Shell’s Exit from Nigerian Onshore Oil and Gas Business Marks the End of an Era
Shell, the British energy conglomerate, is poised to conclude its nearly century-long engagement in Nigerian onshore oil and gas. This decision follows the company’s agreement to divest its subsidiary in the region to a consortium primarily comprised of local companies for a substantial sum of up to $2.4 billion.
As a key player in Nigeria’s oil and gas industry since the 1930s, Shell has encountered a multitude of challenges, including numerous onshore oil spills stemming from theft, sabotage, and operational issues. These issues have led to significant expenses in remediation efforts and high-profile legal disputes. Consequently, the company has been actively seeking to divest its Nigerian onshore oil and gas operations since 2021, while maintaining its presence in the more profitable and less problematic offshore sector.
The sale of its subsidiary, The Shell Petroleum Development Company of Nigeria Limited (SPDC), will result in a substantial windfall of $1.3 billion for Shell, with the consortium of buyers making an additional payment of up to $1.1 billion related to past receivables upon completion. The consortium, known as Renaissance, includes local oil exploration and production companies such as ND Western, Aradel Energy, First E&P, Waltersmith, and the Swiss-based trading and investment company, Petrolin.
The transaction also involves the transfer of responsibility for addressing spills, theft, and sabotage to the new buyers, signifying a significant shift for Shell in Nigeria. Zoe Yujnovich, Shell’s head of upstream, highlighted that this agreement represents a pivotal step for the company, aligning with its previously announced decision to discontinue onshore oil production in the Niger Delta. This strategic move enables Shell to streamline its portfolio and concentrate its future investments in Nigeria on its deepwater and integrated gas ventures.
SPDC, in which Shell operates and holds a 30% stake, oversees 18 onshore and shallow water mining leases and possesses resources totaling approximately 458 million barrels of oil equivalent as of the end of 2022. The joint venture includes partners such as the Nigerian National Petroleum Corporation (NNPC), TotalEnergies, and Italy’s Eni.
Following the divestment, Shell will maintain its presence in Nigeria through its liquefied natural gas plant and other assets. While bidding farewell to its onshore operations, the company’s legacy in Nigeria’s energy sector remains substantial.
In recent years, there has been a trend of western energy companies, including Exxon Mobil, Eni, and Equinor, divesting their assets in Nigeria to pursue more lucrative opportunities elsewhere. This trend underscores a broader realignment of these companies towards newer and more profitable prospects.
This announcement reflects the evolving landscape of Nigeria’s oil and gas industry and signifies a shift in the operational dynamics of the region. As Shell navigates this transition, the company is positioned to redirect its focus and resources towards ventures in Nigeria that offer sustainable growth and value creation.
