The Nigerian unit of the London-based oil major shell plc reached an agreement with a consortium of five companies, paving the way for the latter to acquire its land business in the country.
The deal was sealed after years of setbacks the company suffered in its efforts to divest assets.
Shell Petroleum Development Company of Nigeria Limited (SPDC) will raise up to $2.4 billion from the transaction, including an initial sum of $1.3 billion.
An additional payment of $1.1 billion related to previous accounts receivable and cash balances is expected when the deal is consummated, Shell said in a statement Tuesday.
“This deal marks an important milestone for Shell in Nigeria,” said Zoe Yujnovich, Head of Integrated Gas and Upstream at Shell.
It will help “simplify our portfolio and focus future disciplined investments in Nigeria on our deepwater and integrated gas positions,” he added.
Renaissance, the buyer, is made up of local energy companies: ND Western, Waltersmith, Aradel Energy, Petrolin and First E&P.
The deal is a relief for Shell, which has been trying to offload the assets since 2021 because its management has been complicated by sabotage, theft and spills, some of which have led to litigation and environmental liabilities.
But it will keep its business offshore as it is less prone to such operational risks. Shell says the spills are almost exclusively caused by theft.
“We cannot solve the community problems in the Niger Delta, that may be up to the Nigerian government to solve. We can do the best we can, but at some point we will also have to conclude that this is an exposure that no longer fits our risk appetite,” CEO Ben van Beurden said at a 2021 shareholder meeting.
Shell I have approaches of at least five suitors, all of them Nigeria-based energy companies, in January 2022 to acquire the business, including Sahara Group, Seplat Energies, Famfa Oil, Niger Delta Exploration and Production and Troilus Investments Limited.
Heirs Oil and Gas and ND Western reportedly joined the foray later, before talks halted in June 2022 after a court ruling barred Shell from proceeding with the sale pending ruling in a appeal over a 2019 oil spill involving the company.
A total of 88 communities in Rivers State are seeking $1.95 billion in compensation through the suit.
This month, Nigeria’s Supreme Court ruled that Shell be allowed a hearing in the dispute, noting that the Court of Appeal did not consider the merits of the case in its verdict.
Shell has interests in 19 oil mining concessions in the country, where it has operated since the 1930s.
The deal continues the flight of international oil companies from onshore and shallow water operations in Nigeria.
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ExxonMobil is in the process of selling its onshore asset to Seplat, a transaction worth around $1.3 billion, even though the Nigerian government has withdrawn its consent.
Last November, Norwegian state energy company Equinor agreed to sell its 20.2 percent stake in the Chevron-operated Agbami field to local firm Chappal Energies for an undisclosed sum.
TotalEnergies stated in December that it would invest up to $6 billion in Nigeria in the coming years, particularly in gas production, as it plans to reduce investment in hydrocarbons and transition to cleaner energy.