5 Indigenous Oil Firms Queue for Shell’s Oilfield Assets in Nigeria

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By Chibisi Ohakah & Sunday Elom

Processing of bids is believed to be in various levels as no fewer than five Nigerian indigenous oil and gas firms are reportedly in queue for Royal Dutch Shell’s onshore oilfield assets that are up for sale in Nigeria. The assets could fetch as much $3 billion, Reuters said in a recent report.

While the biddings are due by January 2020, ministry of petroleum resources officials say the current bids are strictly for local oil exploration companies, in the spirit of local content legislation and the newly promulgated Petroleum Industry Act (PIA), which implementation just got underway.

Quoting three unnamed sources in Nigeria, the news agency said Shell’s oilfield stakes have drawn interests from Nigerian oil and gas firms including Seplat Energy, Sahara Group, Famfa Oil, Troilus Investments Limited and Nigeria Delta Exploration and Production (NDEP).

The Dutch multinational opened discussion with the government of Nigeria about its intention to divest its onshore fields, owed to insecurity and unstable government policies. Shell officials said the operating environment in the country is no longer favourable.

The Reuters report notes that Shell has struggled for many years with hostility from hostile host communities, mostly over oil spills in the Niger Delta. Shell has often been at the center of pipeline theft and sabotage complaints, as well as operational issues, leading to costly repairs and high-profile lawsuits.

Shell has stakes in 19 oil mining leases in Nigeria’s onshore oil and gas joint venture (SPDC), which the industry and banking sources said were valued at $2 billion to $3 billion, the agency report said .

The multinational operates SPDC (Shell Petroleum Development Company of Nigeria) and holds a 30% stake in the venture. Nigeria’s state oil company, Nigeria National Petroleum Company (NNPC) holds 55%, TotalEnergies has 10% and ENI 5%.

Reuters said although Africa Bridge Capital Management, foreign partners to indigenous firm, Troilus, declined comments when contacted, it saw documents confirming the effort to raise up to $3 billion for the Shell assets bid.

Analysts have pointed at a number of developments in the oil and gas sector in Nigeria that have rekindled hopes for investors, despite the seemingly lingering, non conducive operating business environment   .

Local investors see the year 2021; despite damages of the global corona virus and general insecurity in Nigeria, as one that brought impetus, and one that raised hopes for investment in the country’s oil and gas industry.

After about two decades in the doldrums, the PIA has now seen the light of the day and it is expected to create an enabling investment environment and codify the regulatory, administrative and fiscal framework for the industry.

The revolution in the industry, which is believed to have commenced, has seen the scrapping of the existing agencies and their replacement with new ones as well as the inauguration of their chief executives.

Furthermore, NNPC, a corporation hitherto, has now been incorporated under the Companies and Allied Matters Act (CAMA) to become a limited liability company. Forty four years after its establishment, the NNPC in 2021 declared a Profit After Tax (PAT) of N287 billion for the year for 2020.

The 650,000 barrels per day Dangote crude oil refinery expected to begin operations in the first half of 2022 comes with high hopes from operators across board. Put at roughly $18 billion to $19 billion, the refinery will produce Euro-V quality petrol and diesel, as well as jet fuel and polypropylene, generate over 4,000 direct jobs and 145,000 indirect jobs.

While the activities will generally buoy the oil and gas sector in Nigeria, it is expected to save Nigeria billions of dollars in foreign exchange as well as ensure energy security for the country.

With Nigeria currently refining zero products, the Dangote refinery, which will have an annual refining capacity of 10.4 million tonnes (Mt) of petrol, in addition to about 4.6mt of diesel and 4mt of jet fuel, among others, is expected to significantly alter the fuel supply dynamics as well as boost the economy.

The deregulation bell ringing in the oil sector in Nigeria seems to be a strong impetus for investors. While it’s been hanging in the air for years, the argument for full deregulation of the oil and gas industry has never been as strong as in 2021.

“If the Petroleum Industry Act (PIA) is activated as prescribed by the law, the removal of subsidy on petrol prices will likely follow,” an observer said. “This will have ripple effects on almost every facet of the Nigerian economy.”

The newly established industry regulators, more than ever, will be hungry to deliver significant dividends in the in-coming sectoral revolution in the oil sector. The NUPRC as well as its counterpart, the midstream and downstream authority are expected to input high level fair-play in the new changes brought about by the PIA.

Generally, the IOCs account for more than half of the nation’s daily crude production. Given the happenstance of divestments by IOCs, indigenous oil and gas firms, firmed up with the strengths of the Nigerian Local Content legislations, seem to be ever ready to test their dreams in the turf of oil exploration.

Nigeria’s Train 7 is expected to stimulate the inflow of more than $10 billion Foreign Direct Investment (FDI) into Nigeria. It is projected to provide more than 12,000 direct jobs and additional 40,000 indirect construction jobs and develop Nigerian local capacities and businesses.

It will be recalled that at the commissioning of the Train 7 project, President Muhammadu Buhari said the proved that the NLNG and its company’s shareholders – NNPC, Shell, Total, and Eni – a Nigerian company – could operate a world-class business safely, profitably, and responsibly.

Ramping work up on the project this year, analyst say, would be a major boost to the Nigerian economy, which will benefit from the over $10 billion investment.


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