Shell will sell its Nigeria oil business for $1.3 billion

Shell will sell its Nigeria oil business for $1.3 billion

Shell said on Tuesday it had agreed to sell its onshore oil and gas business in Nigeria to a consortium dominated by local companies for $1.3 billion.

The transaction is an attempt by Europe’s largest energy company to reduce its exposure to Africa’s largest oil producing country. Nigeria has long been a cornerstone for Shell, but also the source of a damaging legal and environmental legacy.

Specifically, Shell said it would sell its Nigerian subsidiary, which owns 30 percent of the joint venture that operates a vast maze of wells and pipelines and other installations in the swampy Niger Delta. Other partners in the joint venture include Nigeria’s state oil company, which holds a 55 percent stake, and France’s TotalEnergies.

Shell will continue its offshore energy drilling in Nigeria as well as its liquefied natural gas operations there.

Shell has long been considered the most important energy producer in Nigeria, and so its desire to dispose of a long-standing business could raise doubts about the country’s future as an oil and gas producer.

Over the past decade, Nigeria’s oil production has declined by about 40 percent due to lack of investment and management problems. Reflecting the decline, OPEC cut Nigeria’s production quota by about 200,000 barrels per day in November to 1.5 million barrels per day.

Zoe Yuznovich, Shell’s production director, said the company’s aim was to “simplify our portfolio”. He also said in a statement that Shell wants to focus its future investments in Nigeria on offshore drilling and liquefied natural gas, a business in which Shell is a global leader.

Offshore operations are also much easier to avoid piracy and other problems that affect oil production in Nigeria.

Shell’s onshore oil business in Nigeria dates back over 60 years. While this was once a promising and productive part of Shell’s operations, it also resulted in a series of lawsuits over oil spills and harm to local people.

The move raises the issue of whether the company is trying to avoid future responsibility for past actions.

“They are selling off their dilapidated infrastructure to local companies and leaving local communities in a state of environmental disaster,” said Daniel Leader, a partner at the London-based law firm Leigh Day, who represents Nigerian communities in cases against Shell. “

Shell said the buyer would be “responsible” for the Shell subsidiary’s share of the “commitments” and the “remediation” of past expenses.

The potential buyer of Shell’s business is a consortium called Renaissance Africa Energy. It involves four Nigerian companies and one small international company. The buyer will be the operator or manager of the joint venture.

The transaction appears unusually complex. Shell says it will receive $1.3 billion and there could be up to an additional $1.1 billion in other payments. It estimates the book value of the Nigerian subsidiary at $2.8 billion. The company is providing up to $2.5 billion of loans and other funds to help the buyers finance the transaction and promote continued operations in the joint venture.

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