Royal Dutch Shell, which sold its stakes in some Nigerian onshore oil blocks in 2012, said it generated a whopping sum of $1.1bn from the transactions. This was revealed in the Shell Annual Report for the year ended December 31, 2012, released on the company’s website.
“In 2012, we sold our 30 per cent interests in OMLs 30, 34 and 40 for a consideration of $1.1bn,” the report said.
“SPDC is working towards the potential divestment of OMLs 30, 34 and 40,” Shell spokesman, Mr. Tony Okonedo, had said in June 2012. He had explained that the planned oil block sale was in tandem with the company’s move to divest some of its onshore assets.
According to him, Shell has been winding down some of its onshore operations, which are plagued with problems such as militancy and rampant oil theft, as it increasingly focuses on offshore and deepwater drilling.
Prior to the final disposal in 2012, Shell and its partners had tried to sell OML 30 alongside three other oil assets between 2010 and 2011. A lot of Nigerian companies and their foreign partners were said to have shown keen interest in acquiring OMLs 30, 34, 40 and 42.
The Nigerian National Petroleum Corporation, which has controlling interest of 55 per cent in each of the blocks, however, insisted on enforcing its right to operatorship as provided for under the Joint Operating Agreement covering the concessions.
Minister of Petroleum Resources, Mrs. Diezani Alison-Madueke, in June 2011 was quoted as saying that OMLs 30 and 34 held some of the country’s largest gas fields which were important to the country’s power infrastructure programme, and too strategic to be handed over to “certain” operators.
OML 30 was in November, 2012 sold to Heritage Oil while Africa-focused energy firm, Eland Oil and Gas in partnership with Nigerian oil firm Starcrest, completed the purchase of a 45 per cent stake in block OML 40 owned jointly by Shell , Total and Eni for $154m.
Similarly, Shell, had in 2011, raked in $390m from the sale of its 30 per cent stake in OML 42 to local consortium, Neconde Energy, which includes Nestoil Group, Aries E&P Company Limited, VP Global and Poland’s Kulczyk Oil Ventures.
Shell also sold its 30 per cent stake in block OML 26 to First Hydrocarbon Nigeria, which is part-owned by Afren, for $98m in the same year. Whereas, it assigned stakes in three blocks, OML 4, 38 and 41, to Seplat Petroleum in 2010.
Shell, in the report, decried insecurity, limited infrastructure, and inability to enforce existing contractual right in the country as some of challenges facing its operations in the country. It added that these would, among others, have adversely affected the oil company.
The report said, “An erosion of the business and operating environment in Nigeria would adversely affect Shell. We face various risks in our Nigerian operations. These risks include security issues surrounding the safety of our people, host communities, and operations; our ability to enforce existing contractual rights; limited infrastructure; and potential legislation that could increase our taxes or costs of operation.
“The Nigerian government is contemplating new legislation to govern the petroleum industry which, if passed into law, would likely have a significant adverse impact on Shell’s existing and future activities in that country.”
In spite of this, the Shell’s Chief Executive Officer, Mr. Peter Voser, said Nigeria remained one of the company’s strategic priorities.
He said, “We have our growth priorities, which are three areas of great opportunity for us in the years ahead, thanks to our superior technology and innovation. They are integrated gas, deep water and resources plays, such as shale oil and gas.
“Finally, we have future opportunities for the longer term, including the Arctic, Iraq, Kazakhstan, Nigeria, and heavy oil. We also continue to ramp up our conventional exploration activities, which we think is a cost-effective way of identifying new resources.”
The report said Shell-share production in Nigeria was approximately 365 thousand barrels of oil equivalent per day in 2012 compared with approximately 385 thousand boe/d in 2011.
“Security, crude oil theft and flooding in the Niger Delta were significant challenges in 2012,” said.
Speaking on Shell onshore operations in Nigeria, the report said, “The Shell Petroleum Development Company of Nigeria Ltd is the operator of a joint venture (Shell interest 30 per cent) that holds more than 25 Niger Delta onshore oil mining leases, which will expire in 2019. To provide funding, Modified Carry Agreements are in place for certain key projects and a bridge loan was drawn down by the Nigerian National Petroleum Company in 2010.
“December 2012 NNPC repaid the bridge loan with interest. New financing agreements with NNPC are under discussion and are expected to be put in place during 2013.”
The report further revealed that SPDC made progress in reducing flaring in 2012 and this was attributed to improved security in some areas of the Niger Delta. The oil major added that stable co-funding from its partners meant SPDC was able to continue its multi-year programme to install new gas-gathering facilities and repair existing facilities damaged during the militant crisis of 2006 to 2009.
“SPDC is working on projects to further reduce flaring. Progress will depend on continued partner support, the local security conditions and the development of an effective market for gas in Nigeria,” the report added.