The Shell Petroleum Development Company (SPDC) clarified that the recent divestment from three oil blocks in North Western Niger Delta does not imply it is gradually exiting its operations in Nigeria.
Shell insisted on Tuesday night that it is not exiting Nigeria and it is committed to continuing its operations in the country.
Speculations were rife that the oil major has set in motion plans to leave Nigeria because negotiations for the renewal of some of its expired licenses were stalled. This heightened after Shell announced the sale of its Oil Mining Licenses (OMLs) 4, 38, and 41 to a Nigerian-led multinational consortium.
Some industry watchers argue that the move was predicated on certain aspects of the Petroleum Industry Bill, particularly the new fiscal regime being proposed, which the International Oil Companies are uncomfortable with.
No plans to leave Nigeria
“Any suggestion that Shell has divested its asset and is exiting Nigeria is misleading and untrue,” said Mutiu Sunmonu, managing director of SPDC. “We did not sell the asset because of the PIB, neither did we sell the asset as a precursor to closing shop in Nigeria. We have a long-standing presence in, and commitment to Nigeria. We will continue our onshore and offshore exploration and production activities.” The three blocks have a combined condensate output of about 50,000 barrels per day. For a company like Shell, oil blocks which account for less than five percent of its total assets, are insignificant to its portfolio.
Rationale behind the sale
Explaining the rationale for the divestment in the three blocks, Mr. Sunmonu, who also doubles as Country Chair of Shell Nigeria, said: “Shell has a large and diversified global upstream portfolio, which we regularly review to ensure best value for the company.
“I want to emphasise that we did it also in support of government’s aspiration to support local participation in the industry. We believe that these assets are best developed by a third party and the divestment provides an opportunity for local companies to materially increase their participation in the hydrocarbon sector, consistent with the objective of the Federal Government.”
Operating environment
Since 2006, oil installations in Nigeria’s oil industry have come under attack by militants seeking greater access to the oil wealth, which impacted significantly on the operational costs. But despite a recent amnesty deal between the Federal Government and militants, peace still evades the oil-rich Niger Delta.
Mr. Sunmonu acknowledged that, like other oil and gas companies, the operations of Shell in Nigeria have been impacted by this and by several factors. “We recognise that these are challenging times in Nigeria. We’re faced with security, funding and other issues that have severely cut our onshore production and increased our direct costs.”
According to Austin Avuru, chief executive officer of Platform Petroleum, one of the Nigerian companies in the consortium that bought the three oil licenses from Shell: “We know that security is the major risk that we’ll face. It is also a risk we think we can manage better than the multinationals. So, it’s part of the reason we were considered to come in.”
The agreement is subject to the approval of the Federal Government and the Nigerian National Petroleum Corporation (NNPC), who hold the proprietary interest in the fields.
Aspirations for Shell
Mr. Sunmonu, who took over as Country Chair of Shell Companies in Nigeria effective from January 1, said his primary goal is to “turn around the reputation of Shell in Nigeria,” which has taken a hit in recent months. The company is perceived by many to be taking a lot more than it is giving back.
With a budget of close to $4 billion this year, he said raising production levels will also be one of his key goals.
“Shell and Nigeria have been important to each other for over 50 years and we want that relationship to continue in a sustainable way. A successful oil and gas industry is key for Nigeria to achieve its long-term goals and Shell will continue to explore ways and means to emphasise our partnership and support of government objectives in Nigeria,” he promised.
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