Thursday, December 1, 2011

Shell Sells Oil Stakes in Nigeria


LONDON—Nigerian firms have bought onshore oil licenses from a group of European oil giants, including Royal Dutch Shell PLC, as the company continues to trim its assets in the country that are less integral to its strategic growth.

The Nigerian firms, some acting as a consortium and another backed by U.K. explorer Afren PLC, bought the licenses from Shell, Total SA and SPA's Agip unit, the companies announced Tuesday.

The deals for stakes in two oil production interests in the West African country have a total value of $732 million, with total cash proceeds to Shell's local joint venture of $488 million.

Shell, which operated both blocks, has already divested other Nigerian assets. The Anglo-Dutch oil major's operations onshore Nigeria have long been beset by sabotage and th eft and the company has faced decades of criticism from environmental and human-rights groups concerned about the impact its activities have had on the local ecosystem.

The company said the divestments were part of a strategy to refocus its Nigerian onshore interests and in line with the country's goal of giving indigenous companies a greater role in the country's oil and gas sector.

In a statement, Shell said it remained committed to keeping a long-term presence in the country "both onshore and offshore."

In one of Thursday's deals, Afren affiliate First Hydrocarbon Nigeria Ltd. said it paid $147.5 million for a 45% stake in Oil Mining Lease 26 from Shell, Total and Agip. The block currently produces around 6,000 barrels of oil a day from two fields.

Afren, which holds a 45% stake in FHN, said it plans to boost output to 40,000 barrels a day over the next four years before reaching plateau production of 50,000 barrels a day.

"This acquisition is a strong endorsement of Afren's long-term strategy of working with indigenous companies to reactivate fallow assets held by the major international oil companies in Nigeria," said Afren Chief Executive Osman Shahenshah.

The remaining 55% interest in the license is owned by Nigerian state oil firm, the Nigerian National Petroleum Corp. Afren said FHN will partner with NNPC's exploration and production arm in re-developing the block.

In the second deal announced Thursday, the Neconde Energy Ltd. consortium bought a 45% stake from the same three majors. The NNPC also holds the remaining interest.

The consortium is majority Nigerian-owned and includes Nestoil Group, Aries E&P Company Limited and VP Global, as well as Polish firm Kulczyk Oil Ventures.

According to a statement on the Kulczyk Web site, Neconde paid $585 million for the stake in the block, which covers some 814 square kilometers and includes several oil fields.

"Operations had been shut down because of militant activity, but production from the Batan field resumed earlier this year and is currently producing circa 15,000 barrels of oil per day," Shell said.

The deals have been approved by all relevant national authorities, Shell said.

Shell is still in the process of selling stakes in its other onshore licenses in Nigeria, though delays have reportedly arisen because some potential buyers have expressed concern about whether they will be able to take full operatorship of the blocks.

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