Shell’s recent exit from Nigeria’s onshore oil sector, particularly the Niger Delta, has sparked a shift in the country’s oil landscape. While the departure of Shell, a pioneer in Nigeria’s oil industry, underscores the challenges faced by major oil companies in the region, it has also raised hopes for a resurgence in production from local firms. The sale of Shell’s subsidiary to predominantly local companies aligns with a broader trend of Western energy companies divesting from onshore Nigerian oil fields.
Multiple factors have contributed to the exodus of major oil companies, including Exxon, Italy’s Eni, Norway’s Equinor, and China’s Addax. Persistent issues such as policy uncertainties and foreign exchange concerns have hindered investments, leading to a decline in oil production. President Bola Tinubu’s commitment to addressing obstacles faced by producers, including crude theft and pipeline vandalism, has yet to fully materialize, and the ongoing asset sales highlight the evolving landscape of Nigeria’s oil sector.
Shell’s onshore production in Nigeria has experienced a significant decline, from 300,000 barrels of oil equivalent per day (boed) a decade ago to 131,000 boed in 2022. The company attributed this decline to sabotage and theft in the Niger Delta. Industry experts suggest that major oil companies, including Shell and Exxon, reduced investments in onshore assets, hastening the production downturn.
The departure of major players has opened opportunities for local firms to take center stage. Companies like Seplat, First E&P, and Heritage have managed to raise production and address environmental concerns on assets purchased from Shell. However, challenges persist for some local firms, such as Aiteo Eastern E&P and Eroton Exploration, which have grappled with pipeline leaks and oil spills.
Despite concerns about the financial capacity of local firms compared to oil majors, industry leaders like Roger Brown, CEO of Nigeria’s Seplat Energy, believe that independent companies have the appetite to invest and can contribute to increasing production. While access to cheaper capital may be a challenge for local firms, the current oil prices provide an opportunity for indigenous businesses to afford development.
The sale of Shell’s onshore business in the Niger Delta to a consortium led by Renaissance, comprising ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin, is valued at $2.4 billion. The deal represents Shell’s strategic move to streamline its business in Nigeria, focusing on deepwater and integrated gas operations.
The Nigerian government’s approval is essential to finalize the agreement, and activists in the Niger Delta are expected to call for environmental concerns to be addressed before granting approval. The assets include 15 onshore mining leases and three shallow-water operations, with NNPC holding a 55% stake.
If approved, Shell will retain at least three subsidiary operations in Nigeria, emphasizing its commitment to conduct remediation as the operator of the joint venture where spills may have occurred. The evolving dynamics in Nigeria’s oil sector underscore the challenges and opportunities facing the industry in Africa’s largest exporter.