Shell $1.3bn assets sale gets regulatory agency nod

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has accepted Shell International Plc’s bid to sell its onshore assets to Renaissance in a transaction worth $1.3 billion.

Senior government sources told BusinessDay that the transaction that involves Shell’s 75-year-old onshore assets to Renaissance – a consortium of four exploration and production companies in Nigeria and an international energy group – has got the green light from the regulatory commission as required by the Petroleum Industry Act (PIA).

This deal, if successful, is expected to increase Nigeria’s oil production, boost government petrol dollar earnings, support the naira and accelerate the government’s plans for gas development.

The deal, however, still requires the final approval of President Bola Tinubu, who currently holds the portfolio of minister of petroleum resources.

“NUPRC has approved the sale and made the recommendation to the minister of petroleum for approval. This is on the minister’s table. All ‘next steps’ await the minister’s consent,” a senior government source said.

Another senior government source added, “As you know, the minister, who doubles as president, has been out of the country. As the minister has not yet given his approval, all next steps – statutory payments – await his consent.”

The British energy giant pioneered Nigeria’s oil and gas business beginning in the 1930s. It has struggled for years with hundreds of onshore oil spills as a result of theft, sabotage and operational issues that led to costly repairs and high-profile lawsuits.

Shell in January announced that it had reached an agreement to sell its onshore assets in the Niger Delta region to Renaissance and focus on deepwater and integrated gas investments.

The buyer, the Renaissance consortium, comprises ND Western, Aradel Energy, First E&P, Waltersmith, all local oil exploration and production companies, and Petrolin, a Swiss-based trading and investment company.

Sources said Shell executives have promised to assist in speedily developing Bonga assets, support an increase in oil production and accelerate the government’s plans for gas development if the Shell/Renaissance deal sees the light of the day.

“They want to put $7 billion down to develop Bonga and in three years help local operators develop an additional 300,000 barrels per day (bpd) to 500,000 bpd. They also want to stake partnership to ensure that the gas part of the deal is quickly done to benefit Nigeria,” one of the senior government sources said.

Efforts to reach Olaide Shonola, head of public affairs at NUPRC, via calls or messages proved abortive as at the time of writing these reports.

Implications for Bonga

While the deal promises to inject new energy into Nigeria’s oil and gas sector, experts are closely examining its potential impact on Bonga’s production and development plans.

Bonga, Nigeria’s first deepwater oil field, can currently produce 225,000 bpd of crude oil and 150 million standard cubic feet (scf) per day of gas which feeds the Nigeria Liquefied Natural Gas (NLNG) plant at Bonny.

Developing Bonga Southwest had been expected to add around 1 billion barrels to Nigeria’s oil reserves. Shell had previously said it would develop the Bonga Southwest project across three phases with a total potential yield of 3.2 billion barrels.

Output from the field was one of the projects Nigeria was banking on to raise production to around 3 million bpd by 2023, the Nigerian National Petroleum Company (NNPC) officials said.

Nigeria, which produces high-quality light sweet crude oil, has seen its production slump to multi-decade lows, due to operational, technical and sabotage issues.

Nigeria can pump around 2.2 million bpd of crude and condensate but output languished near 1.3 million bpd in July 2024, according to NUPRC’s estimates.

Developing the Bonga Southwest will cost $10 billion, according to estimates by the NNPC, the concessionaire of the field.

The bulk of Bonga Southwest’s resources are located in OML 118, but it also extends to OMLs 132 and 140, operated by US major Chevron, where it is called Aparo. Other partners in the project are France’s TotalEnergies and Italy’s Eni.

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 (4 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.

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 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.

Nigeria is currently faced with a gas supply shortage that must be addressed to meet the objectives of the ‘Decade of Gas,’ which seeks to grow gas penetration and develop a gas-based economy that is more sustainable and spurs industrialisation.

As Nigeria seeks to grow gas production, processing, and distribution, Renaissance will become a pillar of the country’s gas monetisation strategy and a critical partner to the public and private sector players seeking to expand the country’s gas value-chain.

In that regard, the appointment of Tony Attah, former Shell executive and managing director/CEO of Nigeria LNG for more than five years, as Renaissance’s first MD/CEO is not insignificant.