Shell on brink of announcing multi-billion pound sale of four onshore oil …

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Shell has taken a major step towards announcing the multi-billion pound sale of four onshore oil blocks in Nigeria, after wrapping up key sales and purchase agreements.Its Nigerian joint venture SPDC has put pen to paper on two blocks, while the buyers are on the verge of proving that they have the funding, industry sources with knowledge of the deals said.

That leaves government approval as the only hurdle to clear before SPDC – a partnership between Shell, Total, Eni and the government – can formally announce the deals.

Sale: Shell has taken a major step towards announcing the multi-billion pound sale of four onshore oil blocks in Nigeria

Sales and purchase agreements on two more blocks are ‘imminent’, said one source, without offering any update on the parallel sale of the Nembe Creek pipeline.

The asset disposals, set to be worth at least £2billion, form part of a planned £9billion of sales over two years, as new boss Ben van Beurden reins in costs and focuses on the best performing projects.

While Shell (23p lower at 2376p) sees its Nigerian offshore development as a prized asset, onshore operations have been hampered by spills, hurting both the company’s finances and its reputation.

The spills are mostly caused by thieves tapping into pipelines – known as ‘bunkering’ – but Shell has struggled to convince critics that it is solving the problem or cleaning up spills fast enough.

Its difficulties have encouraged the company to divest some of its oil blocks in the West African country. ‘We have signed sales and purchase agreements for some of the oil mining leases but not all that we are seeking to divest,’ said an SPDC spokesman.

‘In the event of a successful completion of the sales process we shall make a market announcement,’ he added.

The company has begun consulting staff who would be affected by the sales but stressed that it would ‘continue to have a significant onshore presence in oil and gas’.

The Nigerian government has encouraged greater ownership by indigenous firms, who analysts say are likely to suffer less from bunkering due to their smaller scale and local connections.

This has encouraged a flood of bids from small explorers, with Shell finance chief Simon Henry saying earlier this year that the firm received more than 100 early-stage offers.

Nigerian-led oil traders Aiteo and Taleveras are thought to have won the race for the largest block, OML 29, beating off competition from fellow local firm Seplat Petroleum.
Seplat, which listed in London earlier this year, was also outbid on block OML 24 by US-based Pan Ocean Energy.

Dangote Group, headed by Africa’s richest man Aliko Dangote, leads one of the few Nigerian-only consortia with the financial firepower for the auction.

But another source said he was outmuscled on block OML 18 by Canadian firm Mart Resources.

Swiss-based commodities firm Glencore expressed initial interest in a foray into Nigerian oil but dropped out of the race months ago. Shell owns 30 per cent of the blocks, with its Western partners in SPDC, Total and Eni, holding 10 per cent and 5 per cent respectively. The Nigerian government owns a majority 55 per cent stake.

The sale of the four oilfields is expected to raise at least £2billion for SPDC, amid fierce competition for the assets. A separate source with knowledge of the bidding process said: ‘They [winning bidders] have paid massively over the odds.’

Independent oil analyst Malcolm Graham-Wood said local firms managing fewer assets would be better protected from the oil theft epidemic.

‘It’s made for companies that can develop smaller prospects and not have the same problem,’ he said.

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