The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has refused Shell International Plc’s proposed $1.3 billion sale of its onshore assets in Nigeria to Renaissance, a consortium of local companies. This decision is a significant setback for Shell, which has been trying to sell its stake in the Shell Petroleum Development Company of Nigeria Limited (SPDC) as part of its broader strategy to reduce its presence in Nigeria’s onshore oil sector.
The rejection of the transaction by the NUPRC is based on the guidelines set forth by the Petroleum Industry Act (PIA), which require regulatory approval for any divestment of petroleum assets in Nigeria. The NUPRC’s rejection reflects concerns about the technical and financial capabilities of the Renaissance consortium, which includes ND Western Limited, Aradel Holdings Plc, the Petrolin Group, FIRST Exploration and Petroleum Development Company Limited, and Waltersmith Group. The regulatory body has also questioned the consortium’s ability to manage the assets efficiently and in compliance with Nigeria’s petroleum laws and environmental standards.
Despite this regulatory hurdle, there is still a possibility for the deal to proceed. As of Monday morning, the deal’s chances were considered to be 70/30, with President Bola Tinubu reportedly pushing for the transaction to be finalized soon. “The President is also interested in the sale and wants to ensure that the sale goes through as quickly as possible,” the source revealed, highlighting the political interest in ensuring the completion of the transaction.
Shell’s intention to divest its onshore assets has been clear for some time as the company is seeking to sell its full stake in SPDC to focus more on offshore oil production and other areas outside Nigeria. However, the proposed sale to Renaissance has faced several challenges, including regulatory scrutiny and legal disputes. In April, the NUPRC established a divestment framework to assess applications for ministerial approval of such sales. This framework evaluates various factors, such as the buyer’s technological expertise, financial stability, legal qualifications, environmental commitments, and relations with host communities.
Gbenga Komolafe, the CEO of NUPRC, emphasized that any buyer, including Renaissance, must demonstrate the technical capability to manage the assets efficiently. He outlined that the commission’s role is to ensure that any transfer of ownership complies with Nigeria’s petroleum regulations and promotes sustainable development in the sector.
Between January and August 2024, the value of Shell’s proposed deal with Renaissance dropped significantly from $2.4 billion to $1.3 billion. This decline has been attributed to a range of factors, including changes in market conditions and ongoing legal disputes. One such dispute involves a local firm, Global Gas and Refining Limited, which has sought a court injunction to prevent NUPRC from approving the sale. Global Gas argues that it has contractual claims over some of the assets and that the sale would violate its rights.
In response to these legal challenges, Shell has clarified that it is not directly selling its onshore assets to Renaissance for $1.3 billion. Instead, the company is transferring shares in SPDC, which includes the onshore assets. This distinction is crucial because it highlights Shell’s strategy of minimizing direct involvement in onshore operations while still managing its broader portfolio in Nigeria.
The proposed sale has also faced opposition from various groups, including a coalition of 40 non-governmental organizations (NGOs), such as Amnesty International. These organizations have raised concerns about Shell’s environmental track record in Nigeria and have called for a thorough assessment of the environmental impact before any sale is approved. They argue that Shell should be held accountable for the environmental damage caused during its decades-long operation in the Niger Delta and that any sale should include commitments to remediation and compensation for affected communities.
Similarly, the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) has voiced its opposition to the sale. The union has expressed doubts about the Renaissance consortium, stating that the group is relatively unknown and raising questions about its ability to operate the assets responsibly. PENGASSAN has also pointed to several allegations against Renaissance, suggesting that these should be investigated thoroughly before any sale is allowed to proceed.
