LNG giant Shell has agreed to sell its Nigerian onshore subsidiary SPDC to Renaissance for up to $2.4 billion.
Renaissance is a consortium of five companies comprising four exploration and production companies based in Nigeria and an international energy group. The companies are ND Western, Aradel Energy, First E&P, Waltersmith, and Petrolin.
UK-base Shell said in a statement on Tuesday that it will receive $1.3 billion as part of the transaction, while Renaissance will make additional cash payments to Shell of up to $1.1 billion, primarily relating to prior receivables and cash balances in the business.
The majority of the amount is expected to be paid at completion of the transaction, which remains subject to approvals by the government of Nigeria and other conditions, it said.
Shell said the transaction has been designed to preserve the full range of SPDC’s operating capabilities following the change of ownership.
This includes the technical expertise, management systems, and processes that SPDC implements on behalf of all the companies in the SPDC joint venture, while SPDC’s staff will continue to be employed by the company as it transitions to new ownership.
The SPDC JV is an unincorporated joint venture comprised of SPDC (30 percent), the government-owned Nigerian National Petroleum Corporation (55 percent), Total Exploration and Production Nigeria (10 percent) and Nigeria Agip Oil Company (5 percent).
It holds 15 oil mining leases for petroleum operations onshore and 3 for petroleum operations in shallow water in Nigeria.
Following completion, Shell will retain a role in supporting the management of SPDC JV facilities that supply a major portion of the feed gas to Nigeria LNG, to help Nigeria achieve maximum value from NLNG, it said in the statement.
NLNG, the operator of the six-train 22 mtpa LNG terminal, is owned by NNPC (49 percent), Shell (25.6 percent), TotalEnergies (15 percent), and Eni (10.4 percent).
Besides the six existing trains, Nigeria LNG is also adding the seventh production unit at the Bonny Island plant.
Shell’s interest in NLNG is outside the scope of this transaction, as well as SNEPCo, which produces oil and gas in the deepwater Gulf of Guinea and SNG, which provides gas to domestic industrial and commercial customers.
Shell said the net book value of the entity subject to this transaction is about $2.8 billion as at December 31, 2023.
Under the agreed deal structure, economic performance accrues to the buyer with effect from December 31, 2021.
However, Shell will continue to consolidate SPDC until control transfers at completion.
At closing, Shell will provide secured term loans of up to $1.2 billion, to cover a variety of funding requirements.
Also, Shell is providing additional financing of up to $1.3 billion over future years to fund SPDC’s share of the development of the SPDC JV’s gas resources to supply feedgas to NLNG, and its share of specific decommissioning and restoration costs.
This additional financing will only be drawn down when these costs are approved and incurred by the SPDC JV, Shell said.
“This agreement marks an important milestone for Shell in Nigeria, aligning with our previously announced intent to exit onshore oil production in the Niger Delta, simplifying our portfolio and focusing future disciplined investment in Nigeria on our deepwater and integrated gas positions” said Zoë Yujnovich, Shell’s integrated gas and upstream director.