Shell Petroleum Development Company (SPDC), a global oil giant operating in Nigeria, has made a groundbreaking announcement about selling its onshore oilfields and gas assets for $1.2 billion. The buyer is Renaissance, a consortium consisting of five Nigerian companies with established footprints in oil exploration and production. These companies include ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin.
This substantial deal, which has been in discussion for some years, hinges on the approval of the Federal Government of Nigeria and other conditions. If sanctioned, the transaction will enable Shell to exit from the challenging operating environment in the Niger Delta region, though it will continue its operations in offshore and deep offshore areas.
According to a report by The Sun, Shell expressed satisfaction with this landmark transaction, noting that beyond the sale price, additional payments of up to $1.1 billion might be received upon completion. This sale is part of Shell’s strategic shift from its onshore commitments in Nigeria due to operational challenges, including oil theft and pipeline vandalism.
Prof Adeola Adenikinju, former Director at the Center for Petroleum Energy Economics and Law, University of Ibadan, voiced concerns over the divestment by International Oil Companies (IOCs). He believes such moves send negative signals to the international community and investors. He highlighted the Nigerian government’s failure to effectively address oil theft and pipeline vandalism as contributing factors.
Adenikinju also pointed out the possible connection between Shell’s divestment and the insecurity in the Niger Delta, which has led to attacks on its assets and significant crude oil losses. This insecurity, coupled with a hostile operating environment, has also led other players in the non-oil sector to exit Nigeria.
He urged the Nigerian government to address these security issues, emphasizing the importance of oil and gas assets as major foreign exchange sources for the country. While acknowledging the new owners’ potential lack of international reach and financial capability, Adenikinju expressed reservations about their ability to manage these newly acquired assets effectively.
In response to an inquiry from the Daily Sun about the economic implications of this deal, Ayodele Oni, Partner at Bloomfield Law Practice, stated that the divestment necessitates acquiring local entities to enhance their financial and technical capacities. He expects the local firms to eventually reach optimal production levels with adequate financing, contributing to Nigeria’s daily oil production projection.
This divestment by Shell is a significant moment in Nigeria’s oil sector, indicating a shift towards local ownership and management of oil assets. The acquisition by Nigerian firms presents both challenges and opportunities in terms of technical and financial capabilities, as well as the potential to invigorate the local oil industry.
