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Nigeria has rejected Shell’s proposed $1.3bn sale of its onshore oil production unit, dealing a blow to the oil major’s plans to exit the troubled shallow water sector in the Niger Delta region.
Gbenga Komolafe, chief executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), told an oil conference in Abuja that the sale to a local consortium, Renaissance Africa Energy, was blocked because the transaction did “not scale [the] regulatory test”.
While he did not provide details of the regulator’s reasoning on Monday, Komolafe has previously cast doubt on little known Renaissance’s ability to operate Shell’s assets in the country. Renaissance declined to comment and Shell did not immediately respond to a request for comment.
The rejection of Shell’s deal with Renaissance came as regulators approved ExxonMobil’s long-delayed $1.28bn arrangement to sell onshore assets to London-listed Seplat Energy, demonstrating hurdles and uncertainty often faced by investors seeking to divest from Nigeria.
Komolafe said at the conference, held in Nigeria’s capital, that a long-awaited ministerial consent had been granted by his agency for the Exxon sale to proceed. Seplat declined to comment but acknowledged the announcement made by the regulator.
Shell announced in January that it had struck a deal to sell its onshore assets in the swamplands of the Niger Delta in the south of the country, putting it on course to exit the region after 68 years.
The European major had been waiting for approval from the country’s oil minister, who in turn is advised by NUPRC on whether to rubber stamp deals. Nigeria’s president, Bola Tinubu, doubles as petroleum minister.
Italy’s Eni, Norway’s Equinor and China’s Addax, are among companies that have announced deals to sell onshore assets in Nigeria in the past two years because of declining returns as a result of oil theft, violence and environmental damage.
Prospects of better returns in offshore fields have also lured oil majors away from the swamplands of the Niger Delta.
US oil company Exxon and Seplat, which is also listed on the Nigerian Stock Exchange, first agreed the deal in February 2022. Seplat has forecast that the takeover of Exxon’s assets will almost triple its production to roughly 130,000 barrels of crude oil, from 48,000.
The all-cash deal had been in limbo since state-owned oil company NNPC sought to block it, arguing that it had a right of first refusal to purchase the assets from Exxon. The US company operates the permits in a partnership with NNPC, as all international companies are legally required to.
Former President Muhammadu Buhari approved the deal in August 2022 after “considering the extensive benefits of the transaction to the Nigerian energy sector and the larger economy”. But he reversed course less than three days later, saying further regulatory scrutiny was needed.
Italian giant Eni completed the sale of its Nigeria unit to Oando for $783mn in August while Norway’s Equinor sold its subsidiary to Chappal Energies, a local company, for an undisclosed amount last November.
Chappal Energies this year acquired a minority stake in a Total onshore venture for $860mn.
Clementine Wallop, director for sub-Saharan Africa at Horizon Engage, a consultancy, said the approval of Exxon’s transaction was “good news for the Nigerian government and for investors in the energy space, after a long wait that has caused uncertainty”.
Additional reporting by Tom Wilson in London