Seplat, Sahara Group, others bid to buy Shell’s joint venture assets in Nigeria

Four indigenous oil and gas firms have indicated interest through the submission of bids for the acquisition of Shell Petroleum Development Company (SPDC)’s multibillion-dollar stake in a joint venture that operates oil fields.

This is as Shell is still pushing ahead with its earlier plans to divest from its Nigerian assets especially its shallow water and onshore interests.

According to several sources with knowledge of the negotiations who wished to remain anonymous, Seplat Energy Plc, Sahara Group Ltd., Heirs Oil and Gas Limited and ND Western Limited submitted the non-binding offers in January.

Bloomberg in its report said that its sources revealed that the sales of Shell’s 30% operating interest could generate as much as $4 billion, although it was noted that the oil major is yet to disclose to buyers the scale of potential future costs related to litigation or decommissioning and abandoning oil wells, which could bring down the sale price significantly.

It can be recalled that in August 2021, energy consultant Wood Mackenzie Limited, had valued Shell’s stake in its joint venture at $2.3 billion, assuming a long-term oil price of $50 a barrel. Brent crude, the international benchmark, is currently trading just below $90.

One of the sources said that Shell is currently deliberating and evaluating the non-binding bids to find out which of the oil firms to move to the next round. However, no final agreements have been reached as Shell could still decide to retain the asset.

What you should know

Recall that earlier in July 2021, Shell had launched a major divestment of its Nigerian assets following the issuance of sale documents with the expressions of interest (EOIs) expected.
Shell was reported to have engaged Standard Chartered to sell its Shell Petroleum Development Company of Nigeria Limited (SPDC) subsidiary, which operates the company’s shallow-water and onshore asset interests with its 30% stake in the SPDC joint venture, which supplies around 10% of Nigeria’s gas demand.
It was reported that Shell is selling its Nigerian business because it no longer views its activities in the Niger Delta as core to its ongoing strategy, which is driven by the Environmental, Social and Governance (ESG) pressure from its investors.
The oil major for decades has faced series of accusations, lawsuits and reputational damage as numerous local communities have been afflicted by oil spills and other forms of pollution. Investors are also keen for Shell to transition to cleaner forms of energy.
Even after a sale of the assets, Shell would retain a significant presence in Nigeria as the owner of export terminals and deep-water assets through Shell Nigeria Exploration and Production Company (SNEPCO) subsidiary.
SPDC is the operator of a Joint Venture Agreement involving the Nigerian National Petroleum Corporation (NNPC), which holds 55%, Shell 30%, Total Exploration and Production Nigeria Limited (TEPNG)10% and Nigerian Agip Oil Company limited (NAOC) 5%.
The joint venture owns 360 producing oil wells, 60 producing gas well, and a network of 4,000 kilometres of oil and gas pipelines and flowlines.

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