Vantage | Why Shell is ending its troubled relationship with Nigeria

Nigeria, the economic powerhouse of Africa and a former British colony, is on the brink of economic decolonisation as Shell, the second-largest oil company globally, prepares to sell its onshore oil drilling business. After almost 90 years of operation, Shell is divesting its assets for a substantial upfront payment of $1.3 billion and additional payments totalling $1.1 billion.

The deal encompasses various assets, including existing facilities and 18 oil mining leases, with estimated reserves of approximately 458 million barrels of oil equivalent. The financial implications are significant, translating to a substantial sum far exceeding the selling price. Shell’s decision to exit its onshore business in Nigeria is rooted in the numerous challenges it has faced over the years. Major oil spills in 2008 led to legal battles where locals sued Shell for millions of dollars. The company paid claimants $83 million in 2015 and an additional $110 million in 2021. The United Nations has also pressed Shell to address environmental damage, projecting a cleanup process lasting 30 years and costing over a billion dollars. Local environmental groups have actively pursued lawsuits against Shell for both major and minor spills, the latter often resulting from theft. Frequent incidents of oil theft have led to smaller spills, compelling Shell to engage in continuous cleanup efforts. The company also faces sabotage attempts by locals seeking wealth-sharing and reparations for damages caused. The relentless challenges prompted Shell to seek an exit from its onshore business for the past two years. The company has found buyers in a consortium of five companies, four of which are local firms, ensuring more of the oil wealth remains within Nigeria. However, the consortium will inherit the responsibility of addressing the environmental mess left behind by Shell. Future operations While Shell bids farewell to onshore drilling in Nigeria, it will maintain its presence in the country. The company will continue operating in the deep sea, particularly in the Gulf of Guinea, where mining is more profitable and less susceptible to theft or sabotage. Shell also retains other businesses in Nigeria, including a gas supply firm, a solar power unit and stakes in liquefied natural gas. With the impending sale of its onshore business, Shell is set to resolve a major problem that has plagued both the company and local communities in Nigeria. The approval from the Nigerian government is the final step, signaling the end of a troubled relationship and the beginning of a new chapter for Shell and the economic powerhouse of Africa. Views expressed in the above piece are personal and solely that of the author. They do not necessarily reflect Firstpost’s views. Read all the Latest News , Trending News , Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.