- After nearly a century, Shell has decided to exit Nigeria’s oil and gas sector.
- Shell has faced persistent challenges over the years, grappling with numerous onshore oil spills caused by theft, sabotage, and operational difficulties.
- In December 2022, Shell agreed to pay $15.9 million in damages to communities in Nigeria’s Niger Delta impacted by numerous oil leaks.
After nearly a century, Shell has decided to exit the Nigerian oil and gas sector. The British multinational is selling Shell Petroleum Development Company of Nigeria Limited (SPDC), the entity that owns onshore oil assets in the nation’s Niger Delta region.
As fate would have it, Shell is selling SPDC to the Renaissance consortium, an alliance of ND Western, Aradel Holdings Plc, First E&P, the Waltersmith Group, Petroleum Development Company Limited and Petrolin.
This deal, reported at a value of $1.3 billion, with further payments of up to $1.1 billion, could offer local energy companies a range of benefits that could significantly accelerate the growth of the country’s oil and gas industry. They can tackle the challenges that Shell has been fighting for centuries.
Shell’s challenges in Nigeria’s oil and gas sector
Having pioneered Nigeria’s oil and gas sector since the 1930s, Reuters highlights that Shell has faced persistent challenges, grappling with numerous onshore oil spills caused by theft, sabotage, and operational difficulties.
These incidents have necessitated costly repairs and resulted in high-profile legal battles for the British multinational. Shell notes that Renaissance will now assume the role of addressing the persistent oil spills and rampant theft of the commodity while also managing never-ending cases of sabotage.
In December 2022, Shell consented to compensate $15.9 million in damages to communities in Niger Delta impacted by numerous oil pipeline leaks. The resolution was reached in a Dutch court as part of a case initiated by Friends of the Earth, attributing responsibility for the oil leaks to SPDC.
The Shell- Renaissance consortium transaction, which is subject to approval by the Nigerian government, offers an opportune chance for Africa’s largest economy to demonstrate how the transfer of oil and gas operations from international to local players can positively drive growth.
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How SPDC can benefit Nigeria’s oil and gas industry
The sale of SPDC to a Renaissance consortium marks a pivotal moment in Nigeria’s energy landscape, presenting an array of advantages and opportunities for both the consortium companies and the nation.
Beyond the immediate implications, this transaction ensures the uninterrupted development of critical fields and infrastructure, laying the groundwork for sustained growth in the nation’s energy sector.
Additionally, the acquisition serves as a testament to the robust capabilities of domestic Nigerian oil and gas companies, demonstrating their capacity to take the reins in steering the nation’s energy destiny.
Moreover, this landmark transaction by the oil giant is poised to unleash a wave of socio-economic benefits across Africa’s most populous nation, echoing far beyond the consortium companies’ boardrooms.
For instance, job creation is poised to increase, providing employment opportunities that resonate deeply within local communities. An estimated 65,000 people work directly in Nigeria’s oil industry, offering roughly 250,000 jobs in non-direct employment.
The revenue generated from this shift will not only contribute to the economic prosperity of the local oil and gas consortium but will also have a cascading effect on national development.
Moreover, the transfer of technology from SPDC to the local consortium is a catalyst for innovation, fostering a knowledge exchange poised to drive Africa’s biggest economy toward the forefront of advancements in the energy sector.
As the local consortium assumes control, SPDC can also gain expertise and experience from these indigenous players. This infusion of local knowledge enhances risk mitigation strategies, ensuring a more resilient and adaptive approach to the dynamic challenges inherent in the oil and gas industry.
Furthermore, the transfer of responsibility brings an increased focus on social responsibility, aligning with the consortium’s commitment to sustainable practices and community development.
This transition symbolizes a change in ownership and a transformative shift towards a more inclusive, resilient, and socially responsible energy future for Nigeria.
SPDC oil and gas assets going to Nigerian companies
For a century, SPDC has played a critical role in the country’s energy landscape by operating and supplying onshore and shallow water oil and gas to the domestic market and export destinations.
Shell, which has been trying to sell its oil and gas business in Nigeria since 2021, is a significant contributor to energy self-sufficiency, supplying about 10 per cent of the country’s domestic natural gas.
With a vast infrastructure network, SPDC manages an extensive system of 3,173 km flow lines and pipelines, assets that will now change ownership to local entities.
Furthermore, SPDC boasts an impressive portfolio of other assets, including 263 producing oil wells, 56 producing gas wells, six gas plants, two major oil export terminals, and a power plant.
These assets are held in collaboration with key partners, namely the Nigerian National Petroleum Corporation (55 per cent), Exploration and Production Nigeria Ltd (10 per cent), and the Nigerian Agip Oil Company (5 per cent), through their Joint Venture.
This Joint Venture holds 15 oil mining leases for petroleum operations onshore and three for petroleum operations in shallow water in the country, all operated by SPDC.
SPDC’s extensive reach, encompassing production facilities, export terminals, and power generation, positions it as a cornerstone in Nigeria’s energy infrastructure.
With a commitment to collaboration through joint ventures, SPDC is set to continue playing a pivotal role in shaping the nation’s energy future, fostering partnerships that contribute to the nation’s economic development and energy security.
What next for Shell in West Africa?
After decades as a pioneer in Nigeria’s energy sector, SPDC is moving to its next chapter under the ownership of an experienced, ambitious Nigerian-led consortium. However, Shell will remain a major investor in the oil-rich country’s energy sector through its deepwater and integrated gas businesses.
The oil giant is looking at increasing investments in the Bongo and Erha fields – where nearly one-third of the country’s deepwater production is derived. Through the Renaissance consortium, greater focus, capital, and time can be given to these assets, resulting in a more profitable and productive future for Shell in Nigeria.
“This agreement marks an important milestone for Shell in Nigeria,” Shell’s Integrated Gas and Upstream Director Zoe Yujnovich explained, adding that the deal is “simplifying our portfolio and focusing future disciplined investment in Nigeria on our deepwater and integrated gas positions.”
“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.”
