LONDON/LAGOS, June 21 (Reuters) - Royal Dutch/Shell is considering a further reduction in its oil production in the eastern Niger Delta, where decades of spills and oil thefts have damaged the region’s environment and the reputation of the company.
Nigeria’s government wants more of its oil and gas owned either by the state oil company or local firms, raising concerns among foreign oil majors they may lose smaller assets for nothing if they don’t sell now, industry experts say.
Shell’s Nigerian subsidiary, the Shell Petroleum Development Co. of Nigeria Ltd. (SPDC), announced a strategic review of its business on Friday, saying it would consult with its international and Nigerian partners over the future of the 28 leases that produce some 750,000 barrels a day of oil.
Shell has already sold eight Niger Delta licences for a total $1.8 billion since 2010. Earlier this week U.S.-based Chevron Corp said it would sell five Nigerian shallow-water oil blocks.
Foreign oil companies have suffered from widespread oil theft and at-times difficult relationships with local communities, driving up the costs of operating there, while a long-delayed energy bill is stuck in parliament, adding to industry uncertainty.
Shell’s review of its Niger Delta oil licences came alongside a decision to go ahead with two other investments in the west African country - the Trans-Niger Pipeline loop-line (TNPL) and Phase Two of the Gbaran-Ubie gas project, which together will cost around $3.9 billion.
The pipeline investment is aimed at better protecting it against the thefts and sabotage it suffers. As recently as Thursday this week, Shell shut the Trans-Niger Pipeline after an explosion and fire at what it called a “crude oil theft point”.
The Gbaran-Ubie gas project is slated to maintain supplies to the Nigeria Liquefied Natural Gas plant and to the Gbaran-Ubie power plant.
SPDC Managing Director, Mutiu Sunmonu said: “Today’s announcements demonstrate our long term commitment to Nigeria by clearly signalling our intent for the strategic direction of Shell in Nigeria.”