Shell’s £2.4 Billion Divestment Draws Attention To Domestic Companies

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The global energy powerhouse, Shell, has made headlines with its decision to exit its onshore operations in Nigeria. This move has echoed through the country’s oil and gas sector, putting a spotlight on local enterprises and sparking uncertainties about the industry’s future.

Shell’s agreement to sell its Nigerian onshore subsidiary for a sum reaching £2.4 Billion was disclosed on Tuesday. Fulfilling a commitment to withdraw from what was once a reliable revenue source in Nigeria, the sale addresses the challenges that have tarnished Shell’s reputation in recent years.

The entity in question, The Shell Petroleum Development Company of Nigeria Limited (SPDC), will be sold for £1.3 Billion, with an additional payment of up to £1.1 Billion for prior receivables at completion. SPDC operates and holds a 30 percent stake in the SPDC joint venture, encompassing 18 onshore and shallow water mining leases with resources amounting to around 458 Million barrels of oil equivalent by the end of 2022.

Shell’s Head of Upstream, Zoë Yujnovich, emphasised the significance of this agreement in alignment with Shell’s strategy to exit onshore oil production in the Niger Delta. However, the completion of the trnsactionn hinges on approvals from the Federal Government of Nigeria and other conditions.

In a bid to ensure the continuity of SPDC’s operating capabilities, Shell stated that the sale is designed to preserve technical expertise, management systems, and processes. SPDC’s staff will remain employed during the transition to new ownership.

The buyer, Renaissance Consortium, consisting of ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin, is set to acquire Shell’s 30 per cent stake in various Oil Mining Leases onshore, and in shallow water.

For local operators, the sale presents a golden opportunity. Aisha Mohammed, an energy analyst at the Centre for Development Studies, believes that with proper financing and expertise, indigenous companies can build strong, sustainable energy businesses on the highly profitable assets being sold.

While challenges such as access to financing, international competition, and the need for skilled personnel persist, the rise of indigenous players is seen as a positive development that could diversify the industry, create jobs, and improve the local economy.

 

 

 

 

 

 

 

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