Shell Plc’s Nigerian unit has finalized a groundbreaking deal, valued at $2.4 billion, with a consortium of five companies, ending years of challenges faced by the oil supermajor in attempts to divest its onshore assets.
The agreement involves Shell Petroleum Development Company of Nigeria Limited (SPDC) receiving up to $2.4 billion, including an initial sum of $1.3 billion, with an additional payment of $1.1 billion tied to prior receivables and cash balances upon the deal’s completion, as outlined in Shell’s statement on Tuesday.
“This agreement marks an important milestone for Shell in Nigeria,” stated Zoe Yujnovich, Shell’s director of integrated gas and upstream, emphasizing its role in simplifying the company’s portfolio and redirecting disciplined investment toward deepwater and integrated gas positions.
The buyer, Renaissance, consists of local energy firms ND Western, Waltersmith, Aradel Energy, Petrolin, and First E&P. For Shell, this deal provides relief from the operational risks of sabotage, theft, and spills associated with its onshore assets, allowing the company to focus on its less-risky offshore business.
The move follows Shell’s attempts to offload these assets since 2021 due to operational complications, environmental liabilities, and litigations arising from spills, largely attributed to theft.
The company aims to retain its offshore business, considered less susceptible to these risks.
The deal comes after approaches from multiple Nigerian-based energy companies in January 2022, including Sahara Group, Seplat Energies, Famfa Oil, Niger Delta Exploration and Production, and Troilus Investments Limited.
Talks faced a temporary halt in June 2022 due to a court ruling that restrained Shell from proceeding with the sale until the resolution of a 2019 oil spill case involving the company.
Shell’s decision to divest aligns with a broader trend of international oil companies distancing themselves from onshore and shallow water operations in Nigeria.
ExxonMobil is currently in the process of selling its onshore assets to Seplat, a transaction of approximately $1.3 billion.
The Supreme Court of Nigeria’s recent ruling allowing Shell a hearing in an oil spill dispute, involving 88 communities seeking $1.95 billion in compensation, adds a layer of complexity to the situation.
Nonetheless, Shell’s move signifies a strategic shift in its risk management approach, emphasizing a focus on offshore opportunities and cleaner energy ventures.
