Big Companies Scramble For Shell’s Oil Blocks

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No fewer than 18 consortia have expressed interests in some oil fields offered for sale by Shell Petroleum Development and Production Company (SPDC) and its partners.

Oil giant Shell last year offered four of its oilfields in the Niger Delta said to have valued at between $150 million to $2 billion for sale.

THISDAY had reported that the oil giant selected a few local companies from among the 30 local firms that submitted expression of interest in the deal. It was learnt that to qualify, the companies had to prove they had the financial and technical means to implement a development plan for the fields, some of which are shut in. Sources familiar with the deal had hinted that Midwestern Oil and Gas, Niger Delta Petroleum Resources and Setplat Petroleum were among the companies that expressed interests in the oil blocks.

However, a report yesterday by Sunday Times of London stated that Nat Rothschild, scion of the banking dynasty, was backing one group of bidders, while Russian gas giant, Gazprom was leading a bid with Nigerian resources firm Equinox Group.

The report, which quoted an unnamed source close to the deal, said London-listed oil industry services group Petrofac has joined forces with Nigerian gas firm, Seven Energy to bid for one of the blocks being sold, while London-listed oil group Afren Plc also plans to make an offer.

Shell

Bonga, Floating Production Storage and Offloading vessel. FPSO, Bonga field offshore Nigeria 2005.

Another bidding group, the report added, includes London-based oil firm Perenco, Nigerian oil and gas company, Oando and Addax & Oryx, which is controlled by billionaire Jean Claude Gandur. In the lsit of interested bidders is Sweden’s Lundin family, which the newspaper said is working with logistics firm Intels Nigeria.

Shell is planning to sell four onshore fields along with its partners Total and Eni. The onshore blocks located in the Southern Nigeria, according to sources familiar with the deal include Oil Mining Leases (OMLs 26, 30, 34, 40 and 42), some of which contain reserves of up to 2 billion barrels. Also to be sold with oil blocks are the facilities located in that region where the industry has faced repeated militant attacks.

Shell’s partners, according to sources would have to approve any disposal of assets. SPDC is the operator of the joint venture in Nigeria between state-owned Nigerian National Petroleum Corporation (NNPC) (55percent), Shell (30percent), Total E&P Nigeria Limited 10 per cent, and Nigeria Agip Oil Company (5percent).

Shell, a major operator in the Nigeria Oil and Gas sector has suffered series of setbacks in its Nigerian operations as security and funding challenges have severely cut the company’s onshore production in Nigeria and increased direct costs.

The company’s Chief Executive, Peter Voser had in 2009 confirmed that the oil giant’s onshore output had dropped to 120,000 barrels per day (bpd), from the about 300,000 bpd being produced before the militancy escalated in the Niger Delta region.

Voser said Shell’s onshore production in Nigeria has been” heavily curtailed by violence” in the oil-rich region. “We have a huge proportion of onshore production shut in at this stage. I think we are now at 120,000 bpd and we used to be close to 300,000”, Reuters had quoted Voser as saying.

Owing to what sources described as tough operating condition, Shell, had in 2008, offered three of its oil blocks, OMLs 4, 38 and 41 for sale.

Most of Shell’s fields are onshore and it was learnt that the divestment programme is focused primarily on those in the western part of the country.

These include producing fields as well as undeveloped blocks and those still shut in because of the violence in the region.

But explaining the company’s divestment in the three blocks recently, Country Chairman of Shell Nigeria cum Managing Director, Mr. Mutiu Sunmonu said it was aimed to encourage local participation in the upstream petroleum industry. He declared that Shell had no plans to close its operations in Nigeria despite the tough operating conditions.

Sunmonu had acknowledged that security and funding challenges have severely cut the company’s onshore production in Nigeria and increased direct costs, but that notwithstanding, the company would continue its onshore and offshore exploration and production activities in Nigeria believing that the country’s Oil and Gas sector will see a better future.

He said Shell has a long standing presence in Nigeria and will continue its exploration and production activities in the country notwithstanding the challenges. He described as untrue reports that the company’s divestment in the three oil blocks; OMLs 4, 38 and 41 was in line with its plans to exit Nigeria, saying the assets represented less than five percent of the company’s assets and were sold to encourage local participation in the upstream sector.

“The assets were sold to encourage local participation in the industry. The Federal Government wants to open up the industry to other players especially local players, in line with the local content policy. Shell is one company that has supported this government initiative. So it is a big boost to the local content”.
Big Scramble to Buy Nigerian Oil Fields

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He said: “Any suggestion that Shell has divested its assets and is exiting Nigeria is misleading and untrue. We have a long standing presence and commitment to Nigeria, and we will continue our on and offshore exploration and production activities”.

Explaining the rationale for the divestment in OMLs 4, 38 and 41, Sunmonu said: “Shell has a large and diversified global upstream portfolio, which we regularly review to ensure best value for the company”.

“We believe that these assets are best developed by a third party and that the divestment provides an opportunity for local companies to materially increase their participation in the hydrocarbon sector, consistent with the objectives of the Federal Government. It may also accelerate the exploration and development of the acreage. The transaction is subject to the approval of the Nigerian National Petroleum Corporation (NNPC) and the Federal Government,” he added.

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