Back to top

Image: Bigstock

Shell's Nigerian Onshore Asset Sale Faces Regulatory Hurdles

Read MoreHide Full Article

Shell plc (SHEL - Free Report) is facing challenges in its efforts to divest its stake in the Shell Petroleum Development Company of Nigeria Limited to Renaissance. The Nigerian Upstream Petroleum Regulatory Commission (“NUPRC”) has rejected Shell International’s proposal to sell its onshore assets in Nigeria to Renaissance.

The deal was valued at $2.4 billion during the time of the announcement. However, the value has reportedly dropped to $1.3 billion at present.

Per the Petroleum Industry Act, the regulatory commission’s approval is required to proceed with the transaction. However, the rejection by NUPRC poses a challenge for Shell and also raises concern regarding the International Oil Companies' future asset sale in the country.

NUPRC’s Rejection & Divestment Framework

The reason behind the deal’s rejection was the doubts regarding the buyer’s ability to manage the assets (that were put up for sale by Shell). The NUPRC had put forward a divestment framework in April 2024. The framework was to assess the applications seeking ministerial approval for the sale of Shell’s onshore assets.

The framework evaluates several aspects, including the buyer’s technological capabilities and financial strength. The framework also covers the legal aspects of the transaction, decommissioning and abandonment procedures, and data repatriation requirements. It also requires the buyer to account for any environmental damage related to its long-term operations in the region, maintain labor and industrial relations, and demonstrate a commitment to build trust with the host communities.

NUPRC has highlighted that Renaissance must demonstrate its capability to manage the assets put up for sale. Renaissance is a consortium of local companies, which include ND Western Limited, Aradel Holdings Plc, the Petrolin Group, FIRST Exploration and Petroleum Development Company Limited, and Waltersmith Group.

Further Challenges for Shell

The transaction was further complicated because the British oil major’s onshore assets are part of a legal dispute between Shell and local firm Global Gas and Refining Limited. The local company has sought a court injunction, which, if implemented, will pose further challenges for Shell. The injuction could prevent the NUPRC from approving the sale of the assets due to unresolved issues between the two companies regarding contractual terms and responsibilities.

Shell has stated that it is not selling its onshore assets directly to Renaissance. The transaction involves a transfer of shares, which means that it will only transfer the ownership of the assets to Renaissance.  

The sale of Shell’s Nigerian onshore assets has also been scrutinized by non-governmental organizations (NGOs) and environmentalists. This raises concern about the transaction even further.

SHEL’s Zacks Rank and Key Picks

Currently, SHEL carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are SM Energy (SM - Free Report) , TechnipFMC plc (FTI - Free Report) and MPLX LP (MPLX - Free Report) . SM Energy presently sports a Zacks Rank #1 (Strong Buy), while TechnipFMC and MPLX carry a Zacks Rank #2 (Buy) each. You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy is an upstream energy firm operating in the prolific Midland Basin and the South Texas regions. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.

TechnipFMC is a leading manufacturer and supplier of products, services and fully integrated technology solutions for the energy industry. The company’s total backlog witnessed a record high of $13.9 million in the second quarter of 2024, indicating a year-over-year increase of 4.51%. This growing backlog ensures strong revenue growth for FTI in the future.

MPLX LP owns and operates a wide range of midstream assets. The partnership's midstream assets include oil and natural gas gathering systems and transportation pipelines for crude, natural gas and refined petroleum products. MPLX is least exposed to commodity price fluctuations as it generates stable fee-based revenues. Furthermore, it surpasses its industry peers in terms of distribution yield, reflecting its commitment to returning capital to its unitholders.


See More Zacks Research for These Tickers


Pick one free report - opportunity may be withdrawn at any time


TechnipFMC plc (FTI) - free report >>

SM Energy Company (SM) - free report >>

MPLX LP (MPLX) - free report >>

Shell PLC Unsponsored ADR (SHEL) - free report >>

Published in