Shell's $1.3 billion sale of onshore production facilities was rejected, Nigeria experiences petrochemical companies divestment

According to the Financial Times, Nigeria has blocked Shell's plan to sell its onshore oil production unit for $1.3 billion, disrupting the oil giant's plan to exit the shallow waters of the Niger Delta.

The Nigeria Upstream Petroleum Regulatory Commission (NUPRC) announced that Shell's sale of the unit to a local consortium (Renaissance Africa Energy) was halted because the transaction did not pass regulatory requirements. Although the commission did not provide further details, it had previously expressed concerns about the Renaissance consortium's ability to manage Shell's assets in Nigeria.

The rejection came as ExxonMobil's $1.28 billion sale of its Nigerian onshore assets to London-listed Seplat Energy was approved. The approval, which was granted after a long delay, hinted at the regulatory obstacles that investors face when trying to withdraw from Nigeria.

In January 2024, Shell announced that it had reached an agreement to sell its onshore assets in the Niger Delta swamps, marking the company's plan to exit the region after 68 years of operation. However, the sale needs to be approved by Nigeria’s oil minister, who is Nigerian President Bola Tinubu, and advised by the Upstream Petroleum Regulatory Commission.

Over the past two years, several international oil companies, including Italy’s Eni, Norway’s Equinor and Sinopec’s Addax, have also begun divesting their onshore assets in Nigeria, citing issues such as oil theft, violence and environmental damage. The promise of better returns from offshore fields has lured oil majors away from the troubled Niger Delta region.

ExxonMobil and Seplat initially agreed the deal in February 2022, with Seplat predicting the acquisition would nearly triple its crude oil production from 48,000 barrels per day to about 130,000 barrels per day. However, the all-cash deal faced delays as state oil company NNPC tried to block the sale, claiming it had a right of first refusal. Although former President Muhammadu Buhari initially approved the deal in August 2022, he reversed the decision three days later, citing the need for further regulatory review.

Despite the challenges, other companies have successfully divested. Italian company Eni sold its Nigerian unit to Oando for $783 million in August, and Equinor transferred its unit to local company Chappal Energies last November. Chappal also bought a minority stake in Total Energy’s onshore joint venture for $860 million this year.