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The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has approved Shell International Plc's proposal to divest its onshore assets to Renaissance in a transaction valued at $1.3 billion.
According to high-ranking government officials, this transaction involves the sale of Shell's 75-year-old onshore assets to Renaissance, a consortium comprised of four exploration and production firms in Nigeria as well as an international energy entity. The regulatory commission has granted the requisite approval in accordance with the provisions of the Petroleum Industry Act (PIA).
If finalized, this agreement is anticipated to enhance Nigeria's oil output, increase government revenue from petroleum, strengthen the naira, and expedite the government's initiatives for gas development.
However, the deal still awaits the final endorsement from President Bola Tinubu, who also serves as the minister of petroleum resources.
"NUPRC has sanctioned the sale and forwarded the recommendation to the minister of petroleum for his approval. The matter is currently with the minister. All subsequent actions are contingent upon his consent," stated a senior government official.
Another official noted, "As you are aware, the minister, who also holds the presidency, has been abroad. Since the minister has not yet provided his approval, all subsequent actions, including statutory payments, are pending his consent."
Shell, a British energy leader, has been a pioneer in Nigeria's oil and gas sector since the 1930s. The company has faced challenges over the years, including numerous onshore oil spills due to theft, sabotage, and operational difficulties, resulting in expensive repairs and notable legal disputes.
In January, Shell announced it had reached an agreement to sell its onshore assets in the Niger Delta to Renaissance, shifting its focus towards deepwater and integrated gas investments.
The purchaser, known as the Renaissance consortium, includes ND Western, Aradel Energy, First E&P, and Waltersmith, all of which are local companies engaged in oil exploration and production, along with Petrolin, a trading and investment firm based in Switzerland.
According to sources, Shell executives have committed to facilitating the rapid development of Bonga assets, enhancing oil production, and expediting the government's gas development initiatives, contingent upon the successful completion of the Shell/Renaissance agreement.
"They are prepared to invest $7 billion to advance Bonga and aim to assist local operators in increasing production by an additional 300,000 to 500,000 barrels per day within three years. They also intend to establish a partnership to ensure the swift execution of the gas component of the agreement for the benefit of Nigeria," a senior government source informed BusinessDay.
Attempts to contact Olaide Shonola, the head of public affairs at NUPRC, through calls or messages were unsuccessful at the time of this report.
Potential Impact on Bonga
The recent agreement is expected to revitalize Nigeria’s oil and gas industry, prompting experts to analyze its possible effects on the production and development strategies of the Bonga field.
Bonga, recognized as Nigeria’s inaugural deepwater oil field, currently has a production capacity of 225,000 barrels per day (bpd) of crude oil and 150 million standard cubic feet (scf) of gas daily, which supplies the Nigeria Liquefied Natural Gas (NLNG) facility located in Bonny.
The anticipated development of Bonga Southwest was projected to contribute approximately 1 billion barrels to Nigeria’s oil reserves. Shell had indicated plans to execute the Bonga Southwest project in three phases, with an overall potential output of 3.2 billion barrels.
The field's production was considered a key element in Nigeria's strategy to elevate its output to around 3 million bpd by 2023, as stated by officials from the Nigerian National Petroleum Company (NNPC).
Despite being a producer of high-quality light sweet crude oil, Nigeria has experienced a significant decline in production, reaching multi-decade lows due to various operational, technical, and sabotage challenges.
Currently, Nigeria has the capacity to produce approximately 2.2 million bpd of crude and condensate; however, output was reported to be around 1.3 million bpd in July 2024, according to estimates from the NUPRC.
The estimated cost for developing the Bonga Southwest project is $10 billion, as per the NNPC, which holds the concession for the field.
Most of the resources from Bonga Southwest are situated in OML 118, but the project also encompasses OMLs 132 and 140, which are operated by the American company Chevron, where it is referred to as Aparo. Other stakeholders in the initiative include France’s TotalEnergies and Italy’s Eni.
Assets earmarked for divestment
The recent agreement is anticipated to rejuvenate Nigeria's oil and gas sector, leading experts to evaluate its potential impacts on the production and development strategies associated with the Bonga field.
As Nigeria's first deepwater oil field, Bonga currently has a production capacity of 225,000 barrels per day (bpd) of crude oil and 150 million standard cubic feet (scf) of gas each day, which supports the Nigeria Liquefied Natural Gas (NLNG) facility located in Bonny.
The development of Bonga Southwest is projected to add approximately 1 billion barrels to Nigeria's oil reserves. Shell has previously outlined plans to progress the Bonga Southwest project in three phases, with an overall potential yield of 3.2 billion barrels.
The production from this field is a crucial element in Nigeria's strategy to increase its output to around 3 million bpd by 2023, as indicated by officials from the Nigerian National Petroleum Company (NNPC).
Despite being a producer of high-quality light sweet crude oil, Nigeria has faced a notable decline in production, reaching levels not seen in decades due to various operational, technical, and sabotage issues.
While Nigeria has the capability to produce about 2.2 million bpd of crude and condensate, output was reported to be approximately 1.3 million bpd in July 2024, according to estimates from the NUPRC.
The projected cost for developing Bonga Southwest is around $10 billion, based on assessments from NNPC, with most resources located in OML 118, extending into OMLs 132 and 140, which are managed by Chevron. Other participants in the project include TotalEnergies from France and Eni from Italy.
Indigenous businesses' success
The Renaissance consortium consists of some of the most esteemed upstream companies in Nigeria, all of which have proven expertise in redeveloping mature assets within the Niger Delta region.
Each shareholder of Renaissance has shown a strong capability to operate effectively in Nigeria while enhancing domestic value creation.
Aradel Holdings has developed a comprehensive oil, gas, and refining operation centered around Ogbele, which has seen continuous growth over the years.
Similarly, Waltersmith operates the producing Ibigwe marginal field and the Ibigwe modular refinery. First E&P successfully launched the Anyala-Madu shallow water hub in 2020 and is collaborating with Dangote to achieve first oil production at the Kalaekule Field in the near future.
Implications for Nigeria's Natural Gas Aspirations
Nigeria is currently experiencing a gas supply deficit that needs to be resolved in order to achieve the goals of the 'Decade of Gas.' This initiative aims to enhance gas utilization and foster a more sustainable gas-based economy that promotes industrial growth.
As Nigeria endeavors to increase its gas production, processing, and distribution capabilities, Renaissance is poised to play a vital role in the nation's gas monetization strategy, serving as an essential partner for both public and private sector entities looking to expand the gas value chain.
In this context, the appointment of Tony Attah, a former Shell executive and the managing director/CEO of Nigeria LNG for over five years, as Renaissance's inaugural MD/CEO is of considerable importance.