UK Energy Giant Shell PLC Sells Nigerian Subsidiary to Local Consortium

In a noteworthy development within the energy sector, the UK-based oil and gas company Shell PLC has executed the sale of its Nigerian onshore subsidiary, The Shell Petroleum Development Company of Nigeria Limited (SPDC), to a consortium of five companies. This consortium, known as Renaissance, consists of four exploration and production companies located in Nigeria and an international energy group.

The sale encompasses Shell’s 30% stake in several onshore and shallow water Oil Mining Leases, with the total consideration payable to Shell amounting to $1.3 billion. Additionally, Renaissance is expected to make further cash payments of up to $1.1 billion to Shell, primarily relating to prior receivables and cash balances.

The process leading up to the sale has been a protracted one, with several Nigerian companies initially expressing interest. However, as of October 2023, only two entities remained in contention: the Renaissance Consortium and the Heirs Oil & Gas/Tullow Oil Consortium, with the latter eventually withdrawing from the race.

Shell has emphasized that the completion of the transaction is subject to approval by the Federal Government of Nigeria and other conditions, and has assured that the transaction has been structured to maintain SPDC’s operating capabilities, including the technical expertise, management systems, and processes. Furthermore, SPDC’s staff will continue to be employed by the company during and after the transition to new ownership.

Following the completion of the sale, Shell will uphold its status as a major investor in Nigeria’s energy sector through its Deepwater and Integrated Gas businesses. The company will also retain a role in supporting the management of SPDC JV facilities that supply a major portion of the feed gas to Nigeria LNG (NLNG).

Under the agreed deal structure, economic performance accrues to the buyer with effect from December 31, 2021, although Shell will continue to consolidate SPDC until control transfers at completion. Financing of up to $1.2 billion in secured term loans will be provided by Shell at closing, with additional financing of up to $1.3 billion to be made available over future years to fund SPDC’s share of gas resource development and specific decommissioning and restoration costs.

It is important to note that the transaction only involves SPDC and does not encompass three other main businesses operated by Shell in Nigeria: Shell Nigeria Exploration and Production Company Limited (SNEPCo), Shell Nigeria Gas Limited (SNG), and Daystar Power Group. Additionally, Shell’s 25.6% interest in Nigeria LNG is outside the scope of the transaction.

The sale of SPDC marks a significant development in the Nigerian energy landscape and is expected to have far-reaching implications for both the local and global energy sector. With the completion of the transaction pending approvals, the future operations of SPDC under the new ownership will be closely monitored by industry observers and stakeholders.