Shell moves away from onshore oil in Nigeria in a $2.4 billion deal
Shell has recently completed the sale of its Nigerian onshore subsidiary, The Shell Petroleum Development Company of Nigeria Limited (SPDC), to Renaissance, a consortium of five companies based in Nigeria and an international energy group.
Financial Details
The sale, which was finalized on December 31, 2022, encompassed SEC proved reserves of approximately 458 MMboe, with a payment of $1.3 billion to Shell. Additionally, the buyer has committed to making further cash payments to Shell, totalling $1.1 billion, primarily for previous receivables and cash balances in the business. In addition, at the time of the transaction’s closure, Shell is prepared to provide secured term loans of up to $1.2 billion to address various funding requirements.
Furthermore, Shell has outlined plans to offer additional financing of up to $1.3 billion to support SPDC’s share of the development of the SPDC JV’s gas resources, as well as specific decommissioning and restoration costs. It is important to note that this financing will only be utilized when the aforementioned costs are approved and incurred by the SPDC JV.
The Joint Venture
Despite the change in ownership, the transaction has been structured in a manner that preserves SPDC’s operational capabilities for the benefit of the joint venture (JV). This includes maintaining the technical expertise, management systems, and processes that SPDC implements on behalf of all the companies in the SPDC Joint Venture.
In light of these developments, Shell has expressed its intention to retain a role in supporting the management of SPDC JV facilities, aiding Nigeria in maximizing value from its operations.
Future Investment Focus
According to Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director, the agreement represents a significant shift for Shell in Nigeria, indicating a strategic move away from onshore oil production in the Niger Delta. This strategic decision is aligned with Shell’s objective of simplifying its portfolio and directing disciplined investment in Nigeria towards deepwater and integrated gas positions.
Looking Ahead
Yujnovich also emphasized the company’s continued commitment to Nigeria, affirming Shell’s intention to continue supporting the country’s energy needs and export ambitions in areas that align with their long-term strategy.
The SPDC JV, which has a significant role in Nigeria’s petroleum operations, currently consists of SPDC Ltd (30%), the Nigerian National Petroleum Corporation (55%), Total Exploration and Production Nigeria Ltd (10%), and Nigeria Agip Oil Company Ltd (5%). It holds 15 oil mining leases for onshore petroleum operations and three for petroleum operations in shallow water, all of which are operated by SPDC.
With the acquisition of SPDC, the Renaissance consortium, consisting of ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin, stands to play a crucial role in the future of onshore oil in Nigeria.
As Shell’s strategic shift gains momentum, the industry observes with interest as the company positions itself to navigate the evolving landscape of Nigeria’s energy sector.
