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/ 83.31.14.* / 2011-10-27 18:17
Shell Nigeria has almost sold off its entire stakes in 10 acreages in the country since 2008.
The first two sold were the company’s non-operated interests in the country’s extensive deepwater terrain.
The remaining eight acreages - located on land and in swamp-and all of which Shell held operating interests, are domiciled in the Delta State of Nigeria.
This is curious, especially if you’re locked on the theory that Shell is selling these properties because they are problematic. And we know that the key problem, in the Niger Delta Basin, is militancy.
Shell Nigeria’s acreage positions span four states of the Federal Republic; Rivers, Bayelsa, Akwa Ibom and Delta.
So, why would Shell choose to divest from Delta State, rather than, say, Bayelsa state? And only Delta state for that matter?.
The company is leaving these acreages as a result of “business exigency”, but how come that all the eight onshore leases the company is walking away from are all contiguous, around the same location?
Shell has said that the sale of these eight, out of a total of 35 operated acreages on the Nigerian shelf, does not mean it is exiting Nigeria entirely. These eight tracts are around 25% of the total number of Shell’s 31 leases under Joint Venture with TOTAL, Agip and the state hydrocarbon company NNPC. (The remaining four(4) tracts are under Production Sharing Contracts).
By any standard, this is quite a large number. But it could be worthwhile to take a look at what the Anglo Dutch major and its European co-travellers, are divesting from.
The Oil Mining Leases(OMLs) 4 38 and 41, which were sold to Seplat Petroleum in January 2010, have in them, such iconic producing fields as Sapele and Oben. The latter, with 937Billion cubic feet of gas, lies at the western end of the much reported OB-OB (Oben-Obrikom) gas pipeline, under consideration for construction, which will link the more industrialized, Western Nigerian gas market to the gas rich Eastern Nigeria.
The OML 34, being sold to the Niger Delta E&P, hosts the storied Utorogu Gas Plant, which is at the heart of Shell’s claim to being the major gas supplier to the country’s thermal electricity generating facilities.
The Odidi Gas Plant, built with over $300Million and commissioned less than 12 years ago, is located in OML 42, one of the last four acreages on the auction block.
Those who say: “Why Delta State?”, need a bit of refresher course in recent Nigerian history. The acreages in Delta State were the site of the most serious damage to Shell operated facilities in the last 15 years. Inter ethnic clashes between Ijaw and the Itshekiri between 1997 and 2000 created much cloudier air of uncertainty in the region than the Ogoni face off with the Nigerian authorities, in the early to mid 90s. Damages were inflicted heavily especially on OML 42, which used to be an economically robust acreage; Facilities constructed to extract oil from promising fields like Egwa, Odidi and Ajuju were heavily destroyed in the low intensity inter ethnic wars. Jones Creek, the site of Nigeria’s first horizontal drilling, was equally battered. Though the field itself had dwindled in production, there were a number of new projects lined up around it, results of new discoveries in the neighbourhood. The Odidi Gas Plant was barely commissioned when it was damaged by marauding throng of angry youth claiming territory. The Movement For Emancipation of the Niger Delta, which announced itself several years later, in 2006, had a lot of learning from this inter ethnic war which shook the foundations of Nigerian Democracy.
Even so, Shell’s assets in Delta state suffered more from the historic bomb blasts of pipelines with which MEND announced itself in 2006. The Trans Forcados Pipeline was hit in three places, including Patani and the mouth of the Forcados River, all in Delta State. This took out 300,000Barrels Of Oil Per Day BOPD-much more than the entire production of Gabon-for at least 18 months. While Shell worked to fix the line, residents along the route helped themselves to crude by doing more damage, cutting the line with hacksaws.
Still there were acreages on sale that are not carrying the scars of battle. What Shell is doing, largely, is portfolio restructuring. The major economic benefit for the company and its partners in places like Oben, Ugheli and Utorogu would have been the gas they were supplying to power plants. The fact that payment by the power utility PHCN weren’t quite forthcoming rendered the acreages less and less attractive. And the difficulty in receiving payment are compounded by bureaucratic headaches that agencies like the NNPC and the Power Holding Company create.
One company who has done this sort of portfolio restructuring, albeit at a much lower scale, is TOTAL . 10 years ago, TOTAL quit OML 57 in the Niger Delta’s western swamp after t