CEM REPORT, ENERGY | After nearly a century of dominating the Nigerian onshore oil and gas landscape, Shell is finally pulling out from Nigeria’s onshore oil and gas operations. The British energy giant has agreed to sell its subsidiary, The Shell Petroleum Development Company of Nigeria Limited (SPDC), to a consortium for up to $2.4 billion, marking a significant shift in the country’s oil industry.
The deal, announced on Tuesday, marks a historic exit for Shell, which pioneered Nigeria’s oil and gas industry in the 1930s and became the dominant player in the sector.
The Renaissance consortium comprises ND Western, Aradel Energy, First E&P, Waltersmith, all Nigerian oil exploration and production companies, and Petrolin, a Swiss-based trading and investment company. The sale, which requires the approval of the Nigerian government, will see the consortium pay $1.3 billion upfront and up to $1.1 billion more depending on the recovery of prior receivables.
Shell’s SPDC Limited, which retains its role as the operator, holds a 30% stake in the SPDC joint venture, encompassing 18 onshore and shallow water mining leases. The joint venture’s other partners include the Nigerian National Petroleum Corporation (55%), TotalEnergies (10%), and Italy’s Eni (5%).
Renaissance, the consortium taking over, inherits the complex task of managing existing spills, preventing future ones, and navigating ongoing legal battles.
The decision comes as Shell has grappled with onshore challenges, including hundreds of oil spills due to theft, sabotage, and operational issues, leading to costly repairs and high-profile lawsuits. The company has been actively seeking to divest its Nigerian onshore assets since 2021, following the footsteps of other Western energy giants like Exxon Mobil, Eni, and Equinor.
Shell’s exit from onshore aligns with its global strategy of prioritizing more profitable and less problematic operations.
Shell’s Head of Upstream, Zoë Yujnovich, emphasized the significance of the agreement, stating, “This marks an important milestone for Shell in Nigeria, aligning with our intent to exit onshore oil production in the Niger Delta, simplifying our portfolio, and focusing future disciplined investment in Nigeria on our Deepwater and Integrated Gas positions.”
Shell’s Exit and its Portfolio of Lawsuits
While Shell’s departure marks a new chapter, the environmental and social consequences of its onshore activities remain. The company has faced numerous lawsuits over oil spills, and activists like Nnimmo Bassey of Health of Mother Earth Foundation emphasize Shell’s responsibility for “full payment for remediation, restoration, and reparations to host communities.”
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Renaissance, the consortium taking over, inherits the complex task of managing existing spills, preventing future ones, and navigating ongoing legal battles.
This deal signifies the end of an era. Shell pioneered Nigeria’s oil and gas business in the 1930s, Shell’s legacy in Nigeria is a double-edged sword. While it fueled the country’s economy for decades, its onshore operations came at a heavy environmental and social cost. The Niger Delta, once a thriving ecosystem, bears the scars of countless oil spills, impacting the livelihoods and health of local communities.
Shell has said that it is committed to cleaning up the legacy spills and restoring the environment in the Niger Delta, in line with the recommendations of a 2011 report by the United Nations Environment Programme. The company has also said that it will continue to support the development and welfare of the communities in the region through various social investment programmes.
Shell’s SPDC Limited, which was formed in 1979, incorporating assets of the older Shell-BP consortium, has produced over 9 billion barrels of oil equivalent from the Niger Delta since its inception. The company’s resources in SPDC reached around 458 million barrels of oil equivalent by the end of 2022, accounting for about 10% of Shell’s global upstream production.
