The End of an Era

Shell’s divestment from its onshore business and its implications on the Nigerian Energy Scene

Source: Guardian.ng

On Tuesday, Shell announced that it had found buyers for its onshore assets in Nigeria. The buyer was Renaissance Africa Energy, a consortium made up of 4 Nigerian-owned Oil and Gas firms and one International trading company. The assets were sold for 1.3 billion US dollars (USD) with an extra 1.1 billion USD related to prior receivables (i.e. oil Shell has already sold from the field but is yet to receive payment on).  

The deal is awaiting regulatory approval but the minister of state for petroleum has expressed support for the deal saying “the government is committed to fostering a business-friendly environment”. 

The New owners will take over the assets and the legal responsibility for the effects of the spills and damages linked to the Shell onshore assets.  

So What? 

First of all, SHELL IS NOT LEAVING NIGERIA…At least not yet 🙂🙂🙂. 

The sale just means it is no longer going to operate onshore, that is, oil fields located on land. So no more operations in the Niger Delta. It would shift its focus to its offshore operations.

Shell had already announced plans to sell the assets back in 2022 as part of its drive to divest from its onshore activities in the country. The company said that it is selling as part of its move towards reducing its carbon emissions. 

Beyond the climate rhetoric, Shell and other International Oil Companies (IOCs) have had difficulty operating onshore assets in Nigeria. Their assets have been the target of sabotage, and vandalism. These persistent attacks have made it hard for them to continue operating profitably in the country.  

Exxon in 2022 announced a sale of its onshore business to Seplat while in September and November 2023, Agip and Equinor announced the sales of their Nigeria business to Oando and Chappal respectively. Currently, all 4 deals are awaiting regulatory approval. 

Divestment of “problematic assets” by IOCs speaks to the challenges that businesses in Nigeria face. While it is great that more Nigerians are taking over these assets, when you combine the sale with the recent departure of International firms in other sectors it presents a worrying picture of the future for the Nigerian economy. 

We will be on the lookout for the response of the Nigerian government to these moves and how the new domestic owners will handle these assets because a lot of these assets are old. This means significant maintenance and revamp investment will be required. 

IOCs have been major drivers of investment, research, and development in the Nigerian oil and gas industry. They have also shouldered the responsibility of training what we know today as Nigerian oil and gas workers. The majority of the new domestic players even started as employees at IOCs. 

Therefore, the success of the divestment will be heavily dependent on the expertise of the new owners and their willingness to invest in maintaining and growing their assets.