Friday, October 29, 2010

Shell to Sell More Nigerian Onshore Oil Blocks

As part of the continued shake-up of its Nigerian operations in apparent response to the harsh operating environment, Royal Dutch Shell has stated that it will continue to sell off its onshore oil and gas fields in the country and channel investment in more profitable projects in other countries.

The company had launched a shake-up of its Nigerian operations by offering oil fields for sale in response to Federal Government’s plans to pass the Petroleum Reform Bill (PIB), which seeks to impose harsher terms on International Oil Companies (IOCs) operating in the country.

The decision by the government to implement an industry-wide reform and abrogate the Petroleum Act of 1960, under which it granted licences to the IOCs, apparently pitched the multinationals against the government.

Confirming the company’s plan to continue to sell off its interests in Nigerian onshore oil blocks, Shell’s Chief Financial Officer (CFO), Mr. Simon Henry, however, told reporters on a conference call yesterday that the company was not planning “a wholesale withdrawal” from Nigeria.

“Our divestment programme is entirely focused” on the onshore fields,” Bloomberg quoted Henry as saying.
“Geographically, some of the West and North-west blocks are more isolated and much less developed. It’s going to be a relatively small proportion of our current production and value,” he added.

The Hague-based company acknowledged in a statement that its share of output from its local venture, Shell Petroleum Development Nigeria Company (SPDC), rose in the third quarter of 2010 by 175,000 barrels of oil equivalent a day.

The oil giant attributed this development to increased production at new fields and improved security conditions in the Niger Delta.
But apart from the “unfriendly PIB” the company is also being confronted with many legal actions over environmental pollution and sabotage of pipelines by host communities, resulting in spilling oil into the environment.

Henry also disclosed that Shell was proceeding with the sale of its onshore blocks partly because the Federal Government was unlikely to fund its share of the projects in the near future.

These blocks “may be more valuable to others, particularly if they have Nigerian indigenous owners and the greater involvement of the local community,” Henry said.

“Many of them have potential significant resources in place, but today, relatively low production and low level of infrastructure,” he added.

Analysts said with Shell’s new projects in the United States’ Gulf of Mexico and Qatar near completion, and the company’s souring relations with the Federal Government as a result of some controversial provisions in the PIB, the new Chief Executive of the oil giant, Mr. Peter Voser, was keen on reducing the company’s reliance on Nigeria.

However, Shell’s decision to sell some Nigerian assets was part of a company-wide shake-up as Voser had “made 15,000 workers re-apply for their jobs, re-entered Iraq and put a handful of European refineries up for sale,” since he assumed duties in July last year.

The company had so far sold four of its 30 onshore licences in Nigeria and about $30 billion worth of assets worldwide over the last five years, Henry said.