By Jeph Ajobaju, Chief Copy Editor
Shell is pressing on with plans to divest interest in onshore fields in Nigeria and is in talks with Abuja to sell off its stakes dating back to 1958 when it became the first major firm to discover oil in commercial quantity in Africa’s largest economy.
Before this latest news, Shell had already joined ExxonMobil, Total, Eni, and other oil majors to slash billions in spending after dips in their profits in Nigeria, and are relocating money to renewable fuels, focusing on cost-effective markets.
Shell – operator of Nigeria’s onshore oil and gas joint venture, Shell Production Development Company (SPDC) – has struggled for years with spills in the Niger Delta as a result of pipeline theft and sabotage as well as operational issues.
Reuters recalls that the spills have led to costly repair operations and high-profile lawsuits.
Shell Chief Executive Officer Ben van Beurden disclosed at the company’s annual general meeting that it can no longer be exposed to the risk of theft and sabotage.
“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,” van Beurden said, quoted by Reuters.
“We’ve drawn that conclusion, and we’re now talking to the Nigerian government on the way forward.”
Minister of State for Petroleum, Timipre Sylva, confirmed the government was in talks with Shell on how to divesting 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 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 van Beurden to call its Nigerian onshore assets as a “headache”.
Last year Shell also lost a Nigerian high court case that could lead to $44 million in damages for spills.
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 (bpd) of oil equivalent in 2020, of which 66,000 barrels were oil.
Shell, Chevron, others leaving Nigeria for better markets
Nigeria attracted $3 billion or 4 per cent of the $70 billion voted by oil majors for new projects in Africa between 2015 and 2019, which experts see as a warning shot to an economy that relies on oil.
The Nation reports that Nigeria’s loss is the gain of other African countries such as Angola and Sao Tome and Principe where some international oil companies (IOCs) have made major investments in recent years.
Nigeria’s loss, Sao Tome and Principe’s gain
Sao Tome and Principe is being courted by oil companies from far and near.
A consortium of US firms, including Chevron Texaco and ExxonMobil, is among the first to secure oil licence in that country along with a Norwegian company, EER, which netted over $70 million with many other prospects.
Delta State Environment Commissioner, Onogba Christian, told The Nation that oil majors like Shell and Chevron may have been compelled by Nigeria’s socioeconomic realities that make the operating environment bad for their business.
“The first ominous sign that presented itself was the deliberate efforts by the international oil companies (IOCs) to relocate their headquarters outside the Niger Delta region. When that happened a few years back, it was a bad signal.
“Of course, you cannot lay all the blame on the IOCs entirely because no businessman wants to invest in an area where insecurity is a big issue. The problem really has to do with the issue third party interference, poor legislation among other factors which are genuine reasons to affect investment decisions,” Christian said.
He urged Abuja to ensure an enabling environment for business to thrive, saying: “I’m convinced that once there is a level of assurance that their investments can be guaranteed many of these oil managers that have exited the country will come back.”
Jasper Jumbo, Chairman/CEO of Niger Delta Projects Consortium, added that “nobody wants to do business in an environment of chaos. Once peaceful co-existence is a challenge no business can survive under such a circumstance.”
International energy companies are concerned that proposals in Nigeria’s long-delayed oil industry law will deter investment in new offshore projects.
Demand for royalty relief
In a joint presentation, the Oil Producers Trade Section (OPTS) urged lawmakers to remove a proposed hydrocarbon tax as producers will still be subject to companies income tax.
“Our review of the Petroleum Industry Bill shows that deepwater provisions do not provide a favorable environment for future investments and for the launching of new projects,” Mike Sangster, managing director of Total SE’s Nigeria unit, told lawmakers at a hearing in Abuja.
To boost new investment, the proposed law should grant deepwater oil projects full royalty relief for the first five years of production or a graduated royalty scheme, argued Sangster, who chairs the OPTS which comprises 30 producers, among them Total, Royal Dutch Shell, Exxon Mobil Corp, Chevron Corp, and Eni SpA.
The bill – two decades in the making – will streamline how Nigeria’s energy assets are operated and funded.
The bill, first presented to the National Assembly in 2008, is held up by political wrangling and objections from IOCs that the government is demanding an excessive increase in revenue.
Failure to pass the bill “has been a major drag” on the oil and gas sector, Senate President Ahmad Lawan said at the public hearing on the bill in January.
The delay has harmed Nigeria’s ability to “attract both local and foreign capital” at a time of greater competition with other resource-rich nations, he stressed.