Concerns mount over $2.4bn Shell onshore, gas assets sale

•As expert calls on FG to tackle oil theft, pipeline vandalism

By Adewale Sanyaolu

Global oil giant, Shell, operating in Nigeria as Shell Petroleum Development Company (SPDC), yesterday announced the sale of its $1.2 billion onshore oilfields and gas assets to Renaissance, a consortium of five companies.

The five Nigerian companies with footprints in oil exploration and production are; ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin,

The deal, which has been in the pipeline for some years, is subject to approvals by the Federal Government in addition to other conditions.

If approved by the federal government, the transaction would fulfill Shell’s long-term goal of removing itself from a challenging operating environment in the Niger Delta region, while its flag remains hoisted in the offshore and deep offshore.

‘‘We are pleased to announce the signing of a landmark transaction with Shell to acquire its entire shareholding in the Shell Petroleum Development Company of Nigeria Limited (SPDC),’’ the company said.

Beyond the initial sale price, Shell said it would receive additional cash payments of as much as $1.1 billion on completion.

Reacting to the deal in a telephone conversation with Daily Sun, former Director, Center for Petroleum Energy Economics and Law, University of Ibadan, Prof Adeola Adenikinju, said the divestments by some International Oil Companies(IOCs) does not augur well for the country and by extension the economy.

He said the development sends a wrong signal to the international community and potential investors, adding that the federal government had perennially failed to address the twin monster of oil theft and pipeline vandalism.

Shell had often lamented that crude theft was a serious threat to Nigeria. In 2022, Shell in its briefing notes, said it faced the biggest operational challenge in many years at SPDC, where a significant decline in crude oil receipts at the Bonny Oil and Gas Terminal resulted in declaration of force majeure in March 2022.

Adenikinju further explained that the divestment by Shell may not be unconnected with the insecurity in the Niger Delta owing to several years of attacks on its assets by vandals, resulting in loss of millions of barrel of crude oil.

He maintained that some players in the non-oil sector had equally exited the country as a result of factors ranging from hostile operating environment to insecurity and others.

He called on the Federal Government to tackle issues around insecurity, especially for oil and gas assets which remains a major source of foreign exchange for the country.

Adenikinju, who is also the President of the Nigerian Economics Association, said he doubts the cognate experience of the new asset owners in terms of international reach and financial capability needed to run such assets.

‘‘One would have been happier if these companies were given green field asset to test their capability as against this Shell deal.

Some companies that acquired such assets in the past are struggling to break even while some have failed to add value to the assets,’’.

In an email response to Daily Sun inquiry on the implication of the deal for the economy, Partner Bloomfield Law Practice, Mr. Ayodele Oni, said the divestment means that the acquiring local entities would need to improve their financial and technical capacities so as to fit into the cap that is being dropped by the divesting international oil companies.

 ‘‘For example, Shell currently operates eighteen (18) Oil Mining Leases in the NNPC/Shell Joint Venture through its Nigerian subsidiary, Shell Petroleum Development Company Limited (SPDC). Available reports and statistics show that SPDC is arguably the largest single private sector contributor to Nigeria’s economy through petroleum taxes, royalties’ payments, lease rental and renewal payments, among others

“The parents of the acquiring company do have an excellent track record, so I expect success in the medium to long term. Hence, whilst the acquiring local entities may struggle, in the short run, to achieve the same optimal production level, with adequate financing, they will meet the expected oil production level that helps in achieving the country’s daily oil production projection.

This is more so that Shell, following the sale, will provide the buyers with secured term loans of as much as $1.2 billion to cover a variety of funding requirements,’’.