SHEL Shell plc

By Christian Moess Laursen

Shell has agreed to sell its Nigerian onshore oil subsidiary for up to $2.4 billion, making good on a promise to exit what was for decades one of its most dependable cash cows but in recent years has become a big drag on its reputation.

The London-based energy major said Tuesday that it will receive $1.3 billion initially for Shell Petroleum Development Company of Nigeria, with the buyer--a consortium of five companies--paying up to an additional $1.1 billion, mainly relating to prior receivables and cash balances. The majority is expected to be paid at completion of the deal.

The divestment aligns with Shell's previously announced intent to exit onshore oil production in the Niger Delta and to focus future investment in Nigeria on its deepwater and integrated gas positions, it said.

"Shell sees a bright future in Nigeria with a positive investment outlook for its energy sector," Integrated Gas and Upstream Director Zoe Yujnovich said.

The oil-and-gas company's relationship with the West African country dates back to 1936, when the group established a venture together with the precursor company of British rival BP. First shipment of oil from Nigeria was in 1958.

At the beginning of this century, Shell's Nigerian operations faced controversy, increasing militant attacks and lawsuits in relation to claims of pollution.

In 2011, a United Nations report alleged that Shell and the Nigerian government contributed to 50 years of pollution in Ogoniland, and required the world's largest oil clean-up, costing an initial $1 billion and taking up to 30 years.

Two years later, a Dutch court ruled Shell could be held partially responsible for pollution in the Niger Delta.

"We will continue to support the country's growing energy needs and export ambitions in areas aligned with our strategy," Yujnovich said.

Shell will continue to play a role in supporting SPDC in the development and production of natural gas, it said.

The consortium, called Renaissance, comprises four exploration-and-production companies based in Nigeria and an international energy group.

By purchasing all the shares in SPDC, Renaissance will at completion control SPDC's 30% stake in the SPDC joint venture, which consists of 15 oil mining leases for petroleum operations onshore and three leases for petroleum operations in shallow waters in Nigeria.

The net book value of SPDC was around $2.8 billion as of Dec. 31.

Completion of the transaction is subject to approvals by the government of Nigeria and other conditions.

At 1014 GMT, shares were down 1.3% at 2,449.00 pence.

Write to Christian Moess Laursen at christian.moess@wsj.com

(END) Dow Jones Newswires

January 16, 2024 05:56 ET (10:56 GMT)

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