01 April 2014, Abuja/London – Nigerian firms Taleveras and Aiteo have made the highest bid of $2.85 billion for the biggest of four Shell assets up for sale, but the oil major is holding out while it tries to persuade them to team up with Seplat, an existing operator.
Several oil industry sources told Reuters that, although there is little doubt the duo can raise cash for the block, Shell is concerned about the reputational risk of selling it to two exporters of crude and importers of gasoline that have no previous experience in running producing oil assets.
Shell is divesting its 30 percent stake in four Nigerian oil blocks, with France’s Total and Italy’s Eni also set to profit from their 10 percent and 5 percent shares. The Nigerian National Petroleum Corporation (NNPC) owns the remaining 55 percent.
As well as being an existing operator, Seplat is set to list its shares in London and Lagos next month.
Shell declined to comment. Taleveras, Aiteo and Seplat did not respond to requests for comment. Bidders are bound by confidentiality clauses.
Winners are expected to be announced next month.
Choosing the right buyer, rather than the highest bidder, can be crucial to securing sales, in a country where political influence can decide deals and legal disputes or financial problems can scupper them.
“Taleveras is resisting because it wants the block for itself, not in partnership with Seplat,” one source said.
The sources also said Africa’s richest man Aliko Dangote, with a personal fortune of $20 billion, and local firm Sahara Energy, had bid for the other three blocks, OMLs 18, 24 and 25, and were in late-stage talks for at least one of them.
Neither Dangote nor Sahara responded to requests for comment. Dangote, who owns two power plants and several cement factories, is more interested in the gas, two sources said. The blocks between them have more than 1.5 trillion standard cubic feet (scf) of gas, they said.
The Nigerian sales are part of a wider plan by Shell to dispose of $15 billion of assets this year and next, in order to slim down operations after a profit warning.
Commodity trader Glencore said this month it was interested in the assets. Sources said it had since backed away. Glencore officials declined to comment.
Shell faces a dilemma: sit tight and try to force a marriage between Seplat and the other two, or dispose of the block and face the criticism that it did not do so to a proper operator.
There is high demand for assets in the Niger Delta, which holds a large portion of Nigeria’s 37 billion barrels of oil reserves. The oil is high-quality, relatively easy to drill, and some Nigerian companies have said they can better handle the security challenges faced by oil majors.
Consensus estimates of the value of the combined 45 percent stake in all four blocks are around $3 billion, showing how asset values are being inflated by a scramble among Nigeria’s increasingly wealthy elites, analysts say.
But deals are fraught with pitfalls. U.S. energy company Chevron is embroiled in a legal battle over its own sale of three Niger Delta blocks. ConocoPhillips has been trying to close a $1.79 billion deal for over a year with Nigerian buyer Oando, although Oando says it has now raised the finance.
*Joe Brock; Tim Cocks; & Dale Hudson – Reuters