Shell Eyes Asset Sales in Nigeria

LONDON (THE WALL STREET JOURNAL via Dow Jones), Dec. 21, 2009

Royal Dutch Shell is seeking buyers for 10 of its Nigerian onshore oil-production assets following years of militant attacks on its facilities, people familiar with the matter said Sunday.

The oil fields have a market value of $4 billion to $5 billion and represent proven oil reserves of about 100 million barrels, one of the people said. The Anglo-Dutch company, for decades Nigeria's biggest foreign oil operator by production, is looking to dispose of the blocks in the first and second quarters.

The move marks a capitulation of sorts for Shell. The company has borne the brunt of militant attacks over the past four years at its Nigerian onshore facilities, at a loss of hundreds of millions of dollars in profit since 2006. Nigeria has Africa's biggest proven oil and natural-gas reserves.

"I think one can say that Shell is looking to throw in the towel for its onshore Nigeria operations to focus on the offshore, where it doesn't have the problems it has onshore," one of the people said.

A Shell spokesman declined to comment.

A Nigerian oil-ministry official said Shell had informed it of its plans to sell the onshore blocks. Nigerian oil officials have said in recent weeks that Chinese state-run oil companies are among a number of entities aiming to boost their production presence in the country.

It was unclear whether Shell was looking to leave Nigeria's onshore area altogether.

Shell's move wouldn't affect its natural-gas export business in Nigeria, one of the people said. The company has a 26% stake in Nigeria Liquefied Natural Gas Ltd., which ships gas to Europe and the U.S.

Shell's move comes as the Nigerian government is looking to toughen the financial terms it offers foreign operators. Some analysts say the terms, contained in proposed legislation that has yet to be approved by Nigerian policy makers, could hurt investment in the country.

Shell Petroleum Development Co., the company's joint venture with the Nigerian government, produced an average 850,000 barrels of oil equivalent a day last year, well below the one million barrels a day in total capacity, according to the company.

Much of the annual growth in Nigeria's annual oil-production capacity comes from its prized offshore waters, where many platforms are out of reach of militants. Shell's Bonga offshore project was Nigeria's first major deep-water project, starting operations in 2005.

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