June 26, 2017

Shell Nigeria to sell four onshore oil blocks over crude theft, pipeline vandalism

Shell Nigeria has announced plans to sell off four onshore oil blocks in Nigeria over increasing crude theft, vandalism and oil spills. The company’s inability to renew licenses of some of the fields is also motivating the sales.

A report stated that the blocks are in joint ventures with the Nigerian National Petroleum Corporation – OML 13 and 16 onshore in the Niger Delta, and OML 71 and 72 in shallow waters.

OML 13 and 16 are located in the Ogoniland, a community that has long accused Shell of multiple oil spills and environmental damage.

The report further stated that OML 72 has proven oil reserves of around 120 million barrels, while OML 71 has significantly lower reserves.

Shell has been discussing with the Federal Government, unsuccessfully, renewing its licenses for these oil blocks. According to the report, NNPC owns 55 per cent of the blocks, Shell owns 30 per cent, Total owns 10 per cent and ENI another five.

Both Total and ENI have sold their shares and Sources said Shell has been discussing renewing these licenses with the Federal Government over the years but has yet to reach a deal.

Oil theft and vandalism on pipelines has cost Nigeria $10.9 billion in potential oil revenues between 2009 and 2011, the chairman of the Nigeria Extractive Industries Transparency Initiative (NEITI) said on Tuesday.

Security experts estimate that up to 250,000 barrels per day of crude is stolen in Nigeria, and often with the complicity of officials in the nation.

It is also driving out oil companies. Italian oil company ENI in March shut down its operations in Nigeria. Shell and Chevron are selling off their onshore blocks to reduce the risks of kidnapping, pipeline sabotage and oil teft.

Rolake Akinkugbe, London-based head of oil and gas at Ecobank Research, said, “The move offshore is being viewed as a longer-term solution to the challenges faced onshore and in the shallow waters.

“Due to the increased level of oil theft and disruptions, a number of oil companies have started selling blocks in the troubled areas and moving to deep water offshore blocks.”

James Craig, a Houston-based spokesman, said in July that Chevron is considering a new business plan in turbulent Nigeria.

“The emerging situation brings with it some important challenges to our traditional way of doing business and also provides us some attractive business opportunities. Our commitment to Nigeria remains strong. We have been in Nigeria for over 50 years,” he said.

Shell has sold eight oil leases in three years, but NNPC spokesperson Omar Farouk is choosing to see the silver lining.

He said: “The move to deep offshore by these companies frees up the onshore fields for the local companies to increase their production. It gives room for those who don’t have the capacity for deep offshore to participate in the industry by operating the onshore and shallow water fields.”

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Pilot Africa News is run and edited by Chika Moses. A video journalist eager to find new, great and inspiring content in Nigeria and Africa. Got a story tip? Send a message!