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|Shell Discussing Possible Sale Of Onshore Oil Assets With Nigeria Government by OfureglobalLTD: 10:03am On May 31|
Shell discussing possible sale of onshore oil assets with Nigeria government
Nigeria is urging Royal Dutch Shell Plc to keep its onshore oil and gas operations (pipelines and oil blocks) in the country rather than divest them, as the company seeks to focus more on cleaner energy and offshore production.
Nigeria's minister of state for petroleum resources Timipre Sylva told reporters on May 19 in Abuja that it is not good for us to be in a situation where “Shell has completely divested from a sector.”
For more than a decade, the Anglo-Dutch energy conglomerate has been gradually selling its onshore assets in Nigeria, an OPEC member and Africa's largest oil producer, as it seeks to address issues such as ruptured pipelines and legal battles with local communities. It is to be noted that Shell is Nigeria's largest oil producer, accounting for roughly 40% of the West African country's total crude and condensate output capacity of 2.2 million barrels per day, and the divestment could have a significant impact on the OPEC member's oil output.
According to the petroleum minister, one option on the table is a potential divestment to the Nigerian Petroleum Development Company Ltd a unit of the state oil company. He also mentioned the possibility of involving local and other foreign independent operators in the process.
“We have been reviewing positions that continue to be challenged from an environmental standpoint, with onshore oil in Nigeria receiving special attention. In onshore Nigeria, we have cut the total number of licenses in half. However, our remaining onshore operations are still vulnerable to sabotage and theft,” Van Beurden said at the Shell AGM on May 18, “it means that the risk-reward balance associated with our onshore oil portfolio in Nigeria is no longer compatible with our strategic objectives.”
Van Beurden, on the other hand, stated that Nigeria will remain an important heartland for Shell, with a focus on the country's Deepwater and gas assets.
Local analysts said that, in addition to the risk of unrest and insecurity in the Niger Delta, the Nigerian government's failure to pass the landmark energy legislation — the Petroleum Industry Bill (PIB) — was a major factor in Shell's decision to leave the country.
“These onshore blocks in question are owned jointly with NNPC, and there is still uncertainty about the terms and conditions that Shell will continue to operate the fields, it is unsurprising that the company has decided to take a break,” said energy analyst Abiodun Adesanya.
Shell diversifying its onshore assets (oil blocks, pipelines) will leave a significant void in crude oil exploration/production, with Shell responsible for 48.6 million barrels in Nigeria by 2020. The absence of such a multinational entity may result in a shortage of petroleum products, which will eventually lead to scarcity for final consumers.
With this in mind and other policies in play, a price increase in petroleum products (AGO, PMS and DPK) appears to be a foregone conclusion as the FG struggles to maintain a bloated subsidy regime.
Source: Maritimes energy, Hellenicshippingnews, SpGlobal.com
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