Shell Plc’s $1.3 billion deal to sell its onshore Nigerian subsidiary, Shell Petroleum Development Company Ltd (SPDC), has encountered a significant setback.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has raised concerns about the buyer’s ability to manage the assets, stalling the sale of one of Shell’s key onshore operations in Nigeria.
In January 2024, Shell announced plans to sell its 15 onshore oil mining leases and three shallow-water operations, all managed through SPDC.
The move was part of Shell’s strategy to exit onshore oil production in Nigeria and focus on more lucrative ventures such as deep-water offshore fields.
The decision to divest followed growing challenges in Nigeria’s onshore sector, including community conflicts, oil theft, and environmental concerns.
Shell’s goal was to streamline its portfolio, prioritizing investments that offer higher returns and lower risks.
The sale agreement had reached the final stages, pending regulatory approval. However, the NUPRC expressed doubts about the buyer, Renaissance Group, citing concerns over their qualifications to manage such complex assets.
While the deal stipulated that ownership would transfer, operational control and technical support were expected to remain with SPDC to ensure the continued supply of gas and oil.
Despite this, the NUPRC believes Renaissance Group lacks the experience and capability to manage and develop these assets responsibly.
The rejection is a blow to Shell, which has been keen on reducing its exposure to Nigeria’s troubled onshore sector.
The company had hoped that by maintaining operational support through SPDC, the transition would be smooth and the new owner could focus on maximizing the assets’ output.
In response to the regulatory pushback, Shell has stated that it remains committed to completing the divestment and is currently in discussions with Nigerian authorities to address their concerns.
The company further says it is providing the necessary documents and further clarifications to satisfy regulatory requirements, but the delay has raised doubts about the future of the sale.
Despite this setback, Shell remains one of the largest investors in Nigeria’s oil and gas sector.
While Shell seeks to exit onshore oil operations in Nigeria, the company maintains a “Hold” rating in the stock market, reflecting investor caution but also confidence in its overall strategy.
Onshore operations, once the backbone of Nigeria’s oil production, have become increasingly difficult to manage due to local conflicts, oil theft, and environmental degradation.
Oil and gas experts say the Nigerian government and regulatory agencies like the NUPRC will need to strike a balance between ensuring responsible management of resources and encouraging foreign investment, which remains crucial for the country’s economic stability.
If the deal eventually falls through, it could mark a significant delay in Shell’s plans to transition away from onshore production in Nigeria fully.