Shell poised to sell four oilfields and a pipeline in Nigeria

Oil Barrels

Shell has struck a deal to sell some of its onshore oil and gas fields in the Niger delta amid rising concern about oil spills, sabotage and industrial-scale theft from Nigerian wells and pipelines of up to 150,000 barrels a day.

Last summer a Shell review flagged the possibility of scaling down operations in Nigeria and the compant is now poised to sell four fields and a pipeline for what some believe could be $5bn (£3bn).

Despite the planned disposals, however, the Anglo-Dutch group still faces legal cases – including one at London's high court – brought by local communities seeking financial redress for pollution.

A company spokesman in London confirmed that an agreement on four oil-mining leases and a pipeline had been reached, but said the process had not yet concluded..

The price tag for the full sale of all four fields and the pipeline was estimated at $5.2bn by two anonymous sources quoted by the FT, but City analysts had presumed in the past that the figure would be nearer $3bn.

Iain Reid, a London-based oil analyst at Bank of Montreal, said van Beurden would please investors if he can sell some of the Delta fields that have been hit by theft and disruption for the higher figure: "If Shell can achieve this sort of price for these assets it will have achieved three objectives: firstly reduced its exposure to troublesome onshore Nigeria, second cut its net capital expenditure spend, and third increased the free cash it can spend on share buybacks and dividends, all of which we believe the market will like."

Shell would only receive a 30% share of any proceeds because it shares the ownership of the assets with the Nigerian National Petroleum Corporation, Total of France and ENI of Italy.

The Anglo-Dutch group, which says it has done its best to clear up pollution and has blamed past oil spills on sabotage, has been trying to reduce its commitment to the troubled area for years but has only now apparently found local buyers willing to pay the prices it has been demanding.

This is partly because the government has offered tax concessions to a crop of local home-grown oil companies such as Oando and Shoreline Natural Resources, which have encouraged them to bid to take control of fields in the Niger delta.

Ben Van Beurden, Shell's new chief executive, who issued a profit warning within days of taking the top job in January, promised to improve the financial performance of the business through asset sales and cutbacks.

He has already taken enormous financial writedowns on a string of assets and disposed of fields and other assets in North America and Australia. Fields in the North Sea are also up for sale.

Shell has yet to abandon other controversial commitments such as the one to drill in the Arctic and its interests in Canada's tar sands but it has generally moved its emphasis away from oil towards the cleaner fuel of gas.

Nigeria has produced almost a quarter of a million barrels of oil equivalents a day for Shell and at least 80,000 barrels would be lost if the four fields are all sold.

A spokesman for the Shell Petroleum Development Company of Nigeria Ltd (SPDC) said it would make a formal market announcement when it had successfully completed the sales process.

But the oil company stressed that it was not abandoning the country. "Nigeria remains an important part of Shell's portfolio, where we will continue to have a significant onshore presence in oil and gas, and which has clear growth potential, particularly in deep-water and onshore gas. Shell has a history of over 50 years in Nigeria and remains committed to the country and to supporting the government of Nigeria in their plans for the oil and gas sector."

Powered by Guardian.co.ukThis article was written by Terry Macalister, for The Guardian on Wednesday 27th August 2014 17.45 Europe/London

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