a transitional energy source. If this is the case, more aggression is required to develop gas-related projects as soon as possible.

What are the main challenges of the Nigerian power sector?
OA: The Nigeria power sector continues to face liquidity challenges arising out of the lack of cost-reflective tariffs, the huge amount of aggregate technical commercial and collection (ATC&C) losses, underdeveloped transmission infrastructure coupled with poor maintenance culture, gas supply and infrastructure constraints, questionable credit worthiness of the major players in the sector and general value chain misalignment.
These challenges are primarily due to lack of planning, proper regulation and policy continuity from one political administration to the other. The private sector is going to drive off-grid power but the sector lacks co-ordinated collaboration from the government. Leadership, co-ordinated political willingness and continuity are key.