Shell along with foreign oil major partners, Total and Agip, have agreed to sell their share in four onshore oil blocks which Shell operates in the Niger Delta wetlands but they need ministerial approval.
Deals for the blocks, one of which attracted a bid of over $1 billion, have already been agreed and a 10 per cent deposit paid. These payments triggered a 180-day window for the deals to be completed, the first of which expires at the end of this month, according to sources involved.
The Nigerian National Petroleum Corporation, NNPC, which owns the majority stake in the blocks is however at loggerheads with the buyers because it says its subsidiary will take over from Shell as operator of the fields once the deals are completed.
But some buyers of the blocks are not willing to complete the deals if NNPC is the operator.
A consortium led by Poland’s Kulczk Oil Ventures agreed a deal for Shell’s block OML 42, while independent energy firm Eland Oil, in partnership with Nigeria’s Starcrest, has agreed to buy OML 40. Niger Delta E&P and Petrolin won OML 34 and Conoil, owned by Nigerian billionaire Mike Adenugu, picked up the biggest block OML 30.
According to Reuters, financial backers will not want to lose their initial funding, in one case topping $100 million, while NNPC and Shell will want deals to go through to realise financial returns, so a compromise has to be found.
“The likely scenario is that NNPC becomes the ‘operator’ of the blocks and then farms out the development of the fields to another firm. This could be the buyer of Shell’s share or another contractor and potentially a host of other companies in between,” sources close to the deals told Reuters.
“Just because you’re the ‘operator’ doesn’t mean the guys on the ground will have your logo on their shirt,” a source with one oil company involved in the bidding process also said.
“It would be a disaster for some of these companies if these deals don’t go through and I’m sure a compromise will be made. There might be a few more layers and a bit less money at the end of the line but it will still be nicely profitable,” he added.
It would be recalled that the Minister of Petroleum, Diezani Allison-Madueke, earlier this year signed off operating rights on three other onshore blocks OML 4, 38 and 41.