Shell Shedding Oil Assets In Nigeria To Cut Costs, Raise $15 Billion

Royal Dutch Shell has begun selling five major oil assets in Nigeria as part of a plan to raise profits and cut $15 billion in costs by the end of 2015.

It is one of several large energy companies shedding assets in oil-producing countries with the goal of increasing profits and cutting costs. Several companies have focused on selling properties in Nigeria -- where sabotage and oil theft has been rising --  which has cost the county billions in reduced production.

In 2013, Shell offered for sale its shares in a key Nigerian pipeline, the Nembe Creek Trunk Line, as well as four oil blocks in the Niger Delta. Shell owns 30 percent of these properties; Total of France and Eni of Italy own 10 percent and five percent, respectively. The Nigerian National Petroleum Corp. owns the remaining 55 percent.

“We have signed sales and purchase agreements for some of the oil mining leases, but not all that we are seeking to divest,” a Shell spokesman said on Aug. 27. Shell did not disclose when the process might be completed or the total value.

So far in 2014, Ben Van Beurden, Shell’s CEO, has raised about $8 billion through asset sales. In early August, the company agreed to sell two gas assets in the United States for $2.1 billion.

In the Nigerian Shell deal, buyers have emerged, but two of them are still trying to negotiate the terms of their contracts. That process is expected to be completed in a few weeks, but it still will be up to the government in Abuja to approve any deal.

The Financial Times quoted two people familiar with the deal who estimated the overall price for the five Shell properties at $5.2 billion, but stressed that the amount could change during the process of the negotiations. On of them, a banker involved in the talks, said the buyers are exerting “a great display of the strength of the Nigerian indigenous oil industry.”

Since 2008, local oil companies, encouraged by the government, have expanded greatly, buying assets worth $5 billion from several global energy giants, transforming the country’s 60-year-old oil industry.
Nigerian oil companies including Oando, Deplat and Shoreline Natural Resources already have bought properties from the U.S. companies Chevron and ConocoPhillips. The pending purchases from Eni, Total and Shell are only the latest deals in the making.

As for the Shell deal, other Nigerian companies -- producer-traders such as Taleveras and Aiteo -- say they are prepared to pay $2.6 billion for the country’s largest oilfield and the Nembe Creek pipeline alone, the Financial Times reports, again quoting anonymous sources.

By Andy Tully of Oilprice.com