Shell &Co Look Forward To Earning $2.5Billion+ From Nigerian Lease Sale - Africa’s premier report on the oil, gas and energy landscape.

Shell &Co Look Forward To Earning $2.5Billion+ From Nigerian Lease Sale

Shell

Shell has put a value of between $1.5Billion and $2.9Billion on the equity of the three European partners in the Oil Mining Lease (OML) 29, the most prized asset in the ongoing sale of four onshore acreages in Eastern Nigeria. The three others on the auction block: OMLs 18, 25 and 29, are each valued between $500MM and $1Billion. Shell, ENI and TOTAL, all European majors, are selling their 45% ownership of the acreages.

About 20 companies and consortia remain in the running to buy out the majors in these four producing acreages.

OML 29 comes with the NCTL –the Nembe Creek Trunk Line (see map)- but some of the bidders dismiss it as of little value. “The NCTL is problematic all of its own”, one company says; this is a relatively new (about two years old) crude transport pipeline that has been so vandalized it has 500 holes along its 97 kilometre extent. Some of the bidders are working on alternative crude transportation route if they succeed in winning OML 29, which has a current crude oil production of 56,000Barrels of Oil Per day from five fields and 40Million standard cubic feet per day (MMscf/d) of gas, evacuated via the NCTL to the Shell export hub. OML 29 holds the iconic Oloibiri field, site of the country’s first discovery, as well as the large sized Nembe Creek field, and the Santa Barbara and Odeama Creek fields.

OML 25 produces 33,000BOPD and 2MMscf/d of gas from one field; OML 24 delivers 25,000BOPD from three fields and outputs 8MMscf/d of gas. OML 18 delivers 21,000BOPD from six fields and 12MMscf/d of gas.

“No one is likely to bid anywhere close to $2.2Billion for OML 29, says a financial analyst consulting for one of the bidding companies. “Any company offering a bid close to Shell’s expectation will create an imbalance in the market”, he argues. “You should remember OML 30”, he says, recalling Conoil’s $1Billion bid for that asset which forced the asset price to go up. (Conoil eventually pulled out, but Shoreline Resources coughed up $830Million to buy the acreage). But these high offers have prevailed; Oando is still trying to pay for its 1.8Billion buy out of Conoco Phillips’ 25,000BOPD assets in Nigeria. Brittania U’s $1.6Billion bid for Chevron’s three Eastern Nigerian acreages are cases in point.

The competing entities, all Nigerian owned, are to submit their final bids by February 18, 2014.  It would be the third of a series of sale of the partners’ stakes in assets located onshore Niger Delta. Shell and Co have sold equities in eight acreages for a total cash haul of $2.72 Billion between 2010 and 2013.

The process of divestment of these four acreages goes back to June 2013, when Shell discretely intimated some Nigerian indigenous companies of its plans to divest from several unnamed Eastern Nigerian onshore licences. In no time, the list of bidders, which initially included such ‘usual suspects’ as Sapetro, ND Western, and Seplat, had ballooned to 100. “There were so many consortia of all sorts”, joked Sam Ajibua, an Africa oil M&A analyst based in Johannesburg. Three months later, when the Anglo Dutch major named the acreages, industry’s attention was focused on the ongoing sale of Chevron’s stakes in three onshore assets in the same neighbourhood. Chevron wrapped up the divestment from OMLs 52, 53 and 55, in early November, with the winning bids going to Seplat, Amni, and Belema Limited. Now, everyone’s attention has returned to OMLs 18, 24, 25 and 29.

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