Shell sells stake in Nigerian oil field for $600m

Business Day

9 May 2011

Shell sells stake in Nigerian oil field for $600m .

Royal Dutch Shell, France’s Total and Eni sold a 45 percent stake in a Nigerian oil block to a Polish-Nigerian consortium, Kulczyk Oil, a partner in the consortium said late on Friday.

The price paid by the consortium consisting of Kulczyk Oil and Nest Oil, Aries and VP Global, was not disclosed, but a source on Thursday said the deal was worth $600 million.

Kulczyk Oil said in a statement it has acquired 9 percent of the OML 42 block, a stake which could produce 11.5 million to 46.4 million barrels of oil equivalent.

“Kulczyk Oil believes these estimates are cautious because they do not take into account significant volumes of gas,” the statement said.

The transaction is subject to a number of approvals, including permission from Nigerian National Petroleum Corporation (NNPC), which owns the remaining 55 percent of the block.

Kulczyk Oil and Shell declined to comment, as did Eni SpA (E) and Total SA (TOT), the two other minority partners in the block. An official at Nest Oil couldn’t immediately comment while the NNPC spokesman couldn’t be reached.

The block’s stake had previously attracted reported bids of $400 million. But valuations appear to have increased after international oil prices stabilised at a high level and Nigeria emerged as a safe haven when compared with the turbulent Arab world.

As it focuses on its largest assets, Shell has already divested other Nigerian interests, including to indigenous Nigerian companies.

But the winning bid also takes local participation one step further by giving a direct stake to communities. Many have long complained of not benefiting from oil fields and instead of suffering from their pollution, which has triggered attacks and violent protests against the oil industry.

The block will be partly owned by VP Global, a partnership company in which the local community has equity interest, the IYC president said.

“The logic in this partnership is to have local experts with longstanding technical and management experience in oil industry to hold special interest and represent community on the board and help advise community professionally on its business interest,” he said.

Under a proposal made by the IYC, each community member will get a share--with the right to vote and dividends--in the community company.

Kuromiema said VP Global had already signed memoranda of understanding with communities for them to be part of the acquisition.

The government has already mulled proposals to give locals some ownership in oil fields. But in the absence of concrete legislation, Kuromiema has previously said the IYC was pushing for market-driven initiatives.

Kulczyk Oil Ventures Inc., formerly Loon Energy Inc., is an international oil and gas exploration and development company with projects in Southeast Asia (Brunei), the Middle East (Syria) and south-central Europe (Slovenia).