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The Nigerian subsidiary of the London-based oil giant Shell Plc has finalized an agreement with a consortium of five companies, paving the way for the acquisition of its onshore business in the country.
After encountering prolonged setbacks in its efforts to divest these assets, Shell Petroleum Development Company of Nigeria Limited (SPDC) is set to receive up to $2.4 billion from the transaction, including an initial sum of $1.3 billion. Shell announced on Tuesday that an additional payment of $1.1 billion, related to prior receivables and cash balances, is anticipated upon the completion of the deal.
“This agreement marks an important milestone for Shell in Nigeria,” said Zoe Yujnovich, Shell’s director of integrated gas and upstream. He added that it will assist in “simplifying our portfolio and focusing future disciplined investment in Nigeria on our deepwater and integrated gas positions.”
The buyer, Renaissance, is comprised of locally-based energy firms – ND Western, Waltersmith, Aradel Energy, Petrolin, and First E&P.
This deal comes as a relief for Shell, which has been seeking to divest these assets since 2021 due to complications arising from sabotage, theft, and spills, some of which led to legal actions and environmental liabilities. Shell intends to retain its offshore business, which is less susceptible to such operational risks, attributing spills primarily to theft.
“We cannot solve community problems in the Niger Delta; that’s for the Nigerian government, perhaps, to solve. We can do our best, but at some point in time, we also have to conclude that this is an exposure that doesn’t fit with our risk appetite anymore,” said CEO Ben van Beurden during a shareholders’ meeting in 2021.
In January 2022, Shell received approaches from at least five suitors, all Nigerian-based energy companies, including Sahara Group, Seplat Energies, Famfa Oil, Niger Delta Exploration and Production, and Troilus Investments Limited. Later, Heirs Oil and Gas and ND Western reportedly joined the competition, but talks halted in June 2022 due to a court ruling preventing Shell from proceeding with the sale until a judgment was reached in an appeal over a 2019 oil spill involving the company.
A total of 88 communities in Rivers State are seeking $1.95 billion in compensation from the suit. This month, the Supreme Court of Nigeria ruled that Shell be allowed a hearing in the dispute, noting that the Court of Appeal did not consider the merits of the case in its verdict.
Shell, operating in Nigeria since the 1930s, holds stakes in 19 oil mining leases in the country. The deal reflects the ongoing trend of international oil companies divesting from onshore and shallow water operations in Nigeria. ExxonMobil is in the process of selling its onshore asset to Seplat, a transaction valued at around $1.3 billion, despite the Nigerian Government withdrawing its assent. In November, Norwegian state-owned energy company Equinor agreed to sell its 20.2% stake in Chevron-operated Agbami field to local firm Chappal Energies for an undisclosed sum.
In December, TotalEnergies announced plans to invest up to $6 billion in Nigeria in the coming years, with a focus on gas production, as part of its strategy to reduce investment in hydrocarbons and transition into cleaner energy.
Source: Preminum Times