WoodMac puts Shell’s divestment assets in Nigeria at $2.3b

As Shell Petroleum Development Company (SPDC) in Nigeria moves to divest its assets in Nigeria, especially joint venture licenses and interests in 19 Oil Mining Leases, a global research body yesterday, put the estimated value of the assets at $2.3 billion.

While the Minister of State for Petroleum Resources, Timipre Sylvia had said the government was engaging with the Royal Dutch Shell Plc to continue onshore oil and gas business in Nigeria, Shell has been gradually reducing investment in Nigeria amidst disputes and a harsh operating environment.

Earlier in the week, Shell had agreed to pay about N46 billion as compensation to oil companies in Ogoni. The court case lasted for over 31 years.

Although the divestment comes with mixed reactions for some stakeholders, who believe that the move would create opportunities for indigenous companies, a situation “where Shell has completely divested from a sector’ won’t be good for the country.

Research Director with Wood Mackenzie’s sub-Saharan Africa upstream team, Gail Anderson, while reacting to the divestment in the joint venture and the 30 per cent interest in 19 OMLs, said: “There is considerable value upside across the joint venture assets, which bidders will need to carefully evaluate and quantify”.

Anderson said: “As a result, our current valuation of Shell’s 30 per cent in the joint venture – which does not include the export pipelines and terminals – is $2.3 billion.

She noted that the projection was based on the current sub-optimal, business-as-usual investment profile under existing fiscal terms.

“A competent buyer/operator, giving priority to the assets, could commercialise much more than 20% of the resource base. However, the availability of funding for the joint venture partners will dictate how much.”

“Importantly, the recently passed Petroleum Industry Bill (PIB), which has still to be signed into law, will offer materially lower royalties and taxes for oil,” Andersons added.