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Shell Plc agreed to sell its Nigeria onshore oil business to a consortium of local companies for more than $1.3 billion, a historic shift in a crucial yet controversial part of the energy giant’s global operations.
If approved by the government, the deal would fulfill Shell’s long-term goal of extracting itself from a challenging operating environment in the Niger Delta.
For decades, the company has been at odds with local communities over oil spills and accusations of human rights violations, something that increasingly clashed with its broader efforts to become cleaner and greener.
Even so, Shell will retain many connections to Nigeria through its natural gas business and deep-water oil fields. It will also provide the buyers of the business with $1.2 billion in loans, and receive additional cash payments of as much as $1.1 billion on completion of the deal.
“This agreement marks an important milestone for Shell in Nigeria,” Zoe Yujnovich, integrated gas and upstream director, said in a statement on Tuesday. The deal is “simplifying our portfolio and focusing future disciplined investment in Nigeria on our deepwater and integrated gas positions”
The buyer of the business, known as Renaissance, is formed of exploration and production companies ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin, all of which are based in Nigeria, according to the statement. Renaissance’s chief executive officer and managing director is Tony Attah, a former Shell employee with 30 years of experience in the oil and gas industry.
The gradual departure of the international oil majors from the West African country has tended to boost the presence of local companies, but is by no means a guarantee that a deal will get approval from the Nigerian authorities.
Exxon Mobil Corp. agreed to sell its shallow-water oil assets to Seplat Energy Plc almost two years ago, but the transaction has yet to complete amid objections from state-owned Nigerian National Petroleum Co. Eni SpA and Equinor ASA are also waiting for regulatory approval to finalize the sale of Nigerian assets.
President Bola Tinubu’s arrival in office in May has made companies optimistic that they will be able to complete these deals, although progress has been slow since the new head of state took power.
Shell has pumped oil in Nigeria for more than half a century, but almost three years ago then-Chief Executive Officer Ben van Beurden signaled the company’s intention to exit its onshore oil positions.
These operations have become increasingly difficult, with local communities accusing Shell of being responsible for oil spills that have polluted their environment.
The company has blamed many of these incidents on damage to infrastructure caused by oil theft.
Shell will provide the buyers with secured term loans of as much as $1.2 billion “to cover a variety of funding requirements”.
The London-based major will also give additional financing of as much as $1.3 billion over “future years” to fund SPDC’s share of the development of joint-venture gas resources, decommissioning and restoration costs. The company expects to take an impairment to the $2.8 billion net book value of the unit upon completion of the deal.
Following the sale, Shell will continue operating in Nigeria through its deep-water oil, natural gas and solar businesses.
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