The Nigerian government has put a stop to Shell’s proposed sale of its onshore oil business, marking a significant setback for the oil giant’s exit strategy from the country’s onshore sector.
The planned sale of Shell’s onshore oil assets to Renaissance Africa Energy Company Limited has been rejected by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), due to failure to meet key regulatory requirements.
This decision was made clear by the NUPRC’s Chief Executive Officer, Gbenga Komolafe, during the launch of the “Project One Million Barrels of Oil Per Day” initiative in Abuja on Monday.
Shell, one of the world’s largest oil companies, has faced increasing pressure in Nigeria, primarily due to issues such as oil theft, sabotage, and environmental liabilities.
In January, Shell struck a deal with Renaissance Africa Energy Company Limited as part of its plan to offload its onshore oil assets.
The deal, initially valued at $2.4 billion, was supposed to provide Shell with $1.3 billion upfront and an additional $1.1 billion upon the completion of the transaction.
“This sale was supposed to be a relief for Shell,” said Komolafe. “The company has been looking to sell these assets since 2021 due to the mounting challenges it faces in Nigeria’s onshore oil business.”
However, despite years of negotiations and agreements, the sale could not go through as planned.
Komolafe explained that Shell’s divestment application was one of five submitted to the NUPRC for approval. While four of those applications passed the regulatory test and secured ministerial consent, Shell’s proposal was the only one rejected.
“The divestment could not scale the regulatory test,” Komolafe stated, making it clear that the Nigerian government’s decision was final.
One of the major reasons for rejecting Shell’s deal was the Nigerian government’s commitment to safeguarding national interest.
Nigeria, which relies heavily on oil revenues, has always had a keen interest in ensuring that its natural resources are managed in ways that benefit the country’s economy and people.
Although Shell had negotiated a substantial deal, the Nigerian government decided that the transaction did not align with its national priorities.
Komolafe emphasized the country’s dedication to maintaining fair business practices, but stressed that business transactions must reflect national interests.
“The government is committed to free entry and exit in business transactions,” Komolafe said. “But such moves must align with national priorities.”
Shell’s attempt to divest its onshore oil business comes as the company seeks to distance itself from the problems associated with operating in the Niger Delta, one of the most troubled oil-producing regions in the world.
Oil theft and pipeline sabotage have become common issues in the area, resulting in severe environmental damage and loss of revenue for the Nigerian government.
In recent years, Shell has been held accountable for several environmental disasters, including oil spills that have devastated local communities and ecosystems.
The company has faced numerous lawsuits and financial penalties over the years for its role in these environmental crises.
For Shell, the onshore business has become a burden, making divestment an attractive option. The sale of its onshore assets would have allowed the company to focus on deepwater operations, where it believes it has a competitive edge due to its advanced technology and financial capabilities.
Despite the setback in its divestment plans, Shell remains committed to staying in Nigeria, though it is now shifting its focus to offshore investments.
Speaking at the Nigerian Economic Summit last week, Osagie Okunbor, Managing Director of Shell Petroleum Development Company (SPDC), clarified the company’s position.
“We are not leaving Nigeria,” Okunbor said. “Instead, we are refocusing our portfolio. We are moving more into the deepwater, where our technological and financial capabilities can be fully realized.”
This shift marks a strategic pivot for Shell, as the company looks to capitalize on its strengths in offshore oil exploration and production while reducing its exposure to the risks associated with onshore operations.
Shell’s rejection by the NUPRC is not just a blow to the company’s divestment plans, but also highlights the growing challenges facing international oil companies operating in Nigeria.
The country’s oil sector has long been plagued by regulatory hurdles, corruption, and political interference, making it difficult for companies to operate smoothly.
In recent years, several other major oil companies, including ExxonMobil and Chevron, have also looked to reduce their onshore operations in Nigeria, citing similar concerns.
The divestment trend has raised concerns about the future of Nigeria’s oil sector, which remains the backbone of the country’s economy.
However, the government has made it clear that while it supports free market operations, it will not allow foreign companies to exit the country without ensuring that the national interest is protected.
Komolafe noted that the commission is guided by seven regulatory pillars that are designed to ensure the integrity of the upstream oil industry.
“The NUPRC is committed to upholding fair business practices in line with the vision of President Bola Tinubu,” Komolafe said.
