Shell has reached an agreement to sell its Nigerian onshore subsidiary, The Shell Petroleum Development Company of Nigeria Limited (SPDC), to Renaissance, a consortium of five companies, comprising four exploration and production companies based in Nigeria and an international energy group.
The completion of this transaction is contingent upon approvals by the Federal Government of Nigeria and other relevant conditions, according to a statement from the company.
The sale has been strategically designed to maintain the full spectrum of SPDC’s operating capabilities after the change in ownership, including technical expertise, management systems, and processes that SPDC implements on behalf of all the companies in the SPDC Joint Venture (SPDC JV). SPDC’s staff will continue to be employed during the transition to new ownership.
Shell, post-transaction, will retain a role in supporting the management of SPDC JV facilities. These facilities play a crucial role in supplying a major portion of feed gas to Nigeria LNG (NLNG), aligning with Shell’s commitment to helping Nigeria achieve maximum value from NLNG.
“This agreement marks an important milestone for Shell in Nigeria, aligning with our previously announced intent to exit onshore oil production in the Niger Delta, simplifying our portfolio and focusing future disciplined investment in Nigeria on our Deepwater and Integrated Gas positions,” Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director, stated.
She continued, “Shell sees a bright future in Nigeria with a positive investment outlook for its energy sector. We will continue to support the country’s growing energy needs and export ambitions in areas aligned with our strategy.”
The SPDC JV, an unincorporated joint venture, consists of SPDC Ltd (30%), the government-owned Nigerian National Petroleum Corporation (55%), Total Exploration and Production Nigeria Ltd (10%), and Nigeria Agip Oil Company Ltd (5%). It holds 15 oil mining leases for petroleum operations onshore and three for petroleum operations in shallow water in Nigeria, operated by SPDC.
Renaissance, the consortium acquiring SPDC, is comprised of ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin.
The financial details of the transaction reveal that the consideration payable to Shell is $1.3 billion. The buyer will make additional cash payments of up to $1.1 billion, primarily relating to prior receivables and cash balances in the business, with the majority expected to be paid at the completion of the transaction. Other contingent payments, including those related to gas supply to NLNG, may become payable depending on business performance and fluctuation of product prices.
The net book value of the entity subject to this transaction is approximately $2.8 billion as of December 31, 2023. Shell is set to provide secured term loans of up to $1.2 billion at closing, covering various funding requirements.
Additionally, Shell will be offering additional financing of up to $1.3 billion over future years to fund SPDC’s share of the development of the SPDC JV’s gas resources to supply feed gas to NLNG and its share of specific decommissioning and restoration costs. This financing will only be drawn down when these costs are approved and incurred by the SPDC JV.
The effective date of the deal structure is December 31, 2021. However, Shell will continue to consolidate SPDC until control transfers are completed. The company expects to recognize impairments in respect of the business up to the date of completion, dependent on the future financial performance of the business.
Shell said in its press statement that it has three other main businesses in Nigeria outside the scope of this transaction. These include Shell Nigeria Exploration and Production Company Limited (SNEPCo), Shell Nigeria Gas Limited (SNG), and Daystar Power Group. Additionally, Shell holds a 25.6% interest in NLNG, which produces and exports LNG to global markets. Shell’s interest in NLNG is also outside the scope of this transaction.
The sale of SPDC to Renaissance marks a significant shift in Shell’s strategic focus in Nigeria, emphasizing a streamlined portfolio with a concentration on Deepwater and Integrated Gas positions. The move is expected to have far-reaching implications on the Nigerian energy sector and aligns with Shell’s commitment to supporting Nigeria’s energy needs and export ambitions.
Concerning Shell employees, the company said: “We do not expect a loss of employment. SPDC’s staff will continue to be employed by the company as it transitions to new ownership.”
