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Shell-led group close to selling Nigeria oilfields for $5bn

Shell-led group close to selling Nigeria oilfields for $5bn
A Royal Dutch Shell-led consortium is close to selling several Nigerian oilfields for about $5bn to domestic buyers, as foreign companies retreat from sub-Saharan Africa’s oldest oil industry.

The price tag for the four oilfields and a key pipeline co-owned by Shell, France’s Total and Eni of Italy has doubled since initial estimates towards the end of last year. The rise highlights the financial muscle of a cluster of Nigerian oil companies that have emerged as prominent players in the country’s hydrocarbon industry.

The sales are the latest move by oil and gas supermajors to reduce their onshore oil presence in Nigeria, in the face of theft and sabotage and long delays to a government bill setting out new terms for operators.

Buyers for the four blocks have been selected, but two bidders are still negotiating their contracts. A deal is expected in the next few weeks, but then all potential buyers will require government approval.

Two people familiar with the situation shared details of the sale that could amount to $5.2bn, but they warned the figure could still change as the companies negotiated the final details.

“It is a lot of money,” said a banker involved in the process. “It is a great display of the strength of the Nigerian indigenous oil industry.”

Nigerian oil traders-cum-producers Taleveras and Aiteo have offered $2.6bn for the largest oilfield, known as Oil Mining Licence 29, according to the people familiar with the situation. The 60-mile Nembe Creek Trunk Line, a key oil transport artery that has been regularly attacked by oil thieves, is being sold as part of this package.

People familiar with the situation added that Pan Ocean Oil Corporation has been selected for oil mining licence 24 for $900m. Eroton, a consortium of Midwest Oil and Gas and Mart Resources, has won OML 18 for about $1.2bn. Crestar has been chosen for OML 25 that is selling for close $500m.

Domestic oil and gas companies have expanded aggressively since 2008 and have bought assets worth $5bn from the world’s biggest energy groups, reshaping Nigeria’s 60-year-old oil industry.

Industry executives believe another $10bn of assets from international companies could be up for grabs in the next few years.

However, some bankers fear bubble-like conditions are emerging in the industry, and that may account for the inflated prices of some these assets.

Foreign banks traditionally facilitated oilfield deals, but this year Nigerian banks have tapped international capital markets to raise long-term dollar financing through bonds and syndicated loans and are using the proceeds to fund local oil companies.

Shell, Total, Eni as well as the US’s Chevron and ConocoPhillips have sold large onshore oilfields to Nigerian players such as Oando, Seplat and Shoreline Natural Resources. The latest sales will feature companies not involved in previous divestment rounds.

Shell said the sale process had not yet concluded. “We have signed sales and purchase agreements for some of the oil mining leases, but not all that we are seeking to divest,” it said. ENI and Total declined to comment.

Shell is selling its 30 per cent stake in four oil blocks, with Total and Eni also set to profit from their 10 per cent and 5 per cent shares respectively. The Nigerian National Petroleum Corporation will keep hold of the remaining 55 per cent..

By Anjli Raval and Javier Blas in London

Financial Times

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