By Teddy Nwanunobi
The Minister of State for Petroleum Resources, Chief Timipre Sylva, has confirmed that Royal Dutch Shell is in talks with the Federal Government to sell its stake in onshore oilfields.
It accounts for around 40 per cent of Nigeria’s total crude and condensate output capacity of 2.2 million barrels per day (bpd).
Shell’s Chief Executive Officer (CEO), Ben van Beurden, speaking on Tuesday, at the company’s annual general meeting, said that Shell can no longer be exposed to the risk of theft and sabotage.
Beurden had told investors that the company’s onshore oil portfolio in Nigeria was “no longer compatible” with its strategic ambitions, which include a focus on climate change and net zero carbon strategy.
“We have been reviewing positions that continue to be challenged from an environmental perspective, and a particular point of attention has been onshore oil in Nigeria. We have reduced the total number of licenses in onshore Nigeria by half. But unfortunately, our remaining onshore operations continue to be subject to sabotage and theft. It means that the balance of risks and rewards associated with our onshore oil portfolio in Nigeria is no longer compatible with our strategic ambitions.
“We cannot solve community problems in the Niger Delta, that’s for the Nigerian government perhaps to solve. We can do our best, but at some point in time, we also have to conclude that this is an exposure that doesn’t fit with our risk appetite anymore.
“We’ve drawn that conclusion, and we’re now talking to the Nigerian government on the way forward,” Beurden said.
But Beurden said that Nigeria will continue to be an important heartland for Shell, with a focus on Nigeria’s deepwater and gas assets.
In a statement on Wenesday, Sylva confirmed that the Federal Government was in talks with Shell on how to divest its onshore stakes.
The sides are considering transferring the stakes to SPDC, or to another local company or selling it to a foreign company, Sylva said in a statement.
“The Federal Government is in consultation with Shell on its divestment plan, although some actually feel that Shell should not hurriedly divest,” Sylva said in the statement.
He said options put forward by the Federal Government in its talks with Shell include handing over Shell’s stakes in the assets to the Nigerian National Petroleum Corporation (NNPC), inviting bids from Nigerian indigenous producers, or having a mixture of local firms and foreign independent producers to bid for the assets.
Valuechain reports that the divestment could have a big impact on the OPEC member’s oil output, since the Anglo-Dutch company is Nigeria’s biggest oil producer.
Shell, the operator of the West African country’s onshore oil and gas joint venture SPDC, has struggled for years with spills in the Niger Delta as a result of pipeline theft and sabotage, as well as operational issues.
The spills have led to costly repair operations and high-profile lawsuits.
In February, a Dutch court held Shell’s Nigerian subsidiary responsible for multiple oil pipeline leaks in the Niger Delta, and ordered it to pay unspecified damages to farmers, leading Beurden to call its Nigerian onshore assets a “headache”.
Last year, Shell also lost a Nigerian high court case that could lead to $44 million in damages for spills.
Shell’s Nigerian onshore joint venture SPDC has sold about 50 per cent of its oil assets over the past decade.
Shell’s stake in SPDC gave it 156,000 barrels per day of oil equivalent in 2020, of which 66,000 barrels were oil.