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As a major move, Shell has announced the sale of its flagship subsidiary in Nigeria, marking a significant shift in the country’s energy landscape. This strategic decision opens up a new chapter not only for Shell but also for the energy sector in Nigeria as a whole.
The sale of Shell’s flagship subsidiary signifies more than just a divestment; it represents a strategic realignment of priorities. By relinquishing its ownership stake, Shell is not only streamlining its operations but also paving the way for new entrants to contribute to Nigeria’s energy sector. This move is expected to spur competition, innovation, and investment, ultimately benefiting the Nigerian economy and its citizens. Let’s delve into the rudiments of this transformative transaction.
UK supermajor Shell Pic has reached an agreement to sell its Nigerian onshore subsidiary The Shell Petroleum Development Company of Nigeria Limited (SPDC) to Renaissance, a consortium of five companies comprising four exploration and production companies based in Nigeria and an international energy group,
Renaissance comprises of ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin.
The sale involves the major’s 30% stake in Oil Mining Leases (OMLs) 20, 21, 22, 23, 25, 27, 28, 31, 32, 33, 35 36, 43, 45 and 46, all onshore, and OMLs 74, 778 79, all in shallow water.
The consideration payable to Shell as part of the transaction is $1.3Billion. Renaissance is expected to make additional cash payments to Shell of up to $1.1Billion, primarily relating to prior receivables and cash balances in the business, with the majority expected to be paid at completion of the transaction.
It has been a drawn-out process, Four Nigerian companies (Seplat, Heirs Oil & Gas, Sahara Energy and NDWestern) were in the running as of end of 2021, when Shell asked parties interested to put in firm bids by mid-January 2022. As of June 2023, only two entities: the Rennaisance Consortium and the Heirs Oil & Gas/Tullow Oil Consortium remained in contention.
The latter had dropped out of the race by October 2023, but Shell had been reticent about the deal making.
“Completion of the transaction is subject to approvals by the Federal Government of Nigeria and other conditions, Shell announced in the release.
The company also allowed that the transaction “has been designed to preserve the full range of SPDC’s operating capabilities following the change of ownership.
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