In line with a recent Supreme Court ruling, Royal Dutch Shell has announced plans to halt the sale of its troubled Nigerian onshore operations.
On June 16, Nigeria’s supreme court had asked Shell to comply with a high court ruling which barred the oil major from any asset sale in Nigeria until a decision is reached on the dispute over a 2019 oil spill is resolved between the company and a community in the oil-rich Niger Delta.
“Shell welcomes the Nigerian Supreme Court’s decision to hear the appeal of the Shell Petroleum Development Company of Nigeria Ltd (SPDC) in this case,” the London-based company said in a statement sent to BusinessDay on Thursday.
Recall, eighty-eight communities in Rivers State were awarded $1.95bn compensation for an oil spill they blamed on Shell and which damaged their farms and waterways.
“Until the outcome of SPDC’s appeal, Shell will not progress the divestment of its interest in SPDC,” Shell said.
Shell wants to sell its stake in Nigeria’s onshore fields, where it has been active since the 1930s, as part of a global drive to reduce its carbon emissions. The company wants to sell its 55percent stake in SPDC, which it also operates, as the joint venture struggles with hundreds of spills that are caused mostly by theft.
Read also: Elumelu’s Heirs Holding, ND Western target Shell’s $2.3bn oil assets in Niger Delta
SPDC is one of Nigeria’s biggest gas explorers boasting over 60 producing gas wells (11 land, 4 west, and 45 central assets) alongside a growing world-class gas transmission and distribution network of over 138km in Nigeria.
Shell also operates several distribution systems including Agbara-Ota in Ogun state, the Aba Cluster in Abia State, and the Port Harcourt Cluster in Rivers State. It recently increased its gas distribution capacity by over 150percent ensuring its gas distribution networks are capable of distributing over 150 mmscf/d of dry processed gas to over 300 industrial customers.
Shell said such divestment will require a “stable and competitive investment climate.”
In a separate statement, Osagie Okunbor, Managing Director of SPDC and Shell’s country chair also confirmed the company “will continue to comply with the Supreme Court’s order to maintain the status quo.”
Last month, BusinessDay reported local firms Heirs Oil and Gas Ltd. and ND Western Ltd. are vying for Shell’s 30 percent stake in the joint venture, which operates assets in the Niger Delta and nearby offshore areas.
Shell’s stake was valued at $2.3 billion by energy consultant Wood Mackenzie Ltd. last year, assuming a long-term oil price of $50 per barrel. However, with Brent trading at around $114 on Thursday, the stake is likely worth much more.
Shell companies in Nigeria directly employ around 2,700 people and more than 9,000 contractors in Nigeria, 97 percent of which are local Nigerians.
In 2020, 100 percent of Shell companies in Nigeria’s contracts, worth $800 million were awarded to Nigerian companies.
“Shell companies in Nigeria have also provided access to nearly $1.5 billion in loans to 764 Nigerian vendors under the Shell Contractor Support Fund since 2012. These loans help improve tendering opportunities,” the company said in its briefing notes for 2020.
Local oil companies lack this kind of capacity. Some still owe banks for loans to acquire their assets and a forced merger was the only way to get the current marginal oil field bids off the ground.
Seplat Production Development Company and a few other local companies have been successful in managing divested oil assets but many have failed. This is why the government is uneasy.
Shell has suffered humiliating losses at local and international courts compelling it to pay millions of dollars in fines for its onshore assets. While its actions were reprehensible in some, in many others, the host communities have victimised the company.
In 2020, more than 90 percent of oil spills amounting to more than 100 kilograms from the SPDC JVs’ facilities were due to third-party interference and other illegal activities, the company said.
