Shell’s long-awaited $1.3 billion sale of its onshore oil and gas assets in Nigeria to the Renaissance consortium is poised to receive regulatory approval, BusinessDay can confirm.
Since 2021, Shell has sought to sell its Nigerian oil and gas business, though it will remain active in Nigeria’s more lucrative and less problematic offshore sector.
According to the Petroleum Industry Act, the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) approval is required to proceed with the transaction.
Africa Oil & Gas Report, an energy intelligence publication by Tony Akinosho, a respected analyst, said there is every indication that the closure of the transaction would be announced in the next days.
The NUPRC had, on September 11, 2024, denied approving the divestment of Shell’s onshore assets to the Renaissance consortium.
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“Negotiations had sped up since then,” Africa Oil & Gas Report said on Monday.
The deal was valued at $2.4 billion during the time of the announcement. However, the value has reportedly dropped to $1.3 billion at present.
“It’s now up to the regulator to communicate the ministerial consent to the parties involved. This year alone, we’ve got two important Final Investment Decisions (FIDs), all thanks to the executive orders, which have been helpful or impactful,” a senior government source close told BusinessDay.
A senior oil executive who is close to the deal, speaking on the condition of anonymity, noted, “This transaction benefits the Nigerian people and aligns with the country’s development priorities. So far, both Shell and Renaissance have been cooperative and transparent. Approval could be imminent.”
Olu Verheijen, special adviser on energy to President Bola Tinubu, on October 31, said Nigeria’s upstream oil regulator found some issues with Shell’s proposed sale of its onshore assets to a consortium of local companies but they should be resolved soon.
“I am sure that, in short order, it will be resolved with the regulator in a way that addresses our objectives to continue to accelerate exits for international oil companies,” Verheijen said during a call with an energy reporters’ association.
If approved, the deal will mark a significant milestone for Nigeria’s energy sector. It will also mark a significant milestone in Nigeria’s oil and gas sector, potentially concluding one of the largest divestments by an international oil company in the region.
A similar deal by ExxonMobil to sell onshore assets to Seplat Energy was completed on December 12, but only after a wait of more than two and a half years.
In July 2023, at the first of several high-level meetings with Shell’s global leadership, President Tinubu declared, “We are open for business and serious about creating a stable, predictable, and investor-friendly environment.”
The deal underscores the Nigerian government’s commitment to fostering local participation in the industry while ensuring the technical and financial robustness of operators.
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Presidential directives issued in early 2024 reinforced this commitment by fast-tracking regulatory approvals, reducing operational costs, and introducing competitive fiscal incentives
These directives, aimed at enhancing regulatory clarity, accelerating project timelines and incentivising investment in Nigeria’s energy sector, have yielded remarkable results.
Earlier this year, the Ubeta oilfield (OML 58), the first blueprint project under this initiative, achieved an FID through a partnership between TotalEnergies and NNPC Limited. Dormant since its discovery in 1965, the Ubeta project will produce 350 million standard cubic feet of gas per day, bolstering domestic supply and expanding Nigeria’s presence in the global energy market.
Assets at stake for divestment
Shell said it has structured the deal to maintain Shell Petroleum Development Company of Nigeria Limited (SPDC) operational capabilities to support the SPDC Joint Venture (SPDC JV).
Data sourced from Shell Nigeria’s Briefing Notes 2023 showed the operating assets of SPDC JV include: 250 producing oil wells (189 West assets and 61 East assets); 37 producing gas wells (four West assets and 33 East assets); four gas plants and two onshore oil export terminals.
Other partners in the SPDC JV include: the NNPC (55 percent), Total Exploration and Production Nigeria (10 percent) and Nigeria Agip Oil Company (5 percent).
As part of the transition, SPDC’s employees will remain with the company under the new ownership.
Shell’s 25.6 percent interest in Nigeria’s Liquefied Natural Gas (NLNG) plant is not included in this transaction.
Shell’s presence in Nigeria will still be significant post-sale, with three businesses that will also remain outside the scope of the deal.
These include: Shell Nigeria Exploration and Production Company, which operates in the deepwater Gulf of Guinea; Shell Nigeria Gas, which supplies gas to local industries and commercial customers; and Daystar Power Group, which is engaged in offering solar power solutions across West Africa.
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Win for indigenous companies
The Renaissance consortium comprises some of Nigeria’s most respected upstream companies with demonstrated track records of redeveloping mature assets in the Niger Delta.
Individually, each of Renaissance’s shareholders has also demonstrated an ability to operate in Nigeria and maximise domestic value creation. Aradel Holdings has grown an integrated oil, gas and refining business around Ogbele that has continued to expand over the years.
Waltersmith follows a similar pattern as an operator of the producing Ibigwe marginal field and the Ibigwe modular refinery.
First E&P successfully commissioned the Anyala-Madu shallow water hub in 2020 and is working with Dangote on achieving first oil at the Kalaekule Field soon.
