Shell will sell its oil activities in Nigeria for $1.3 billion
Shell said on Tuesday it had agreed to sell its onshore oil and gas operations in Nigeria for $1.3 billion to a group dominated by local companies.
The deal is an attempt by Europe's largest energy company to reduce risks in the country that is Africa's largest oil producer. Nigeria has long been a cornerstone for Shell, but also the source of a damaging legal and environmental legacy.
Specifically, Shell said it would sell its Nigerian subsidiary, which owns 30 percent of a joint venture that operates a vast maze of wells, pipelines and other installations in the swampy Niger Delta. Other partners in the joint venture include the Nigerian State Oil Company, which has a 55 percent stake, and the French TotalEnergies.
Shell will continue its offshore energy drilling in Nigeria, as well as its liquefied natural gas activities there.
Shell has long been considered Nigeria's top energy producer, and its willingness to divest a long-standing business could increase doubts about the country's future as an oil and gas producer.
Over the past decade, Nigerian oil production has declined by about 40 percent due to lack of investment and management problems. As a result of this slippage, in November OPEC cut Nigeria's production quota by about 200,000 barrels per day to 1.5 million barrels per day.
Zoe Yujnovich, Shell's manufacturing director, said the company's goal was “to simplify our portfolio.” She also said in a statement that Shell wants to focus its future investments in Nigeria on offshore drilling and liquefied natural gas, a sector in which Shell is a global leader.
Offshore activities are also much easier to protect against piracy and other problems that plague Nigeria's oil production.
Shell's onshore oil activities in Nigeria date back more than 60 years. Once a promising and productive part of Shell's business, it has also resulted in a series of lawsuits over oil spills and damage to local people.
The move raises questions about whether the company is trying to avoid future responsibility for past actions.
“They are selling their dilapidated infrastructure to local companies and leaving local communities in a state of environmental disaster,” said Daniel Leader, partner at London-based law firm Leigh Day, which has represented Nigerian communities in cases against Shell.
Shell said the buyers would be “responsible” for the Shell subsidiary's properties share of “commitments” and for “remediation” of past leaks.
The potential buyers of Shell's operations are a consortium called Renaissance Africa Energy. It consists of four Nigerian companies and a small international company. The buyers will be the operator or manager of the joint venture.
The transaction appears unusually complex. Shell says it will receive $1.3 billion and that other payments could be made up to an additional $1.1 billion. It estimated the book value of the Nigerian subsidiary at $2.8 billion. The company is providing loans and other funds worth up to $2.5 billion to help the buyers finance the transaction and strengthen the joint venture's continued operations.