Shell, Total and Agip Divest 45% Stake in OML 40

Oil giants, Shell Petroleum Development Company of Nigeria Limited (SPDC) and its partners, Total E&P Nigeria, and Nigerian Agip Oil Company Limited (NAOC) have announced the sale of their 45 percent interest in the onshore block Oil Mining Lease (OML) 40 to Elcrest Exploration and Production Nigeria Limited.

Elcrest, a consortium comprising Starcrest Nigeria Energy Limited and Eland Oil and Gas Limited led by Nigerian business mogul, Emeka Offor, emerged the successful bidder for the OML 40, located at the Western Operating Division in Niger Delta following a competitive and well publicised auction process that was conducted by SPDC, NAOC and Total E&P.

A formal completion of the transaction was conducted by representatives of both parties at Shell’s office in Abuja Friday after all relevant documents had been signed by the legal teams involved. The transaction papers, which is subject to the approval of the Federal Government was however handed over to Offor for Elcrest by the Managing Director and Country Chairman of SPDC, Mr. Mutiu Sunmonu on behalf of the Joint Venture partners.

Although, THISDAY could not ascertain the actual financial terms of the oil block deal as both parties refused to divulge the information on the ground that it is highly commercially sensitive, sources however disclosed that Elcrest earlier made a bid of $147 million for the oil block, but later increased it to $154 million.

Upon approval and final completion, Shell and its JV Partners will effectively cede their 45 percent stake in the OML 40 to Elcrest, an indigenous Nigerian oil company while, the Nigerian National Petroleum Corporation (NNPC) will retain its 55 percent stake in the oil field.

Sunmonu told reporters at the signing ceremony that Elcrest had met the technical and commercial criteria set by Shell to emerge the preferred bidder; he explained that the sale of OML 40 to Elcrest was based on an existing criterion that an indigenous oil firm must emerge as its preferred bidder.

He dismissed speculations that the company was disposing off its assets in the country as part of an alleged exit strategy. “I want to clearly state here that we are not planning to quit our operations in Nigeria, this is merely part of our strategy to divest and grow indigenous oil companies.

We are strategising for the future, I will urge you to patiently observe us and see where we will be in the very near future,” he said.

In his response, the trade leader of Elcrest, Offor, said the acquisition is a cardinal part of the strategic growth plan of Elcrest to champion the local content cause as contained in the Local Content Act.

He stated that Elcrest would in time evolve strategies aimed at becoming a leading indigenous oil and gas company in Sub-Saharan Africa. According to him: “I am a Nigerian and we understand the terrain very well, we have put in place measures to foster healthy community relations with the host community where this oil block is located and of course we have in our management team, seasoned oil and gas professionals with years of successful operation in oil and gas projects in Nigeria, coupled with a broad range of funding from international blue chip institutional investors.”

In line with Shell’s plan to reduce its onshore operations in the Niger Delta region, where it had faced repeated attacks that drastically reduced its production the company had announced its decision to sell onshore blocks, OML 30, 34, 40 and 42, some of which sources said contain reserves of up to 2 billion barrels.

Eighteen consortia had expressed interests in the oil fields. Top on the list of interested bidders were Mike Adenuga's Consolidated Petroleum; Femi Otedola's African Petroleum (AP) Consortium; and Neconde Energy, of which Nestoil’s to Ernest Azudialu, is said to be a member.

Others are Oando Group Plc backed by China’s Addax Petroleum and Perenco, an Anglo-French company; United Kingdom-registered Afren; and Niger Delta Petroleum, allegedly belonging to governments of the South-south states.

However, investigation revealed that of the 18 firms that had put in bids for the blocks, several have withdrawn from the transaction or were automatically disqualified, either because their bids were considered too low, or their inability to meet the deadline given by Shell to escrow 10 per cent of their bid price with J.P. Morgan in the UK.

SPDC is the operator of the joint venture in Nigeria between the NNPC (55percent), Shell (30percent), Total E&P Nigeria Limited (10percent) and Nigeria Agip Oil Company (5percent).

those companies are divesting for two reasons, 1. to reduce their onshore assets and 2. they are afraid of the PIB, which will reduce their profitability.

Well, let's hope the people benefit more, I am a little worried by the free for all that would follow (Politicians Oil Companies are the ones buying)