Shell to exit Nigeria's troubled onshore oil after nearly a century

Ron Bousso
Tue, January 16, 2024 


LONDON (Reuters) -Shell is set to conclude nearly a century of operations in Nigerian onshore oil and gas after agreeing to sell its subsidiary there to a consortium of five mostly local companies for up to $2.4 billion.

The British energy giant pioneered Nigeria's oil and gas business beginning in the 1930s. It has struggled for years with hundreds of onshore oil spills as a result of theft, sabotage and operational issues that led to costly repairs and high-profile lawsuits.

Since 2021, Shell has sought to sell its Nigerian oil and gas business, but will remain active in Nigeria's more lucrative and less problematic offshore sector.

Shell's exit is part of a broader retreat by western energy companies from Nigeria as they focus on newer, more profitable operations. Exxon Mobil, Italy's Eni and Norway's Equinor have struck deals to sell assets in the country in recent years.

The British major will sell The Shell Petroleum Development Company of Nigeria Limited (SPDC) for a consideration of $1.3 billion, it said in a statement, while the buyers will make an additional payment of up to $1.1 billion relating to prior receivables at completion.

"This agreement marks an important milestone for Shell in Nigeria, aligning with our previously announced intent to exit onshore oil production in the Niger Delta, simplifying our portfolio and focusing future disciplined investment in Nigeria on our Deepwater and Integrated Gas positions," Shell head of upstream Zoë Yujnovich said.

The buyer, the Renaissance consortium comprises ND Western, Aradel Energy, First E&P, Waltersmith, all local oil exploration and production companies, and Petrolin, a Swiss-based trading and investment company.

The sale, which Renaissance confirmed, requires the approval of the Nigerian government.

SPILLS AND LAWSUITS

Renaissance will take over the responsibility for dealing with spills, theft and sabotage, said Shell, which has faced in recent years multiple lawsuits for compensation over damage caused as a result of spills in the Niger delta.

Nnimmo Bassey, Executive Director of Nigerian advocacy group Health of Mother Earth Foundation said: "Shell must own up to its responsibility."

"This means full payment for the remediation and restoration of the polluted areas as well as reparations to the host communities. They cannot walk away from the virtually irreparable harm they have caused," Bassey said in a statement.

Shell's SPDC Limited operates and has a 30% stake in the SPDC joint venture that holds 18 onshore and shallow water mining leases. Shell's resources in SPDC reached around 458 million barrels of oil equivalent by the end of 2022.

Other partners in the joint venture are the state's Nigerian National Petroleum Corporation (NNPC), which holds 55%, TotalEnergies, with 10% and Italy's Eni with 5%.

Apart from its operations and stakes in several fields deep offshore, Shell still has a liquefied natural gas plant and other assets in Nigeria.

SPDC, which remains the operator, was formed in 1979, incorporating assets of the older Shell-BP consortium, with its current partners entering at later stages.

(Reporting by Ron Bousso; additional reporting by Tife Owolabi in Yenegoa and Camillus Eboh in Abuja; editing by Louise Heavens, Jason Neely and Barbara Lewis)

Shell to Sell Nigeria Onshore Oil Business for $1.3 Billion

Laura Hurst
Tue, January 16, 2024

(Bloomberg) -- Shell Plc agreed to sell its Nigerian onshore oil business to a consortium of local companies for more than $1.3 billion, a historic shift in a crucial yet controversial part of the energy giant’s global operations.

If approved by the government, the deal would fulfill Shell’s long-term goal of extracting itself from a challenging operating environment in the Niger Delta. For decades, the company has been at odds with local communities over oil spills and accusations of human rights violations, something that increasingly clashed with its broader efforts to become cleaner and greener.

Even so, Shell will retain many connections to Nigeria through its natural gas business and deep-water oil fields. It will also provide the buyers of the business with $1.2 billion in loans, and receive additional cash payments of as much as $1.1 billion on completion of the deal.

“This agreement marks an important milestone for Shell in Nigeria,” Zoe Yujnovich, integrated gas and upstream director, said in a statement on Tuesday. The deal is “simplifying our portfolio and focusing future disciplined investment in Nigeria on our deepwater and integrated gas positions”

The buyer of the business, known as Renaissance, is formed of exploration and production companies ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin, all of which are based in Nigeria, according to the statement. Renaissance’s chief executive officer and managing director is Tony Attah, a former Shell employee with 30 years of experience in the oil and gas industry.

The gradual departure of the international oil majors from the West African country has tended to boost the presence of local companies, but is by no means a guarantee that a deal will get approval from the Nigerian authorities. Exxon Mobil Corp. agreed to sell its shallow-water oil assets to Seplat Energy Plc almost two years ago, but the transaction has yet to complete amid objections from state-owned Nigerian National Petroleum Co. Eni SpA and Equinor ASA are also waiting for regulatory approval to finalize the sale of Nigerian assets.

President Bola Tinubu’s arrival in office in May has made companies more optimistic that they will be able to complete these deals, although progress has been slow since the new head of state took power.

“These divestment processes can be protracted and complex affairs,” said Clementine Wallop, a senior adviser at political-risk consultant Horizon Engage. “Given their recent pro-business rhetoric, there is pressure on President Tinubu and on upstream regulator chief Gbenga Komolafe to show that they can manage this process smoothly.”

Labored Process

Shell has pumped oil in Nigeria for more than half a century, but almost three years ago then-Chief Executive Officer Ben van Beurden signaled the company’s intention to exit its onshore oil positions. These operations have become increasingly difficult, with local communities accusing Shell of being responsible for oil spills that have polluted their environment. The company has blamed many of these incidents on damage to infrastructure caused by oil theft.

Tuesday’s announcement comes after a labored sales process that had to be halted in 2022 after a court ordered Shell Petroleum Development Company of Nigeria Ltd. to pause its divestment plans pending the outcome of a separate case related to allegations of pollution. Earlier this month, Nigeria’s Supreme Court upheld Shell’s appeal against this ruling.

The same lawyers that Shell faced in Nigeria’s Supreme Court are also representing about 1,200 plaintiffs in the southwestern city of Akure, who allege they were affected by an oil spill in 2011. That court also placed a freezing order on SPDC for the sale of any assets in Nigeria.

“SPDC has confirmed that their ability to comply with this order is unaffected. The proposed sale keeps SPDC whole and does not reduce its business,” a spokesperson for Shell said. “SPDC have a strong case and will continue to defend this claim vigorously.”

Shell will provide the buyers with secured term loans of as much as $1.2 billion “to cover a variety of funding requirements”. The London-based major will also give additional financing of as much as $1.3 billion over “future years” to fund SPDC’s share of the development of joint-venture gas resources, decommissioning and restoration costs. The company expects to take an impairment to the $2.8 billion net book value of the unit upon completion of the deal.

Following the sale, Shell will continue operating in Nigeria through its deep-water oil, natural gas and solar businesses.

--With assistance from William Clowes.

©2024 Bloomberg L.P.