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Financial Times: Shell looks to sell two Nigerian oil licences

By Dino Mahtani in London and Matthew Green in Lagos
Published: November 29 2007 02:00 | Last updated: November 29 2007 02:00

Royal Dutch Shell is privately negotiating the sale of its stake in two offshore oil licences in Nigeria, with China’s state-controlled offshore company and Nigeria’s largest fuel retailer among the front-runners for the acquisition.

Sources familiar with the situation said CNOOC, China’s leading offshore producer, and African Petroleum, controlled by one of Nigeria’s top business oligarchs, were considering making bids for the acreage that could reach up to $1bn (£483m).

The two oil licences are operated by Eni, the Italian multinational, which holds a majority stake, with Shell holding the remaining 49.8 per cent equity. Eni’s share of production in one licence is 12,000 barrels a day. The other licence is still in its exploration phase.

The interest shown by CNOOC is part of a wider move by China to acquire oil assets in Africa, although it is unclear whether China will succeed in winning this deal. Last year, CNOOC funded its most expensive acquisition to date, with a $2.7bn payment for a share in a Nigerian oil block that was negotiated behind closed doors.

African Petroleum is controlled by Femi Otedola, who acquired a controlling stake in that company this year and has been involved in other business deals with politically-connected Nigerian conglomerates that have acquired other oil licences and the state-owned telephone company.

The negotiations for the two offshore blocks come in the wake of Shell’s announcement this month that it was ready to reorganise its Nigerian business units due to escalating costs and security troubles in the Niger Delta region.

Shell has historically been the main foreign oil producer in Nigeria, where it books a significant portion of its reserves but has lost significant revenues there since last year when militant attacks on oil facilities led to a halving of Nigerian output.

Analysts said the decision to divest two of its offshore blocks, which, unlike onshore blocks, are not vulnerable to militant attacks, suggested the company was probably considering a wider disinvestment policy in Nigeria as it looks to focus on other projects round the world.

The Nigerian government is also considering tightening the terms on some of the offshore licences operated by Shell and other multinationals.

Officials from the Nigerian oil ministry said they were not aware of the talks and said any deal would be subject to approval by Nigeria’s new president, Umaru Yar’Adua, who is facing political pressure to distance himself from allies of his predecessor, Olusegun Obasanjo.

Mr Obasanjo was instrumental in escalating SinoNigerian relations, and is widely seen as being a political patron of Mr Otedola.

Copyright The Financial Times Limited 2007

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