BusinessDay

Shell Nigeria assets valued at $2.3bn, many not commercially viable

Analysts at WoodMac have put the valuation of Shell’s 30 percent equity in the joint venture in Nigeria excluding pipelines and terminals at $2.3billion raising concern that much of the assets may not be commercially viable due to lack of investment.

The Nigerian unit of Royal Dutch Shell has started the process of divesting its operated joint venture licences held by the Shell Petroleum Development Company (SPDC) in Nigeria.

This includes a 30 percent interest in 19 Oil Mining Leases (OMLs). Gail Anderson, Research Director with Wood Mackenzie’s Sub-Sahara Africa upstream team, said: “There is considerable value upside across the joint venture assets, which bidders will need to carefully evaluate and quantify.”

Wood Mackenzie, an energy intelligence firm considers only 20 percent of the joint venture resources to be currently commercial due to a lack of investment, crude theft, insecurity, and gas market constraints.

Anderson said: “As a result, our current valuation of Shell’s 30% in the joint venture – which does not include the export pipelines and terminals – is US$2.3 billion.

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“But this is based on the current sub-optimal, business-as-usual investment profile under existing fiscal terms.

“A competent buyer/operator, giving priority to the assets, could commercialise much more than 20% of the resource base. However, the availability of funding for the joint venture partners will, as ever, dictate how much.”

She added: “Importantly, the recently passed Petroleum Industry Bill (PIB), which has still to be signed into law, will offer materially lower royalties and taxes for oil.”

Shell assets in Nigeria include the Shell Petroleum Development Company of Nigeria Limited (SPDC), which has a 30 percent share in the SPDC joint venture (SPDC JV) and produces oil and gas in the Niger Delta; the Shell Nigeria Exploration and Production Company Limited (SNEPCo), which operates in the deep waters of the Gulf of Guinea; and Shell Nigeria Gas Limited (SNG), which provides gas to Nigerian industrial and commercial customers.

In addition, the company also owns Shell Gas B.V. which holds a 25.6 percent shareholding in Nigeria LNG Limited (NLNG), that produces and exports liquefied natural gas to European and other markets.