Shell’s Decision to Offload Nigerian Onshore Subsidiary
Shell plc has recently announced its decision to sell its Nigerian onshore subsidiary, Shell Petroleum Development Co. of Nigeria Ltd. (SPDC), to a Nigerian-based consortium called Renaissance. The consortium includes ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin, and the deal is valued at approximately $1.3 billion. Additionally, Shell could potentially receive extra cash payments of up to $1.1 billion, which primarily pertain to prior receivables and cash balances within the business.
This move is in line with Shell’s previously declared intention 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.” These sentiments were expressed by Zoë Yujnovich, Shell’s integrated gas and upstream director, in a press release on Jan. 17.
The SPDC joint venture currently holds 15 oil mining leases for petroleum operations onshore and three for petroleum operations in shallow water in Nigeria. These operations fall under the management of SPDC, and as of Dec. 31, 2022, SEC proved reserves that are the subject of the deal amounted to approximately 458 million barrels of oil equivalent.
Shell has emphasized that the deal has been structured in a manner that will effectively preserve the full scope of SPDC’s operating capabilities during and after the transition of ownership. This includes maintaining the technical expertise, management systems, and processes implemented by SPDC on behalf of the companies in the SPDC joint venture. Furthermore, after the completion of the deal, Shell will continue to play a role in supporting the management of SPDC JV infrastructure, which supplies a significant portion of the feed gas to Nigeria LNG (NLNG).
However, it is important to note that the finalization of this deal is contingent upon approvals by the Federal Government of Nigeria and fulfillment of other conditions.
The SPDC JV is an unincorporated joint venture that is made up of various entities. These include SPDC Ltd. (30%), the government-owned Nigerian National Petroleum Corp. (55%), Total Exploration and Production Nigeria Ltd. (10%), and Nigeria Agip Oil Co. Ltd. (5%).
The decision by Shell to divest its Nigerian onshore subsidiary reflects the company’s strategic realignment and commitment to focusing on other key areas within the Nigerian energy sector. It will undoubtedly be interesting to observe how this move shapes the landscape of oil and gas operations in the region in the coming years.
