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Shell is battling to win approval for the $1.3bn sale of its onshore oil and gas business in Nigeria after the divestment was blocked by regulators.
The company and the proposed buyer Renaissance Africa Energy were informed by the Nigerian Upstream Petroleum Regulatory Commission in August that the deal could not be approved in its current form, according to people familiar with the matter.
Both parties have since engaged in an intense lobbying effort but have failed to persuade the regulator to reverse course, the people said.
NURPC’s chief executive, Gbenga Komolafe, announced last month that the sale of Shell Petroleum Development Company of Nigeria (SPDC) to Renaissance did “not scale [the] regulatory test”.
In an interview with the Financial Times, Shell chief executive Wael Sawan said talks with the regulator were ongoing.
“What we continue to see is a regulator that is engaging with us to be able to get the assurances that any regulator requires to be able to bless the transaction and that’s what we’re trying to provide to them,” he said.
In the past two years companies including Exxon, Eni, Equinor and China’s Addax have announced plans to divest their Nigerian onshore assets, but Shell’s exit was always likely to face the most scrutiny. Shell drilled Nigeria’s first successful oil well in 1956 and SPDC is the biggest oil company in the country.
It operates a joint venture with the Nigerian National Petroleum Company, TotalEnergies and Agip, and has 18 production licences producing as much as 12 per cent of Nigeria’s crude oil and 21 per cent of its gas.
Rather than offload SPDC’s assets individually, Shell has decided to sell the entire company, leaving it intact so it can continue to operate the joint venture and assume responsibility for the complicated remediation of past environmental damage.
However, the regulator has expressed several concerns over the proposal, the people familiar with discussions said, adding that the deal may need to be restructured to win approval.
The Renaissance consortium includes Switzerland-based Petrolin and four Nigerian oil producers, ND Western, Aradel Holdings, First E&P and Waltersmith.
One of the regulator’s concerns has been whether the group has the financial resources to manage the assets, given that Renaissance is relying on Shell to help fund some of its operations. Under the terms of the sale, Shell has agreed to lend Renaissance a total of $2.5bn to cover certain funding requirements, including SPDC’s development of the joint venture’s gas resources.
Another area of concern is whether Renaissance can fund the cost of cleaning up decades of environmental damage across SPDC’s operations and whether those costs have been properly assessed by Shell. Oil spills caused by the rampant tapping of pipelines by organised criminal groups and leaks from ageing infrastructure have left many parts of the Niger Delta heavily contaminated.
Olu Verheijen, special adviser on energy to Nigerian President Bola Tinubu, told reporters last week that the regulator had found issues with the proposed transaction but that she expected the objections to be resolved in “short order”.
“For the independent [oil companies] who are coming in onshore, we want to make sure that they align with our objectives of rapidly growing production,” she said. “They need to ensure that there is a technical and financial capacity and that some of the obligations that need to be addressed are being addressed.”
Some officials of NUPRC and NNPC have argued that the wholesale acquisition of SPDC would give Renaissance too much control and are pushing for the company’s assets to be broken down into smaller entities for other local companies to purchase.
Renaissance casts such proposals as an attempt by politically connected interests to take a slice of an important company, according to people familiar with the consortium.
Renaissance declined to comment.
