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Shell To Sell Nigeria Onshore Oil Business Up To $2.4 Billion

After almost a century of operations in Nigeria, British energy giant Shell to sell Nigeria onshore oil business for up to $2.4 billion to a group of five primarily local businesses.

Abeo Bunkechukwu
Abeo Bunkechukwu
Jan 17, 20242.4K Shares36.4K Views
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Shell To Sell Nigeria Onshore Oil Business Up To $2.4 Billion

After almost a century of operations in Nigeria, British energy giant Shell to sell Nigeria onshore oil businessfor up to $2.4 billion to a group of five primarily local businesses.

Operating in the nation of West Africa since the 1930s, Shell has endured years of hardship due to hundreds of oil spills at its onshore facilities, which resulted in expensive repairs and high-profile legal actions due to theft, sabotage, and operational problems.

Since 2021, it has attempted to sell its oil and gas company in Nigeria; nevertheless, it will continue to operate in the country’s more profitable and less problematic offshore market.

Shell To Sell Nigeria Onshore Oil Business

Lights on a Shell logo
Lights on a Shell logo

In a significant move marking the end of nearly a century of involvement in Nigeria's onshore oil and gas sector, British energy giant Shell has agreed to sell its subsidiary, The Shell Petroleum Development Company of Nigeria Limited (SPDC), to a consortium of five primarily local companies for a substantial sum of up to $2.4 billion.

Having been a pioneer in Nigeria's oil and gas industry since the 1930s, Shell has grappled with persistent challenges, including hundreds of onshore oil spills resulting from theft, sabotage, and operational issues. These incidents not only incurred substantial repair costs but also led to high-profile legal battles.

Shell initiated efforts to divest its Nigerian oil and gas business in 2021 while expressing its commitment to maintaining operations in the country's more lucrative and less problematic offshore sector.

The sale of SPDC for a consideration of $1.3 billion, with an additional payment of up to $1.1 billion relating to prior receivables at completion, represents a strategic move aligning with Shell's previously announced intent to exit onshore oil production in the Niger Delta. The company aims to simplify its portfolio and channel future investments in Nigeria towards Deepwater and Integrated Gas positions, according to Zoë Yujnovich, Shell's Head of Upstream.

The buyer, the Renaissance consortium, is composed of ND Western, Aradel Energy, First E&P, Waltersmith - local oil exploration and production companies - and Petrolin, a Swiss-based trading and investment company. The sale is subject to approval from the Nigerian government, and Renaissance will assume responsibility for addressing spills, theft, and sabotage.

Shell's exit from onshore operations in Nigeria is part of a broader trend among Western energy companies, including Exxon Mobil, Italy's Eni, and Norway's Equinor, who have recently divested assets in the country to focus on newer and more profitable ventures.

Nnimmo Bassey, Executive Director of the Nigerian advocacy group Healthof Mother Earth Foundation, emphasized Shell's responsibility for environmental damage, stating, "Shell must own up to its responsibility,"calling for full payment for remediation and restoration of polluted areas and reparations to affected communities.

While SPDC Limited remains the operator, Shell retains a 30% stake in the SPDC joint venture, which holds 18 onshore and shallow water mining leases. The joint venture includes partners such as the Nigerian National Petroleum Corporation (NNPC) with a 55% stake, TotalEnergies with 10%, and Italy's Eni with 5%.

Despite the divestiture, Shell retains operations in deep offshore fields, a liquefied natural gas plant, and other assets in Nigeria. SPDC was formed in 1979, incorporating assets from the older Shell-BP consortium, with current partners entering at later stages.

Final Thoughts

Shell, a prominent British energy corporation, is strategically positioned to divest The Shell Petroleum Development Company of Nigeria Limited (SPDC), its Nigerian onshore oil and gas subsidiary, in a transaction of significant value amounting to $2.4 billion.

This critical decision is revealed after nearly a century of Shell's uninterrupted operations in Nigeria, a region infamous for operational difficulties and prominent legal disputes. As a result, the organization is shifting its attention to the offshore sector, which is intrinsically more profitable and relatively less fraught with complications and is located within the nation.

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