Environmental Due Diligence in Mergers and Acquisitions in the Nigerian Oil and Gas Sector

This study examines the professional practice of environmental due diligence in mergers and acquisitions transactions in Nigeria's oil and gas sector, evaluating the scope, quality, and regulatory context of environmental due diligence as a risk management tool for asset transfers involving potentially contaminated upstream or midstream facilities. The Nigerian oil and gas sector has experienced significant asset divestiture activity as international oil companies sell onshore and shallow-water assets, and the environmental liabilities associated with decades of petroleum operations, including contaminated soil and groundwater, pipeline rights-of-way, and well abandonment obligations, represent material financial risks requiring systematic professional assessment. The study employs a case review methodology, examining the environmental due diligence reports and post-transaction environmental monitoring records of eight completed asset divestiture transactions in the Niger Delta between 2018 and 2022. Review criteria assess site investigation methodology adequacy, liability estimation approaches, disclosure quality, and the accuracy of pre-transaction liability estimates against post-transaction remediation costs. Interviews were conducted with environmental engineers from four service companies and three regulatory officials. Findings reveal that Phase I environmental site assessment scope and rigour vary considerably across the reviewed transactions, with limited Phase II intrusive investigation in most cases due to access constraints. Liability estimates are systematically underestimated relative to post-transaction remediation cost outturn, with a median cost overrun ratio of 3.2. Regulatory engagement in due diligence processes is minimal. Recommendations include standardised minimum Phase I/II scope requirements for oil and gas sector transactions under DPR oversight. Keywords: environmental due diligence, mergers and acquisitions, oil and gas, liability assessment, Niger Delta.