Five indigenous oil and gas companies are set to bid for Shell’s onshore oilfields before January 2022 ends. According to documents and source privy to the process, the sales of the oilfields has been estimated to fetch up to $3 billion.
Shell met with President Muhammadu Buhari-led government in 2021 to discuss selling its stake in the onshore fields.
The company has plans to sell its onshore fields which have been active since the 1930s, as part of a global drive to reduce its carbon emissions.
According to banking sources, Shell’s stakes in 19 oil mining leases in Nigeria’s onshore oil and gas joint venture (SPDC) are valued at $2 billion to $3 billion.
The company has struggled in Nigeria for years due to the spills in the Niger Delta, pipeline theft and sabotage as well as operational issues, leading to costly repairs and high-profile lawsuits.
A further report revealed that the sale of the onshore has drawn interest from independent indigenous oil and gas firms including Seplat Energy, Sahara Group, Famfa Oil, Troilus Investments Limited and Niger Delta Exploration and Production (NDEP).
International oil companies are not expected to take part in the bidding process which will end by January 31, 2022.
Sources claimed that the Nigerian National Petroleum Corporation (NNPC) could also choose to exercise its right to preempt any sale to a third company.
The company said it was unclear whether potential bidders could raise sufficient funds as many international banks and investors have become wary about oil and gas assets in Nigeria due to concerns about environmental issues and corruption.
Some African and Asian banks, however, are still willing to finance fossil fuel operations in the region, they said.
Troilus has hired Nigeria focused Africa Bridge Capital management to raise up to $3 billion for the assets.
The document also said any buyer of Shell’s assets will also need to show it can deal with future damage to the oil infrastructure which has ravaged the Niger Delta in recent years.
The Federal Government had last month said it will scrutinise oil companies that will bid for the takeover of assets that Shell and other oil majors will be divesting from in the country.
The Minister of State for Petroleum, Chief Timipre Sylva, disclosed this on Wednesday at a breakfast meeting organised by the African Energy Future in Houston, Texas, U.S.
At a separate business meetings with top managements of Chevron and Schlumberger at their headquarters, in Houston, Texas, Sylva said the government would carry out due diligence in the selection and eventual approval of any company that would take over the assets from which these companies intend to divest.
According to him, the previous practice whereby companies are just allowed to purchase strategies without verifying their capacity to operate such assets would no longer be tolerated.
He added: “In the past, companies were just allowed to buy assets that they had no capacity to operate. We would no longer allow that to happen again because government is the ultimate loser. If they are not able to operate such assets optimally, the government won’t be able to generate revenue from such assets.
“So, we are going to do our best to ensure that we get the best value from these assets,” Sylva said.
He told Chevron and Schlumberger team that the government would create the enabling environment for them to increase their investments in Nigeria.
He noted that with the passage of the Petroleum Industry Act (PIA), Nigeria would increase the incentives for investments in the oil and gas sector of the economy.
“With PIA, we now have the enabling laws that protect and make the operating environment more attractive.
“With the passage of the PIA, there are a lot of interests in the oil and gas sector in Nigeria today.
“The responses we have gotten from investors so far are quite good. Everybody is quite happy,” Sylva added.
He said that the Nigerian government while willing to encourage new investors, would open its doors first to those who already have business and investments in the country.
The minister while speaking on cost optimisation, security of oil and gas assets, and domestic gas utilisation, called for more investments in the sector.