Photo caption: Mr. Tony Attah (Picture credit – file)
By Emeka Ugwuanyi
The immediate past Managing Director of Nigeria LNG Limited, Mr. Tony Attah, has been appointed the Chief Executive Officer and Managing Director of Renaissance Africa Energy, a Nigerian consortium that acquired the entire shareholding of The Shell Petroleum Development Company of Nigeria Limited (SPDC).
Attah, who also was a former Shell employee, has 30 years of experience working in the oil and gas industry and has traversed almost all the hydrocarbon value chain.
Oil major Shell on Tuesday said it has agreed to sell its Nigerian onshore subsidiary, SPDC, to a Nigerian consortium, Renaissance Africa Energy, which is formed of ND Western, Aradel Energy, First E&P, Waltersmith and Petrolin. According to Shell, the transaction will preserve the full range of SPDC’s operating capabilities, adding that Shell will remain a major investor in Nigeria’s energy sector through its Deepwater and Integrated Gas businesses.
“Shell 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.
“Completion of the transaction is subject to approvals by the Federal Government of Nigeria and other conditions. Transaction will preserve SPDC’s operating capabilities for benefit of joint venture.
“The transaction has been designed to preserve the full range of SPDC’s operating capabilities following the change of ownership. This includes the technical expertise, management systems and processes that SPDC implements on behalf of all the companies in the SPDC Joint Venture (SPDC JV). SPDC’s staff will continue to be employed by the company as it transitions to new ownership.
“Following completion, Shell will retain a role in supporting the management of SPDC JV facilities that supply a major portion of the feed gas to Nigeria LNG (NLNG), to help Nigeria achieve maximum value from NLNG and will focus investment on Deepwater and Integrated Gas positions.”
Commenting on the transaction, Shell’s Integrated Gas and Upstream Director, Zoë Yujnovich, 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.
“It is a significant moment for SPDC, whose people have built it into a high-quality business over many years. Now, after decades as a pioneer in Nigeria’s energy sector, SPDC will move to its next chapter under the ownership of an experienced, ambitious Nigerian-led consortium.
“Shell sees a bright future in Nigeria with a positive investment outlook for its energy sector. We will continue to support the country’s growing energy needs and export ambitions in areas aligned with our strategy.”
The SPDC JV is an unincorporated joint venture comprised of SPDC Limited (30%), the government owned Nigerian National Petroleum Company Limited (55%), Total Exploration and Production Nigeria Ltd (10%) and Nigeria Agip Oil Company Ltd (5%).
SPDC assets
The SPDC Joint Venture holds 15 oil mining leases for petroleum operations onshore and three for petroleum operations in shallow water in Nigeria and it is operated by SPDC. The assets as at December 31, 2022, had combined proved reserves of approximately 458 million barrels of oil equivalent (MMboe).
The consideration payable to Shell as part of the transaction is US$1.3billion. The buyer will make additional cash payments to Shell of up to US$1.1bln, primarily relating to prior receivables and cash balances in the business, with the majority expected to be paid at completion of the transaction, bringing the total to payment to US$2.4 billion.
Shell said the amounts above will be adjusted to reflect any shareholder distributions, above US$200 million, made prior to completion. Other contingent payments, including those related to gas supply to NLNG, may become payable depending on business performance and fluctuation of product prices.
The net book value of the entity subject to this transaction is approximately US$2.8billion as at December 31, 2023, the oil giant said.
“Under the agreed deal structure, economic performance accrues to the buyer with effect from December 31, 2021 (the effective date). However, Shell will continue to consolidate SPDC until control transfers at completion. Although any amounts will depend on the future financial performance of the business, we expect to recognise impairments in respect of the business up to the date of completion, including to the extent that the net book value of SPDC exceeds the expected consideration at completion.
“At closing, Shell will provide secured term loans of up to US$1.2billion, to cover a variety of funding requirements.
“Shell is providing additional financing of up to US$1.3billion over future years to fund SPDC’s share of the development of the SPDC JV’s gas resources to supply feedgas to NLNG, and its share of specific decommissioning and restoration costs. This additional financing will only be drawn down when these costs are approved and incurred by the SPDC JV,” Shell added.
Shell has three other main businesses in Nigeria that are outside the scope of this transaction. They include Shell Nigeria Exploration and Production Company Limited (SNEPCo), which produces oil and gas in the deepwater Gulf of Guinea; Shell Nigeria Gas Limited (SNG), which provides gas to domestic industrial and commercial customers; and Daystar Power Group, which provides integrated solar power to commercial and industrial business across West Africa.
In addition, Shell’s 25.6% interest in NLNG, which produces and exports LNG to global markets, is also outside the scope of this transaction.
Shell has struggled with its onshore business in Nigeria for years, and has had its fair share of troubles there, including several lawsuits from local communities in recent years over oil spills. The oil major denies responsibility for those spills and says that oil theft and criminality are major sources of pollution. Theft is the cause of the majority of spills in the latest claims from communities that were allowed to proceed by the High Court in London at the end of last year, according to Shell.
At a point between 2022 and 2023, SPDC was losing about 50 per cent of its oil production to theft.
If the transaction is approved by the Nigerian government, the deal would fulfill Shell’s long-term goal of extracting itself from a challenging operating environment in the Niger Delta. For decades, the company has been at odds with local communities over oil spills and accusations of human rights violations, something that increasingly clashed with its broader efforts to become cleaner and greener.
SPDC has pumped oil in Nigeria for more than half a century, but almost three years ago then-Chief Executive Officer Ben van Beurden signaled the company’s intention to exit its onshore oil positions. These operations have become increasingly difficult, with local communities accusing Shell of being responsible for oil spills that have polluted their environment. The company has blamed many of these incidents on damage to infrastructure caused by oil theft.
Tuesday’s announcement comes after a laboured sales process that had to be halted in 2022 after a court ordered SPDC to pause its divestment plans pending the outcome of a separate case related to allegations of pollution. Earlier this month, Nigeria’s Supreme Court upheld Shell’s appeal against this ruling.
