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Will Shell pull out of Nigeria? Shell, probably the earliest oil major in sub-Saharan Africa, is having second thoughts about its future commitments in Nigeria. The violence and hostage taking in the Delta has, it seems, weakened its resolve to stay on. What are the implications?

Continued violence in the Niger Delta finally appears to have weakened Shell's resolve to focus on its Nigerian operations. Peter Voser, the company's chief executive, said: "Nigeria is still a heartland for Shell, but we no longer depend on it for our growth aspirations. This gives us more flexibility in deciding when and how to develop oil and gas resources in Nigeria."


He added: "We have hardly any projects in our growth prospects which we have made public. There is a lot to actually develop if you want to do so, but the circumstances are not right."

Shell Petroleum Development Company (SPDC) has long been the biggest oil producer in Nigeria but its operations have come under attack from a variety of armed gangs in the Delta. While many sources have reported an improving security situation in the wake of Movement for the Emancipation of the Niger Delta's (MEND's) 2009 ceasefire, bomb attacks, kidnapping and illegal oil bunkering have all continued. Voser said: "Shell staff in Nigeria are doing a great job in this very difficult environment. During 2009, sabotage and attacks on installations of the Shell Petroleum Development Corporation of Nigeria have again reduced production levels."

Ever since Shell announced in January that Nigeria would be a lower priority for its future investment plans, it has come under attack from rebels. Four SPDC workers have been kidnapped and three of the company's flow stations were closed down by a bomb attack on the Trans-Ramos oil pipeline, just one day after MEND formally ended its ceasefire.

Violence in the Delta has repeatedly held up efforts to develop the country's gas reserves, while the lack of gas supplies has postponed the completion of new gas-fired power plants.

Although the Trans-Ramos attack was not carried out by MEND itself, a spokesperson for the group said: "It was certainly a response to our order to resume hostilities by one of the various freelance groups we endorse."

MEND has threatened an "all-out onslaught" against oil industry infrastructure and personnel, although the group is a fairly loose coalition of other militant organisations and it is not clear how many factions are prepared to return to armed struggle.

In addition, many of the pipeline attacks and kidnappings are carried out by gangs with purely criminal rather than political intentions.

Shell divests

It had been reported that Shell hopes to sell stakes in a number of licences in the Niger Delta, with China National Petroleum Corporation (CNPC) among the likely suitors. At the end of January, the company announced that it had sold its 30% equity share in three licences to Maurel & Prom and Seplat Petroleum, which is owned by two Nigerian firms: Platform Petroleum and Shebah Petroleum. Although the licences have production capacity of 50,000 b/d, they have been out of production since 2008 because of pipeline damage.

SPDC's managing director Mutiu Sunmonu commented: "This sale of assets supports the Nigerian government's goal of expanding opportunities for local energy companies. We have been i n Nigeria for more than 50 years and remain committed to doing business here. This transaction should be seen in the context of Shell's active portfolio management of its assets and interests across the world." However, it remains to be seen whether any more substantive assets will be offered for sale.

President Umaru Yar'Adua's continued absence from the country and the associated political paralysis has certainly affected talks between the federal government and the militants. The president has been in King Fahd Hospital in Saudi Arabia receiving treatment for pericarditis, or heart inflammation, since 23 November. Pressure has grown for him to hand over the reins of power, while the apparent leadership vacuum has held up the Niger Delta peace process.

Nevertheless, Emmanuel Egbogah, the special advisor to the President on energy, has announced that there will be a new licensing round for both onshore and offshore acreage later this year.

Again, Chinese companies are believed to be particularly interested in securing assets. Egbogah revealed: "We have been in negotiations with the Chinese since August of last year. There might be a revised offer, but I am not in a position to confirm that."

China National Offshore Oil Corporation (CNOOC) has drawn up a list of licences it hopes to secure, including some that are currently owned by the majors but which are coming up for renewal. Despite the Delta's main problems, interest in Nigerian oil assets remains high.
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Title Annotation:Shell Petroleum Development Company of Nigeria Ltd.
Comment:Will Shell pull out of Nigeria? Shell, probably the earliest oil major in sub-Saharan Africa, is having second thoughts about its future commitments in Nigeria.
Publication:African Business
Date:Mar 1, 2010
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