•Set to retain deepwater , gas production operations
•Seplat, Sahara Group withdraw non-binding offers
Shell Plc is set to receive two final offers this week for its onshore oil and gas fields in Nigeria, a Bloomberg report has said, quoting people with knowledge of the matter.
Nigerian companies Heirs Oil and Gas Ltd., and ND Western Ltd. are competing to buy Shell’s 30 per cent interest in the joint venture, which operates assets in the Niger Delta and nearby offshore areas.
Bids are due June 10, the people said, asking not to be identified because the information is private.
Energy consultant Wood Mackenzie Ltd. last year valued Shell’s stake at $2.3 billion, assuming a long-term oil price of $50 a barrel. But with Brent now trading at about $121, the stake likely is worth significantly more. Shell, Heirs and ND Western declined to comment, the report said.
Shell announced its intention last year to sell the stake, saying its long-term energy transition strategy was incompatible with Nigerian operations prone to spills and theft.
Chief Executive Officer Ben van Beurden told shareholders in May that a significant increase in sabotage in recent years had resulted in a state of near-lawlessness that the company couldn’t control.
“In the end, we have to concede that this is beyond what we can do,” he said.
But a recent media report indicated that the planned divestments by the International Oil Companies (IOCs) go beyond just the issues in the country’s Niger Delta.
A number of Nigerians believe that Shell especially is leaving the region in a “mess” after the devastation of the environment for over 60 years and has no plan for cleaning it up or embarking on decommissioning and is now moving towards the deep offshore terrain.
According to a recent McKenzie document, 19 Oil Mining Leases (OMLs) are expected to be put up for sale by the oil giant in onshore locations and shallow waters in the company’s eastern and western operations in the Niger Delta.
Secretary General of the Niger Delta Ethnic Nationalities, Capt. Bassey Henshaw earlier on, told media that it was not against Shell leaving the region, but it must remediate the Niger Delta environment.
“The oil companies must clean up the environment they have degraded over the years as well as pay compensation before any talk about leaving their onshore and shallow water operations in the region,” he insisted.
“We do not dispute the fact that they can go green or whatever, but there has to be some closure. You have a business running and there are issues emanating from those businesses. You do not wake up and say you are going green. All the issues have to be fixed and resolved.
“We cannot hold then ransom if they want to leave, but they have to have a closure of the previous business they have done, the degradation of the environment, the oil spillages and all,” he said.
Nigeria’s crude production has fallen 25 per cent in last decade Data compiled by Bloomberg with potential future costs related to litigation and environmental liabilities likely to affect the stake’s valuation, two of the people said.
Two other local companies, Seplat Energy Plc and Sahara Group Ltd., Bloomberg said, put non-binding offers for Shell’s assets earlier this year, but the people said they no longer were in the running. The firms didn’t respond to requests for comment.
While Shell is retaining its deepwater oil assets and its large liquefied natural-gas presence, it’s not the only energy giant turning its back on Nigerian onshore and shallow water fields.
Exxon Mobil Corp. agreed in February to sell its shallow-water unit to Seplat for about $1.3 billion, and France’s TotalEnergies SE wants to offload its 10 per cent interest in the same joint venture Shell is divesting from.
Meanwhile, the premium for Nigeria’s high-grade Bonny Light oil has surged this month to $4 a barrel, up from $2.50 a year ago, a separate Bloomberg report has stated.
Oil refiners are paying record premiums for the high-quality crude oil they use to produce diesel and petrol, a sign of strong demand in the physical oil market that calls into question claims that soaring oil prices are being driven by speculators.
They are paying up to $5-$6 a barrel on top of current record prices to secure high-grade oil, traders said, double the level of a year ago, it said, with the mark-ups four times higher than the 2000-2008 average.
The movement in prices paid for physical barrels of oil has gone largely undetected outside the refinery industry because financial markets pay almost exclusive attention to the price of oil futures traded in London and New York.
The fact that refiners are willing to pay a higher price for physical supplies than the futures benchmark lends weight to the argument that speculators are not the cause of record oil prices, it added.