Appetite in Nigeria’s oil sector wanes as Shell divests its holdings
Multinational oil companies have been grappling with myriad challenges on their onshore assets, making oil exploration increasingly costly.
This follows closely on the heels of similar divestments of onshore assets by other multinational oil companies, sparking fears the Nigerian oil and gas industry is losing its attraction.
The company long seen as a poster child of Nigeria’s oil and gas industry, discovering the country’s first oil at Oloibiri decades ago and embedded in the fabric of not just the oil business but also the government, the divestment will come as a shock to many people. Although the press statement released on the global website of the oil giant sought to cloak the shock in woolly language, it is what it is: A lack of enthusiasm in Nigeria.
Shell Global, in a statement released today, announced it was leaving its onshore assets, and seeking refuge in its deep offshore assets, which are far removed from the challenges associated with the onshore assets. Community issues, insecurity and the increasingly costly nature of onshore operations, in addition to some of these assets ageing, are some of the main factors pushing the multinationals offshore.
Shell has reached an agreement to sell its Nigerian onshore subsidiary, The Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance, a consortium of five companies comprising four exploration and production companies based in Nigeria, and an international energy group. Completion of the transaction is subject to approvals by the Federal Government of Nigeria and other conditions, the company announced on its website.
The five companies that make up the consortium are ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin. The deal, is worth US$2.8 billion, with a proven reserve of approximately 458 MMboe by December 31, 2023.
Still attempting to lessen the shock this announcement would create in the Nigerian oil and gas sector, and indeed, the wider economy, Shell enthused: Shell sees a bright future in Nigeria with a positive investment outlook for its energy sector. We will continue to support the country’s growing energy needs and export ambitions in areas aligned with our strategy.
This will however be cold comfort for the current Federal Government that has seen a spate of withdrawals of multinational companies since it assumed office. The media and opposition will latch on this as yet another evidence that the Tinubu-led administration has not been able to inspire confidence and its economic policies are headed in the wrong direction. What they will not say is that this retreat to deep offshore has long been on the cards even before the elections.
Multinational oil companies have been grappling with myriad challenges on their onshore assets, making oil exploration increasingly costly. Indeed, Nigeria is reported to have one of the highest costs of operations in the global oil industry.
This agreement marks an important milestone for Shell in Nigeria, aligning with our previously announced intent 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, declared Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director.
