Shell Strikes Landmark Deal to Sell All Onshore Nigerian Oil Assets for $2.8bn

•Consortium of four local firms, one foreign coy to take over operations  

•Assets include 15 onshore, three shallow water OMLs of 458m barrels 

•Shell to focus on deepwater, integrated gas operations

Emmanuel Addeh in Abuja and Peter Uzoho in Lagos

Oil giant, Shell, has agreed to sell its Nigerian onshore oil assets to Renaissance, a consortium of four Nigerian firms and one foreign company, for $2.4 billion.

A statement from the London office of Shell, yesterday, said with the deal, its onshore subsidiary, the Shell Petroleum Development Company of Nigeria (SPDC), will now be operated by ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin, a Swiss firm.

However, Shell stated that the completion of the deal was still subject to approval by the federal government.

Shell, which has operated in Nigeria for over six decades, noted that its offshore and deep-water operations will continue in the country.

According to the global oil and gas company, the transaction will also preserve the full range of SPDC’s operating capabilities, including its management and staff.

Shell disclosed that it was divesting SPDC for $1.3 billion and expected to receive additional payments of as much as $1.1 billion. This would total N2.4 billion.

If the deal succeeds, it would rank as the first landmark asset sale and purchase transaction to be recorded in the Nigerian oil and gas exploration and production sector in 2024 and one of the biggest under the Petroleum Industry Act (PIA).

The SPDC JV is an unincorporated joint venture comprising SPDC Limited (30 per cent), Nigerian National Petroleum Company Limited (55 per cent), TotalEnergies Exploration and Production Nigeria Limited (10 per cent), and Nigeria Agip Oil Company Limited (five per cent).

It holds 15 oil mining leases for petroleum operations onshore and three for petroleum operations in shallow water in Nigeria, with total reserve of approximately 458 million barrels of oil equivalent.

The statement added, “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. Transaction will preserve SPDC’s operating capabilities for benefit of joint venture,”

For decades, Shell 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.

There have been agitations by the host communities, some of which are currently in court with the oil giant, that before the exit of the company, it must pay compensation and do some remediation work on the environment, which has been negatively impacted for over 60 years.

“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,” Shell’s Integrated Gas and Upstream Director, Zoë Yujnovich, said.

Yujnovich added, “It is a significant moment for SPDC, whose people have built it into a high-quality business over many years. Now, after decades as a pioneer in Nigeria’s energy sector, SPDC will move to its next chapter under the ownership of an experienced, ambitious Nigerian-led consortium.

“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.”

According to the agreement, at closing, Shell will provide secured term loans of up to $1.2 billion, to cover a variety of funding requirements.

Shell noted that it was providing additional financing of up to $1.3 billion over future years to fund SPDC’s share of the development of the SPDC JV’s gas resources to supply feedgas to NLNG, and its share of specific decommissioning and restoration costs.

The multinational said this additional financing will only be drawn down when these costs were approved and incurred by the SPDC JV.

The statement said the net book value of the entity subject to the transaction was at approximately $2.8 billion as at December 31, 2023.

The statement said, “However, Shell will continue to consolidate SPDC until control transfers at completion. Although any amounts will depend on the future financial performance of the business, we expect to recognise impairments in respect of the business up to the date of completion, including to the extent that the net book value of SPDC exceeds the expected consideration at completion.”

The statement further explained that the amounts above will be adjusted to reflect any shareholder distributions, above $200 million, made prior to completion.

Other contingent payments, according to the transaction,  including those related to gas supply to the Nigeria Liquefied Natural Gas Limited (NLNG), may become payable depending on business performance and fluctuation of product prices.

In a separate statement announcing the deal with Shell, Renaissance said it had signed a landmark transaction with Shell to enable it acquire the oil major’s entire shareholding in SPDC.

But unlike Shell, the buyer did not mention the worth of the deal in financial terms.

Renaissance said the acquisition marked a significant milestone for it, establishing its strategic position in the Nigerian market. It aligned with Shell that the completion of the transaction was subject to the requisite regulatory approvals.

Renaissance stated, “We are pleased to announce the signing of a landmark transaction with Shell to acquire its entire shareholding in SPDC.

“This acquisition marks a significant milestone for Renaissance, establishing its strategic position in the Nigerian market. We are committed to ensuring a smooth transition and look forward to leveraging our expertise, in partnership with SPDC’s industry-leading staff and working in partnership with all the stakeholders in the SPDC-JV to drive continued growth and success in Nigeria and beyond.”

Commenting on the acquisition, one of the companies that formed Renaissance consortium, Aradel Energy Limited, said in a statement that the acquisition marked a significant milestone for Aradel. It stated that this will bring enormous benefits to its shareholders, further strengthen its financial outlook, and consolidate its strategic positioning in the Nigerian energy market.

Aradel maintained that it was committed to working in partnership with all the stakeholders in Renaissance and SPDC JV to ensure a smooth transition and drive continued growth and success in Nigeria and beyond.

Aradel’s Chief Executive Officer/Managing Director, Mr. Adegbite Falade, said, “This successful acquisition represents a key step in our journey to becoming a leading energy company in Africa and aligns with our long-term strategic growth plans. It also demonstrates our commitment to our ‘3R’ Strategy of Resilience, Robustness, and Redundancy.”