Shell Petroleum Development Company (SPDC), energy giant, has decided to sell its Nigerian onshore oil and gas assets to Renaissance Oil, an indigenous company with some affiliates.
The decision is a move signalling by Shell to shift away from onshore oil production.
Renaissance Oil is a consortium with affiliates including ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin.
The assets being sold include Shell’s 49 percent stake in the SPDC Joint Venture, which operates over 30 oil and gas fields onshore, as well as its interest in the Forcados and Bonny export terminals.
According to the oil major, Shell will sell The Shell Petroleum Development Company of Nigeria Limited (SPDC) for a consideration of $1.3 billion, it said in a statement.
The buyers will make an additional payment of up to $1.1 billion relating to prior receivables at completion.
Experts said the deal encompasses around 95,000 barrels of oil equivalent per day (boe/d) of production, making it one of the largest divestments in Shell’s history.
The deal, announced Tuesday, marks a significant shift for Shell, which has been operating in Nigeria for over 90 years.
However, the onshore assets have faced operational challenges in recent years, including security concerns and environmental activism in the Niger Delta region.
Analysts suggest that the sale reflects Shell’s broader divestment strategy, focusing on higher-margin deep-sea and liquefied natural gas (LNG) projects.
Additionally, the complex operating environment in Nigeria’s onshore fields, coupled with pressure from climate change activism, may have played a role in the decision.
According to the statement issued by Shell, the 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 the benefit of the joint venture. The transaction has been designed to preserve the full range of SPDC’s operating capabilities following the change of ownership.
“This includes the technical expertise, management systems, and processes that SPDC implements on behalf of all the companies in the SPDC Joint Venture (SPDC JV). SPDC’s staff will continue to be employed by the company as it transitions to new ownership.
“Following completion, Shell will retain a role in supporting the management of SPDC JV facilities that supply a major portion of the feed gas to Nigeria LNG (NLNG), to help Nigeria achieve maximum value from NLNG.
Commenting on the deal, Shell’s Integrated Gas and Upstream Director, Zoë Yujnovich, said, “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.
“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.”
The SPDC JV is an unincorporated joint venture comprised of SPDC Ltd (30%), the government-owned Nigerian National Petroleum Corporation (55%), Total Exploration and Production Nigeria Ltd (10%), and Nigeria Agip Oil Company Ltd (5%).
According to Shell, “The SPDC JV holds 15 oil mining leases for petroleum operations onshore and 3 for petroleum operations in shallow water in Nigeria. It is operated by SPDC.
“The consideration payable to Shell as part of the transaction is US$1.3 billion. The buyer will make additional cash payments to Shell of up to US$1.1 billion, primarily relating to prior receivables and cash balances in the business, with the majority expected to be paid after the transaction.
“The amounts above will be adjusted to reflect any shareholder distributions, above US$200 million, made prior to completion. Other contingent payments, including those related to gas supply to NLNG, may become payable depending on business performance and the fluctuation of product prices.
“The net book value of the entity subject to this transaction is approximately US$2.8 billion as of December 31, 2023. Under the agreed-upon deal structure, economic performance accrues to the buyer with effect from December 31, 2021 (the effective date). However, Shell will continue to consolidate SPDC until control transfers are completed.
