Shell has received approval from Nigeria’s Minister of State for Petroleum Resources to finalize the sale of its onshore and shallow-water oil and gas assets to Renaissance Group in a deal worth $2.4 billion.
Renaissance confirmed the development on Wednesday, describing the approval as a significant milestone toward completing the transaction. This sale concludes Shell’s nearly 100 years of operations in Nigeria’s onshore oil industry and marks a broader trend of divestment by Western oil majors from the country’s oil sector.
The transaction marks the culmination of Shell’s long-standing operations in Nigerian onshore oil, dating back to its discovery of commercial oil in Oloibiri in 1956. Over the decades, Shell played a dominant role in developing Nigeria’s onshore and shallow-water oil resources, often serving as the face of the nation’s energy sector.
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However, the company’s presence in Nigeria has not been without controversy. Decades of oil spills, environmental degradation, and community unrest in the Niger Delta significantly tarnished its reputation. Moreover, challenges such as crude oil theft, pipeline vandalism, and regulatory uncertainties made onshore operations increasingly unsustainable.
The sale to Renaissance is part of Shell’s global strategy to shift focus toward offshore and cleaner energy projects while reducing its footprint in high-risk environments.
Renaissance Capacity Under Question
While the approval represents progress, the deal was initially blocked in October by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). The regulator raised concerns about Renaissance Group’s capacity to manage the vast assets, which include an estimated 6.73 billion barrels of oil and condensate and 56.27 trillion cubic feet of gas. Renaissance was required to demonstrate its technical and financial capabilities to manage these resources effectively.
The eventual green light from the oil minister signals that these concerns have been addressed. However, industry analysts remain cautious, noting that the transfer of such significant assets will require robust oversight to ensure operational continuity and environmental sustainability.
Neither Shell nor the NUPRC has commented on the approval, leaving questions about how the transition will be monitored and managed.
Shell’s Strategic Shift: Investment in Offshore Projects
As Shell exits onshore oil in Nigeria, it is strengthening its focus on offshore ventures, including its recent decision to proceed with the Bonga North project. Located in Oil Mining Lease (OML) 118, the deep-water development will tie back to Shell’s Floating Production Storage and Offloading (FPSO) facility.
The Bonga North project, involving the drilling and completion of 16 wells (8 production wells and 8 water injection wells), is expected to sustain oil and gas production at the Bonga facility. With an estimated recoverable resource of more than 300 million barrels of oil equivalent (boe), the project is set to reach a peak production of 110,000 barrels of oil per day by the end of the decade.
Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director, described the project as “another significant investment, which will help us maintain stable liquids production from our advantaged Upstream portfolio.”
The Bonga FPSO, which began production in 2005, remains one of Nigeria’s most significant offshore oil facilities, with a daily production capacity of 225,000 barrels of oil. The field, operated by Shell Nigeria Exploration and Production Company (SNEPCo), is a joint venture with partners including Esso Exploration and Production Nigeria Ltd. (20%), Nigerian Agip Exploration Ltd. (12.5%), and TotalEnergies Exploration and Production Nigeria Ltd. (12.5%).
Implications for Nigeria’s Energy Sector
Shell’s divestment is part of a larger trend among international oil companies (IOCs) retreating from Nigeria’s onshore oil industry. ExxonMobil, Italy’s Eni, and Norway’s Equinor have similarly scaled back their operations, citing challenges such as oil theft, sabotage, and prolonged disputes with host communities. These challenges have undermined profitability and posed reputational risks for the companies involved.
While Shell’s exit signifies the end of an era, it also highlights the increasing localization of Nigeria’s oil industry. The Renaissance Group’s acquisition is seen as a critical test of the ability of Nigerian companies to manage and maximize the country’s oil and gas resources.
Economically, the sale transfers significant resources to Renaissance, but questions remain about how the Nigerian government will regulate the new operator. Analysts caution that without strict oversight, the transfer could lead to a repeat of the issues that plagued the region during Shell’s tenure.
The Bonga North Project
While Shell scales down its onshore operations, its investment in offshore projects like Bonga North underscores its commitment to Nigeria’s energy sector, albeit in a redefined capacity. Offshore oil production offers fewer security and environmental risks compared to onshore operations and aligns with Shell’s broader strategy of prioritizing high-yield, low-risk projects.
Bonga North represents a significant boost to Shell’s portfolio, with an estimated internal rate of return (IRR) exceeding the company’s upstream investment hurdle. The project is expected to generate substantial revenue for both Shell and its joint venture partners, contributing to Nigeria’s economy through taxes and royalties.