Shell said Tuesday that it had agreed to sell its onshore oil and gas business in Nigeria to a group dominated by local companies for $1.3 billion.
The transaction is an effort by Europe’s largest energy company to reduce its risks in the country that is Africa’s largest oil producer. Nigeria has long been a cornerstone for Shell, but also the source of a damaging legal and environmental legacy.
Specifically, Shell said it would sell its Nigerian subsidiary, which owns 30 percent of a joint venture that operates a vast maze of wells and pipelines and other installations in the swampy Niger Delta. Other partners in the joint venture include Nigeria’s state oil company, which has a 55 percent stake, and France’s TotalEnergies.
Shell will continue its offshore energy drilling in Nigeria, as well as its liquefied natural gas operations there.
Shell has long been considered the most important energy producer in Nigeria, and so its willingness to dispose of a longstanding business could add to doubts about the country’s future as an oil and gas producer.
Over the last decade, Nigeria’s oil production has declined by about 40 percent because of lack of investment and management problems. Reflecting this slippage, OPEC in November trimmed Nigeria’s production quota by about 200,000 barrels a day to 1.5 million barrels a day.
Zoe Yujnovich, Shell’s director for production, said the company’s aim was “simplifying our portfolio.” She also said in a statement that Shell wanted to focus its future investment in Nigeria on offshore drilling and liquefied natural gas, a business in which Shell is a global leader.
Offshore operations are also much easier to protect from the piracy and other problems that have plagued oil production in Nigeria.
Shell’s onshore oil business in Nigeria dates back more than 60 years. Once a promising and productive part of Shell’s operations, it has also resulted in a series of lawsuits over oil spills and harm to local people.
The move raises issues of whether the company is trying to avoid future responsibility for past actions.
“They are selling their decrepit infrastructure to local companies and leaving local communities in a state of environmental disaster,” said Daniel Leader, a partner in the London-based law firm Leigh Day, which has represented Nigerian communities in cases against Shell.
Shell said that the buyers would be “accountable” for the Shell subsidiary’s share of “commitments” and for “remediation” of past spills.
The prospective buyers of Shell’s business are a consortium called Renaissance Africa Energy. It consists of four Nigerian companies and a small international company. The buyers will be the operator or manager of the joint venture.
The transaction seems unusually complex. Shell says it will receive $1.3 billion and that there could be other payments, up to an additional $1.1 billion. It estimated the book value of the Nigerian subsidiary at $2.8 billion. The company is providing loans and other funds of up to $2.5 billion to help the buyers finance the transaction and to bolster continued operations at the joint venture.