The Nigerian unit of London-based oil supermajor Shell Plc struck a deal with a consortium of five companies, setting the scene for the latter to acquire its onshore business in the country.
The deal was sealed after years-long setbacks met by the company in its efforts to rid itself of the assets.
Shell Petroleum Development Company of Nigeria Limited (SPDC) will get up to $2.4 billion from the transaction including an initial sum of $1.3 billion.
A further payment of $1.1 billion relating to prior receivables and cash balances is expected at the consummation of the deal, Shell said in a statement on Tuesday.
“This agreement marks an important milestone for Shell in Nigeria,” said Zoe Yujnovich, Shell’s director of integrated gas and upstream.
It will help in “simplifying our portfolio and focusing future disciplined investment in Nigeria on our deepwater and integrated gas positions,” he added.
Renaissance, the buyer, comprises locally-based energy firms – ND Western, Waltersmith, Aradel Energy, Petrolin and First E&P.
The deal is a relief for Shell, which has sought to offload the assets since 2021 because running them has been complicated by sabotage, theft and spills, some of which have sparked litigations and environmental liabilities.
But it will retain its offshore business, being less prone to such operational risks. Shell says the spills are caused almost entirely by theft.
“We cannot solve community problems in the Niger Delta, that’s for the Nigerian government perhaps to solve. We can do our best, but at some point in time, we also have to conclude that this is an exposure that doesn’t fit with our risk appetite anymore,” CEO Ben van Beurden told a shareholders’ meeting in 2021.
Shell got approaches from at least five suitors, all of them Nigerian-based energy companies, in January 2022 to acquire the business including Sahara Group, Seplat Energies, Famfa Oil, Niger Delta Exploration and Production and Troilus Investments Limited.
Heirs Oil and Gas and ND Western reportedly joined the foray later before talks ground to a halt in June 2022 after a court ruling forbade Shell from proceeding with the sale until judgment was given in an appeal over a 2019 oil spill involving the company.
A total of 88 communities in Rivers State are seeking $1.95 billion in compensation from the suit.
This month, the Supreme Court of Nigeria ruled that Shell be allowed a hearing in the dispute, noting that the Court of Appeal did not consider the merits of the case in its verdict.
Shell holds stakes in 19 oil mining leases in the country, where it has been operating since the 1930s.
The deal continues the flight of international oil companies from onshore and shallow water operations in Nigeria.
ExxonMobil is in the process of selling its onshore asset to Seplat, a transaction in the neighbourhood of $1.3 billion, even though the Nigerian Government has withdrawn assent.
Last November, Norwegian state-owned energy company Equinor agreed to sell its 20.2 per cent stake in Chevron-operated Agbami field to local firm Chappal Energies for an undisclosed sum.
TotalEnergies stated in December that it would invest as much as $6 billion in Nigeria in coming years, particularly in gas production, as it plans to cut down investment in hydrocarbons and transition into cleaner energy.
