An economist Kalu Aja, who is a Certified Financial Education Instructor and astute professional with extensive experience in capital market operations, Treasury, investment, asset management, and occupational pension services, has said that “Shell leaving onshore Nigeria is bad” just as other experts and activists expressed mixed reactions on the recent divestment of the Shell Petroleum Development Company (SPDC) of Nigeria Limited to a consortium of local companies and the Waltersmith Group for $2.4 billion.

The economist made his position known in a tweet on his X handle, explaining that onshore or offshore was not what investors read, but that what they read was “Shell is leaving the largest oil exporter in Africa; things must be bad for investors in Nigeria.”

Shell Plc first disclosed its consent to sell its Nigerian onshore oil and gas subsidiary, SPDC, to a consortium of indigenous companies on Tuesday, January 16. A Bloomberg report reveals that the British multinational company will sell its SPDC for a consideration of $1.3 billion. At the same time, the buyers will pay up to $1.1 billion for prior receivables at completion.

The buyers, Renaissance Africa Energy, made up of ND Western Limited, Aradel Holdings Plc, the Petrolin Group, First Exploration and Petroleum Development Company Limited, and the Waltersmith Group, confirmed the acquisition of Shell SPDC in a statement on Tuesday but stated that “The completion of the transaction is subject to the requisite regulatory approvals.”

Aja who further said Shell operating in the country is part of branding and national pride, also revealed that Shell lost a case in the Netherlands, and they were asked to “reduce” their oil footprint, noting that the Nigeria’s onshore divestment is their response, lamenting that open stealing of oil onshore was a significant factor in Nigeria.

Another expert, the Head of Financial Institutions rating at Agusto & Co, Ayokunle Olubunmi, told The ICIR that divesting the international oil company (IOC) to the Nigerian indigenous firms could come in the form of a two-edged sword.

An advantage of the divestment, according to Olubunmi, is that it could relieve key technical competence areas in the oil and gas operations to Nigerians as there are specialised positions the IOCs reserved for expatriates and have never been occupied by Nigerians, paving the way for local firms to handle the country's oil and gas assets.

Others he said include the retention of whatever profit the indigenous firms make in Nigeria, stressing that such could improve the stock market’s performance if the companies are listed on the country’s stock exchange (NSE) citing the case of Seplat Energy, an indigenous firm.

“We can see it from Seplat Energy, which is listed on the Nigerian stock exchange. The company has helped significantly in the stock exchange. For instance, Nigerians that want to hedge against the naira buy Seplat’s shares because the company pays even its dividends in dollars,” Olubunmi said.

On the downside, he said the divestment would be in the form of capital requirements to finance, explore and even optimise the oil fields, as investments in oil and gas are capital-intensive.

“That is why all those IOCs have contacts with banks and financial institutions worldwide that provide funding for their operations. These funds are dollarised as all the equipment and other items needed for operations are sourced in dollars. So, it is likely going to be difficult for the local firms to be able to raise the dollar amounts to explore the oil fields and maximise them,” Olubunmi added.

Also speaking on the development, Nnimmo Bassey, Executive Director of Nigerian advocacy group, Health of Mother Earth Foundation, said in a statement that: "Shell must own up to its responsibility. This means full payment for the remediation and restoration of the polluted areas as well as reparations to the host communities. They cannot walk away from the virtually irreparable harm they have caused."

Others who towed the same line of thought include the President of the sociocultural organisation in the Niger Delta, the Ijaw National Congress, INC, Prof. Benjamin Okaba; and a notable environmental and peace advocate from the Center for Peace and Environmental Justice, CEPEJ, Chief (Comrade) Sheriff Mulade, who both issued separate statements to that effect.

Speaking on the divestment, Shell Head of Upstream, Zoë Yujnovich, was quoted to have said, “This agreement marks an important milestone for Shell in Nigeria, aligning with our previously announced intent to exit onshore oil production in the Niger Delta, simplifying our portfolio and focusing future disciplined investment in Nigeria on our Deepwater and Integrated Gas positions."

According to Shell, Renaissance will take over the responsibility for dealing with spills, theft and sabotage, which it has faced in recent years multiple lawsuits for compensation over damage caused as a result of spills in the Niger delta.

Shell's SPDC Limited operates and has a 30% stake in the SPDC joint venture that holds 18 onshore and shallow water mining leases. Shell's resources in SPDC reached around 458 million barrels of oil equivalent by the end of 2022.

Other partners in the joint venture are the state's Nigerian National Petroleum Company Limited (NNPCL) which holds 55%, TotalEnergies (TTEF.PA), opens new tab, with 10% and Italy's Eni (ENI.MI), opens new tab with 5%.

Apart from its operations and stakes in several fields deep offshore, Shell still has a liquefied natural gas plant and other assets in Nigeria. SPDC, which remains the operator, was formed in 1979, incorporating assets of the older Shell-BP consortium, with its current partners entering at later stages.

On its part, Renaissance Africa said the acquisition marked a significant milestone, establishing its strategic position in the Nigerian market, as it is “committed to ensuring a smooth transition and looks forward to leveraging its expertise, in partnership with SPDC’s industry-leading staff and working in partnership with all the stakeholders in the SPDC-JV to drive continued growth and success in Nigeria and beyond."

Source: Reuters | ICIR

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