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

Four indigenous oil and gas companies have expressed interest by submitting bids to acquire Shell Petroleum Development Company’s (SPDC) multi-billion dollar stake in a joint venture that operates oilfields.

Indeed, Shell is continuing its earlier plans to divest its Nigerian assets, particularly its shallow water and onshore interests.

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

Bloomberg in its report said its sources revealed that sales of Shell’s 30% operating stake could generate up to $4 billion, although it was noted that the major oil company has not yet revealed to buyers the magnitude of potential future costs related to litigation or the dismantling and abandonment of oil wells, which could lower the sale price significantly.

Recall that in August 2021, energy consultant Wood Mackenzie Limited, 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 Shell is currently deliberating and evaluating non-binding bids to see which of the oil companies will advance to the next round. However, no definitive agreement has been reached as Shell may still decide to keep the asset.

What you should know

  • Recall that earlier in July 2021, Shell had launched a major sale of its Nigerian assets following the issuance of sales documents with expected expressions of interest (EOI).
  • Shell has reportedly contracted Standard Chartered to sell its subsidiary Shell Petroleum Development Company of Nigeria Limited (SPDC), which operates the company’s shallow water and onshore interests with its 30% stake in the SPDC joint venture, which supplies around 10 % of Nigeria’s gas demand.
  • It has been reported that Shell is selling its Nigerian operations as it no longer sees its Niger Delta operations as central to its ongoing strategy, which is driven by environmental, social and governance (ESG) pressure from its investors. .
  • For decades, the oil major has faced a series of accusations, lawsuits and reputational damage as many local communities have been hit by oil spills and other forms of pollution. Investors also want Shell to switch to cleaner forms of energy.
  • Even after the sale of the assets, Shell would retain a significant presence in Nigeria as the owner of the export terminals and deepwater assets through Shell’s subsidiary Nigeria Exploration and Production Company (SNEPCO).
  • SPDC is the operator of a joint venture agreement involving the Nigerian National Petroleum Corporation (NNPC), which owns 55%, Shell 30%, Total Exploration and Production Nigeria Limited (TEPNG) 10% and Nigerian Agip Oil Company limited (NAOC) 5% .
  • The joint venture has 360 producing oil wells, 60 producing gas wells, and a 4,000 kilometer network of oil and gas pipelines and flowlines.