Shell, in the announcement said it is ready to offload more of its Nigeria onshore assets to expand her deep offshore strategy aimed at producing more oil to help meet Nigeria’s daily output.
To this end Shell said it has reached an agreement to sell its Nigerian onshore subsidiary The Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance.
Renaissance is a consortium of five companies comprising four exploration and production companies based in Nigeria and an international energy group.
Shell’s Integrated Gas and Upstream director, Zoë Yujnovich, said the deal will help to simplify its portfolio and help the company focus on disciplined investment in Nigeria targeting it’s deepwater and Integrated Gas positions.
Completion of the transaction is subject to approvals by the Federal Government of Nigeria and other conditions.
Transaction will preserve SPDC’s operating capabilities for benefit of joint venture.
The transaction has been designed to preserve the full range of SPDC’s operating capabilities following the change of ownership.
This includes the technical expertise, management systems and processes that SPDC implements on behalf of all the companies in the SPDC Joint Venture SPDC’s staff will continue to be employed by the company as it transitions to new ownership.
Following completion, Shell will retain a role in supporting the management of SPDC JV facilities that supply a major portion of the feed gas to Nigeria LNG (NLNG), to help Nigeria achieve maximum value from NLNG.
“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” said Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director.
“It is a significant moment for SPDC, whose people have built it into a high-quality business over many years. Now, after decades as a pioneer in Nigeria’s energy sector, SPDC will move to its next chapter under the ownership of an experienced, ambitious Nigerian-led consortium.
“Shell sees a bright future in Nigeria with a positive investment outlook for its energy sector. We will continue to support the country’s growing energy needs and export ambitions in areas aligned with our strategy.”
The announcement comes after sales process that had to be halted in 2022 after a court ruling ordered Shell Petroleum Development Company of Nigeria Ltd. to stop its divestment plans pending the outcome of a court case related to allegations of pollution.
However, the Supreme Court upheld Shell’s appeal against this ruling.
Based on the terms of the the sale agreement, Shell will continue operating in the country through its deep-water oil business, Shell Nigeria Exploration and Production Company Ltd.
Another unit that provides gas to domestic industrial and commercial customers, Shell Nigeria Gas Ltd, will also continue operating as will solar firm Daystar Power Group.
Shell will retain its 25.6 per cent stake in Nigeria Liquified Natural Gas, NLNG, which produces and exports liquefied natural gas.
FG Ready For The Approve Deal
Although the minister of state for petroleum, Heineken Lokpobiri, said the federal government will not impede legitimate business transactions, he also reaffirmed governments commitment to “fostering a business-friendly environment” in the sector.
Lokpobiri, stated this at World Economic Forum in Davos, just a key environmental activists raised concerns seeking a halt to any approval.
In a statement, Lokpobiri dismissed concerns about any negative impacts from oil majors selling their Nigeria assets.
“On the part of the government, once we get the necessary documents, we will not waste time to give the necessary considerations and consent,” he said.
Nigeria, Africa’s top oil producer, has suffered declining output in recent years due to theft and sabotage, mostly at onshore fields, as well as low investment in the sector.
The Nigerian National Petroleum Company NNPC Ltd said the exit of oil majors provides an opportunity for new players to take over the fields.
Lokpobiri called for investment and partnership in Nigeria’s energy transition rather than imposing deadlines, emphasising Africa’s measured approach to the global transition from fossil fuels to renewable energy.
“The conversation should be about fostering strategic partnerships and attracting investment, not enforcing timelines that could undermine our economic stability.
“What we need is strategic investment in our fossil fuels sector to bolster our economy and ensure energy security. Nigeria cannot hastily transition with aids or grants,” he said.
The move further reaffirms federal government’s desire to meet and even exceed its 2024 oil production target.
Lokpobiri, has earlier reaffirmed that Nigeria will reach and exceed the 2024 crude oil production budget target of 1.7 million barrels per day (bpd).
“And as a government, we are willing to sustain that engagement with the stakeholders so that in 2024 and beyond, we will ensure that we produce not just 1.7 million bpd that we need for our budget but ensure that we produce what is needed to meet the local demand,” he said.
Towards the end of last year the government said it secured a total of $13 billion in investment commitments in its oil and gas sector from major international energy companies, including ExxonMobil, Shell, and TotalEnergies.
The deal was announced by Olu Verheijen, the Special Adviser on Energy to Nigeria’s President Bola Tinubu.
Verheijen and the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), recently met with representatives of 15 oil and gas companies operating in Nigeria and have secured their commitment to invest in Nigerian oil and gas.
“We are faced with a revenue crisis which is impacting all Nigerians. To urgently address this, President Bola Tinubu is actively seeking ways to grow revenue and forex to stabilise our economy and currency, and the oil and gas sector remains critical to our ability to do so despite current production levels falling significantly short of our potential,” Verheijen said.
Also, president Tinubu’s spokesman Ajuri Ngelale said that ExxonMobil would boost its crude oil production in Nigeria by an additional 40,000 barrels per day (bpd).
Currently, Nigeria’s oil production is about 1 million barrels per day, bpd, below around its capacity. The government has cited a lack of investments, a shortage of funding sources because of the energy transition, and insecurity among the factors driving the situation.
Nigeria aims to significantly increase its oil production to up to 1.7 million bpd by November 2023, hoping to win a higher quota in the OPEC+ agreement, Gabriel Tanimu Aduda, Permanent Secretary at Nigeria’s Ministry of Petroleum Resources, told Energy Intelligence in July.
Nigeria’s quota was 1.742 million bpd earlier this year, but due to its under production of more than 400,000 bpd, the output cap for Nigeria was lowered to 1.38 million bpd to at the OPEC+ meeting in early last June.
Nigeria has consistently failed to produce to its quota in the OPEC+ agreement. The combination of pipeline vandalism and oil theft with a lack of investment in capacity has made Nigeria the biggest laggard in crude oil production in the OPEC+ alliance.
New Oil Bid Round In The Offing
Meanwhile, the Nigeria Upstream Petroleum Regulatory Commission, NUPRC, said it will soon unveil a new oil bid round during which 12 blocks in the continental shelf and deep offshore will be offered to bidders.
This was disclosed in Lagos by the chief executive officer of the Commission, Gbenga Komolafe, during a meeting with the Independent Petroleum Producers Association, IPPG and Oil Producer Trade Group (OPTS), which is a body of major oil companies.
He used the occasion to showcase the NUPRC Regulatory Action Plan for 2024 and the Near term, which was intentionally issued on 1st January 2024 to set a direction for the industry activities.
Komolafe explained that the Plan attracted significant publicity both in the local and international media.
“The Regulatory Action Plan is not just a document; it is crafted as a signpost to the industry and stakeholders, the three (3) year focus areas of the Commission to address prevailing industry challenges and harness the opportunities that lie ahead. “It is a roadmap that outlines our vision for the upstream oil and gas to enable shared prosperity. It is our firm believe that this parley would afford us the opportunity to x-ray the Action Plan, expatiate the underlining premises and secure vital insights from you that will enrich its implementation.”
Speaking further, he said the Commission acknowledged that some of the key actions of the Plan may require clarifications and further engagements, particularly as it relates to its implications for their business models, operational architecture, and business plans.
He assured that the Commission has considered the possible implications and have designed the Plan with the flexibility to accommodate industry dynamics.
“Our goal is to enhance and facilitate a business environment that is resilient, adaptable, and aligned with global best practices. As members of OPTS and IPPG, you will continue to play pivotal roles in shaping the industry response to the evolving energy dynamics for the prosperity of our nation.
“The implementation of the Regulatory Action Plan will be a collaborative effort for our mutual benefit.” he said.
The CCE, said that to facilitate open communication, the Agency will be establishing dedicated platforms for continuous engagement on the RAP. These platforms will provide all stakeholders, OPTS and IPPG inclusive,
with opportunities to share insights, seek clarifications, and actively participate in shaping the landscape for a collective good.
On the bid round he said, that in line with provisions of Section 73 of the Petroleum Industry Act, PIA, the Commission will conclude the 2022/2023 Mini Bid Round as well as conduct a new Bid Round of 12 Blocks located in the continental shelf and deep offshore.
He called on all investors to participate in the Bid Round process that would commence soon for shared prosperity, adding that the Commission will be engaging certified metering experts to conduct technical integrity
audit of the metering facilities in the Nigerian upstream sector with a view to ensuring that metering facilities function at best practices and industry allowable limit of error.
“The Commission has equally put in place a robust framework to guide issues of divestment and
implementation of Decommissioning and Abandonment and Host Community Development Trust.
“In the weeks ahead, the Commission will be conducting a tour of upstream facilities in Nigeria.” he added.
Backing Nigeria’s Position
The African Energy Chamber, AEC, the voice of the African energy sector, has supported the Federal Government urging a fast-tracked approach to approving the deal.
Delaying the transaction will only impact the growth of the industry, and Nigeria stands to serve as an example of how the successful transfer of oil assets from an international major to local players can advance the industry.
The SPDC operates and supplies onshore and shallow water oil and gas to domestic and export markets.
The company currently supplies about 10 per cent of Nigeria’s domestic natural gas as well as operates a network of 3,173 km of flow-lines and pipelines. SPDC also has 263 producing oil wells, 56 producing gas wells, six gas plants, two major oil export terminals and one power plant. All of these assets are held through its Joint Venture with the Nigerian National Petroleum Corporation, TotalEnergies and the Nigerian Agip Oil Company.
For Shell, the transaction of these assets allows the British multinational to focus its attention on other critical assets within its portfolio. The company is looking at increasing investments in the Bongo and Erha fields – where nearly one-third of the country’s deepwater production is derived. Through the transaction, greater focus, capital and time can be given to these assets, resulting in both a more profitable and productive future for Shell in Nigeria.
The AEC, says the sale of the SPDC to the local consortium offers several benefits, both for the consortium companies and the country as a whole. In addition to ensuring the continuous development of fields and infrastructure, the acquisition showcases the capacity of domestic Nigerian companies and will lead to enhanced job creation, revenue generation and technology transfer for the consortium itself. SPDC will also benefit from the expertise and experience of the local players, improving risk mitigation and greater social responsibility.
“The AEC strongly urges the government of Nigeria to approve the transaction, thereby transferring the onshore assets into the capable hands of the local consortium. For decades, the Chamber has been promoting the role local energy companies play in Africa’s energy industry and this transaction is a strong testament to this. Local Nigerian companies will lead the next phase of the country’s energy industry transformation and we look forward to the success the consortium will have in the onshore market,” stated NJ Ayuk, Executive Chairman of the AEC.
Challenging The Divestment Plan
The divestment announcement by Shell is not going smoothly as some notable groups are seeking a temporary halt from government until some environmental issues are settled.
For instance, the Head of Business and Human Rights of Amnesty International, AI, Mark Dummett, has called on the Federal Government of Nigeria, not to allow Shell, to wash its hands of the problems caused by decades of oil spills in the Niger Delta.
Dummett, made the demand in a statement released on the X handle of Amnesty International.
Dummett said: “For decades oil spills have damaged the health and livelihoods of many inhabitants of the Niger Delta.
“Shell has earned billions of dollars from this business and it must make sure that its withdrawal does not have negative human rights and environmental consequences. We are calling for effective remedy for people whose rights have long been abused.
“Shell should not be allowed to wash its hands of the problems and leave, and we urge the Nigerian government to require Shell to provide a full assessment of existing pollution and the current state of its infrastructure. This information needs to be shared with affected communities.
“Nigeria’s government must ensure local inhabitants’ concerns about the sale are fully appraised and addressed, and uphold and protect the human rights of its citizens, including their rights to an adequate standard of living, clean water and health.”
Supporting this position, also, the Corporate Accountability and Public Participation Africa (CAPPA) has urged the Nigerian government to stop Shell from selling its onshore oil business until it fixes the environmental damage caused by its activities.
The CAPPA stated this in a statement reacting to the Shell PLC’s decision to sell its Nigerian onshore assets to a consortium of local companies for over $1.3billion.
The organisation said Shell had been trying to offload its troubled onshore oil assets since 2021, noting that permitting it to do so would allow it to escape alleged liability for its oil spills that have destroyed communities in the Niger Delta.
The CAPPA argued that the company’s sudden claim that maintenance upsurge, incessant theft and increasing lawsuits were affecting its operation raised more suspicion and anger rather than sympathy.
It recalled that Shell was one of the pioneer oil companies that have significantly altered the ecological landscape of the Niger Delta part of Nigeria since the 1930s, adding that the oil firm had benefited hugely from the ineptitude of state authorities and loopholes in the country’s environmental governance and policy framework.
“The exit plan of Shell must be firmly opposed in the interest of the communities that have gained nothing and lost everything from its operations over the years. At a time when historical damage, such as those committed by Shell, is increasingly being recognized and accountability demanded, it is not only important for the government to compel Shell to take responsibility for its actions but also for well-meaning Nigerians to resist the move by local entities to inherit environmental liabilities they cannot manage,” CAPPA Executive Director, Akinbode Oluwafemi, said.
Similarly, CAPPA Programme Manager, Ogunlade Olamide, noted that “The people of the Niger Delta are not prepared to add toxic legacies, relics of decaying infrastructures and more conflicts to the social imbalance and poverty that currently seems to be normal to them.”
“The lined-up buyer, the Renaissance consortium, which comprises ND Western, Aradel Energy, First E&P, and Waltersmith, said to be local exploration and production companies are relatively unknown, while Petrolin, a Swiss-based trade and investment company is feared to continue the atrocities of Shell,” Olamide added.
The organization argued that divestment by international standards should strictly follow the principle of informed, transparent and inclusive decision-making.
It suggested that the government, rather than approving all divestment calls, should implement and enforce measures that ensure corporations in the extractive industry not only align their operations for sustainable development but also take responsibility for the environmental impact of their activities.
The body tasked the Nigerian government to conduct comprehensive asset integrity tests and thorough environmental audits of Shell’s portfolio before any divestment process is concluded.
