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Shell says asset disposal not exit strategy

By Bassey Udo

April 4, 2011 11:32AM

Shell Petroleum Development Company (SPDC) of Nigeria Limited at the weekend declared that its decision to dispose of some of its marginal acreages in Nigeria to some indigenous exploration and production operating companies should not be construed to mean a grand plan to leave the country in the near future.

The company has already offered to dispose of about four of its onshore oil blocks located in oil mining leases (OMLs) 30, 34, 40 and 42, reputed to hold a combined reserves of about 2 billion barrels of crude, as part of its strategic plan to reduce the scope of its onshore operations in the Niger Delta region as a result of increase of attacks on its facilities.

The company’s Managing Director/ Country Chairman, Mutiu Sunmonu (right), told NEXT at the formal sealing of a sale and purchase agreement (SPA) with Elcrest Exploration and Production Nigeria Limited (Elcrest) for the sale of 45 percent equity in OML 40 in Abuja that the company is not contemplating its exit from Nigeria any time soon. “This (the sale of some of its assets) is not an exit strategy for Shell in Nigeria. What we are doing is consolidating our operations to strengthen even our future in Nigeria. We are in Nigeria for the long haul. Some of these assets are of more value to indigenous companies than the multinationals. The sale of marginal oil fields is an exercise aimed at growing indigenous capacity in the upstream oil and gas industry,” Mr. Sunmonu said.

The agreement with Elcrest, a joint venture company of Starcrest Nigeria Energy Limited and Eland Oil and Gas Limited, both of the Chrome Group, is one of the initial 18 consortia that indicated interest in bidding for the four marginal oil field lined up by the SPDC for sale to indigenous companies with the requisite technical capacity to operate them. Elcrest emerged the winner with an offer of about $154 million. According to the SPDC boss, the SPA for the other three oil blocks is expected to be sealed in the next few weeks following the emergence of Consolidated Oil Limited as preferred bidder for OMLs 30 and 42, with offers of $1.295billion and $700 million respectively, while Niger Delta Petroleum Limited’s bid for OML 34 was not disclosed. Indications are that the company might rake in as much as $2.5billion from the sale of the four acreages. The transaction, which is subject to the final approval of the Nigeria National Petroleum Corporation (NNPC) with controlling stake of 55 percent equity in OML 40, grants Elcrest the right to work with its partners, Starcrest and Eland, in collaborating with the local communities to realize the aspirations of the all stakeholders for a successful development of the resources in the area.

Strategic growth plan

It was gathered that an application for consent has already be dispatched to the NNPC management requesting its permission for the consignors, SPDC and its JV partners, Total E&P Nigeria Limited and Nigerian Agip Oil Company of Nigeria, to go ahead with the assignment of the oil block to Elcrest consortium. “SPDC’s desire is to help grow indigenous companies operating in the country’s oil and gas industry. That is why we have promised to render assistance in whatever form they require within the framework of our agreement to help release the collective aspirations of all stakeholders,” Mr. Sunmonu said.

Chairman, Starcrest Nigeria Energy Limited, Emeka Offor, described the acquisition of equity interest in OML 40 as important to its strategic aspirations to grow the company in line with the Nigerian Content capacity building policy of the Federal Government in the country’s oil and gas industry.

“This acquisition is a cardinal part of the strategic growth plan of Chrome Group as we kick-start the new direction to develop an indigenous oil and gas company in sub-Saharan Africa with a global perspective, and capacity to compete with other operators around the world. We are positioned to champion the cause for local content development in the oil and gas industry in the country,” Mr. Offor said.

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