Shell’s $1.3 billion sale of its onshore production unit has been rejected by Nigeria, a blow for the oil giant’s plans to leave the troubled shallow-water sector in the Niger Delta.
Gbenga Kmolafe (NUPRC) chief executive told a Nigerian oil conference in Abuja the sale of a local energy consortium to Renaissance Africa Energy was blocked as the transaction “did not pass the regulatory test”.
Komolafe did not give details on the regulator’s decision on Monday but he has cast doubts on the little-known Renaissance’s capability to run Shell’s assets within the country. Shell and Renaissance both declined to respond to requests for comment.
Investors who want to leave Nigeria face many obstacles and uncertainties.
Komolafe announced at the conference in the capital of Nigeria that his agency had granted the long-awaited ministerial approval for the Exxon deal to go ahead. Seplat declined comment, but acknowledged that the announcement was made by the regulator.
Shell announced that in January it had reached a deal with the government to sell the onshore assets it owns in the swamplands in the Niger Delta, in the southern part of the country. This will allow it to leave the area after 68-years.
The European major was waiting for the approval of the oil minister who is then advised by NUPRC whether or not to rubber stamp any deals. Bola Tinubu is Nigeria’s President and also the country’s Petroleum Minister.
Eni of Italy, Equinor of Norway, and Addax of China are some of the companies who have announced deals in recent years to sellonshore properties in Nigeria due to declining returns caused by oil theft, violent crime, and environmental damage.
Oil majors have also been lured away from swamplands in the Niger Delta by the prospect of higher returns offshore.
The deal was first signed in February 2022 by US oil company Exxon, and Seplat (which is listed on the Nigerian Stock Exchange). Seplat forecasts that Exxon assets being acquired by Seplat will nearly triple the company’s production, to 130,000 barrels from 48,000.
The cash-only deal was in limbo because the state-owned oil firm NNPC tried to block it. It claimed that it had a first-refusal right to buy Exxon’s assets. As all international companies must do, the US company manages the permits as part of a partnership with NNPC.
The former President Muhammadu Buhari had approved in August 2022, after “considering its extensive benefits to the Nigerian Energy Sector and the wider economy”. He then reversed his decision within three days, stating that further regulatory scrutiny is needed.
Italian giant Eni sold its Nigerian unit to Oando in August for $783mn, while Norway’s Equinor bought its subsidiary from Chappal Energies for an undisclosed sum last November.
Chappal Energys acquired this year a minority stake of $860mn in a Total Onshore Venture.
Clementine Wallop of Horizon Engage, an energy consultancy, said that the approval of Exxon’s transaction is “good news for Nigerian investors and the government, after a lengthy wait which has created uncertainty”.
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