Nigeria’s oil industry regulator has rejected Shell’s proposed $1.3 billion divestiture of its onshore assets to a local consortium, Renaissance Africa Energy Company (RAEC), citing concerns over the consortium’s ability to manage the significant oil and gas operations. The decision by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has raised questions about the future of the assets and Nigeria’s broader energy sector, as the country seeks to maximize oil and gas production during a critical period for its economy.
According to reports by local media, the NUPRC found that RAEC, a consortium of five Nigerian energy companies, lacked the necessary capacity to take over the assets. An anonymous industry source explained that none of the consortium members are currently managing even half of their existing oil and gas assets. “If they are not managing their current assets up to 50 percent, why would you now give them even more significant volumes to manage?” the source told ThisDay, reflecting the regulator’s concerns over the consortium’s competence.
The sale of Shell Petroleum Development Company’s onshore oil and gas assets has been in the pipeline for some time. Shell holds 15 oil mining leases (OMLs) onshore in Nigeria and had planned to exit these operations as part of a broader strategy to reduce its involvement in Nigeria’s volatile onshore oil sector. Shell’s decision is motivated by several factors, including security challenges, operational risks, and environmental concerns related to spills and pipeline vandalism in the Niger Delta. The $1.3 billion deal, which would have seen RAEC take control of these assets, had been awaiting regulatory approval before NUPRC’s recent decision.
The rejection of the deal marks a significant development in Nigeria’s energy sector, as the government emphasizes the need for qualified operators to manage key oil and gas assets. The regulator expressed concern that handing over these operations to a consortium without proven capacity could lead to further production shortfalls. With Nigeria’s oil production still below pre-pandemic levels and efforts underway to increase output, the government is particularly cautious about ensuring competent management of strategic assets.
“Nigeria could be the loser,” said one industry expert, who highlighted the risks of entrusting such valuable resources to an underqualified entity. Another major issue raised during the review was the transparency of the seller-financing model proposed in the deal. The source noted that under this model, Shell would also serve as the financier, creating potential conflicts of interest and raising concerns about the fairness and transparency of the arrangement. “It didn’t make sense and was not transparent, especially given the problems this model has caused in the past,” the source added.
Had the sale been approved, RAEC would have been required to make additional cash payments of up to $1.1 billion, including payments for past receivables and cash balances held within the business. However, with the deal now off the table, the future of Shell’s onshore assets remains uncertain.
Shell’s divestment is part of a broader trend among international oil companies (IOCs) seeking to reduce their footprint in Nigeria’s onshore oil sector due to growing operational challenges. Over the past decade, several IOCs have sold off their onshore assets, focusing instead on offshore operations, which are generally seen as safer and less prone to disruptions. For Nigeria, finding competent local operators to manage these assets has become a priority as it seeks to maintain production levels and safeguard revenues critical to the national economy.
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