Nigeria oil enters unclear new era after Shell's onshore asset sale
By MacDonald Dzirutwe and Libby George
LAGOS/LONDON (Reuters) — Shell (LON:SHEL)'s exit from Nigeria's onshore oil sector highlights risks oil majors face in Africa's biggest exporter but has raised hopes that local firms could reverse the output decline from the Niger Delta, industry officials and analysts said.
Shell – which pioneered Nigeria's oil industry – is the most prominent Western company to exit the Delta, a region blighted by pollution, oil theft and pipeline vandalism. Those issues have for years stymied investment – and throttled production and government finances.
The company's sale of its subsidiary to five mostly local firms fits an ongoing trend of Western energy companies divesting onshore Nigerian oil fields. Exxon (NYSE:XOM), Italy's Eni, Norway's Equinor and China's Addax have struck deals to sell assets in the country in recent years.
«Nigeria has had well-established problems in policy in the oil sector, and the FX policy concerns have put constraints on investments. That's probably partially why you have seen the majors pulling out, and disinvesting to some extent,» said Andrew Matheny, senior economist with Goldman Sachs.
«It explains a significant portion of the decline in oil production in recent years.»
President Bola Tinubu took office last May pledging to remove obstacles faced by producers, including ending crude theft and pipeline vandalism. But seven months into his presidency, the asset sales, which were well underway before his election, highlight the inexorable changes to the country's oil sector.
«If companies are now leaving the less capital-intensive onshore operations to focus on offshore operations, it sends a perfect picture of the risk involved in doing business in
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