Multinational consortium buys Shell oil assets

The Shell Petroleum Development Company of Nigeria Limited (SPDC) on Friday, agreed to transfer its interest in three production licences and related equipment in the Niger Delta to a consortium led by two Nigerian companies.

The buyer is Seplat Petroleum Company Limited, a company jointly held by two Nigerian firms, Platform Petroleum Limited and Shebah Petroleum Development Company Ltd, along with Maurel & Prom of France.

“It’s a landmark transaction for a Nigerian company,” said Austin Avuru, the chief executive officer of Platform Petroleum.

“Ordinarily, this is the type of thing this country should support. We’re not sitting down and waiting for government to be issuing out leases and all of us queue up and start looking for political whatever to get those lease. Here we went through a purely commercial transaction between us, a multinational consortium, and Shell until we agreed on what we think is fair value for the assets.”

The Managing Director of SPDC, and new country chair of Shell Companies in Nigeria, Mutiu Sunmonu, priased the deal saying, “This sale of assets supports the Nigerian government’s goal of expanding opportunities for local energy companies.

“We have been in Nigeria for more than 50 years and remain committed to doing business here. This transaction should be seen in the context of Shell’s active portfolio management of its assets and interests across the world.”

Although the amount paid for the leases and other details of the deal are still sketchy, Mr. Avuru revealed that “the reason we’re not disclosing is that it remains fluid. You know between now and the actual transaction close, we’ve got to get approval and start doing an asset transfer (transfer of physical assets and data) and we’ve to also during the transaction period demonstrate our ability to operate the fields very efficiently.”

Hence the actual closing of the transaction is still anywhere from two months to six months away.

Reason behind the transaction

Shell says the sale was part of its active portfolio management of global assets as the new management, headed by Peter Voser, continues to restructure the company’s global operations.

“The main reason we’re interested in it is for the potential,” Mr Avuru revealed. “They’re not very high valued reserves, they’ re small fields scattered around the place that are not necessarily likely to attract the multinationals attention because they’re too small but for us, two indigenous Nigerian companies, they fit into our kind of portfolios.”

A statement from Shell said, “The agreement covers Shell’s 30 percent interest in oil mining leases (OMLs) 4, 38 and 41 covering approximately 2,650 square kilometres in the north western Niger Delta.” The area includes about 30 wells with a production capacity of approximately 50,000 barrels of oil equivalent per day. The wells also produce natural gas for domestic and industrial purpose.

However, crude production is currently shut down awaiting completion of repair works to an export pipeline damaged in late 2008.

The Niger Delta, the heart of Nigeria’s oil industry, has come under attack from militants since 2005 although a recent amnesty deal between the federal government and militants has brought some respite in the violence since July last year. However the relative peace may be over as the Movement for the Emancipation of the Niger Delta (MEND) on Saturday said it has decided to call off a unilateral ceasefire ordered on Sunday, October 25, 2009.

But the consortium’s enthusiasm has not been dampened by this recent development.

“We know that security is the major risk that we’ll face, it’s 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,” Mr Avuru said.

As negotiations to renew the oil major’s expired licenses began to stall late last year, reports emerged in December that the oil major was considering selling about $5 billion worth of its Nigerian onshore and shallow assets.

However, it still remains unclear whether these concessions sold include any of the expired licenses, or whether Shell’s motivation was triggered by the proposed new Petroleum Industry Bill (which industry players argue proffers stiffer fiscal terms), or if it is simply looking to minimise its exposure in the volatile Niger Delta region where it has been the worst hit by the activities of militants violence in the oil-rich Niger Delta.

The agreement is subject to the approval of the Federal Government of Nigeria and the Nigerian National Petroleum Corporation (NNPC), who hold the proprietary interest in the fields.

SPDC is the operator of the joint venture between NNPC (55 percent), Shell (30 percent), Total E&P Nigeria Limited (10 percent), and Nigeria Agip Oil Company (5 percent). This implies that Total E&P Nigeria Ltd and Nigeria Agip Oil Company will also transfer their interest in the three oil mining leases, ceding the operator status to the new owners.