Glencore Xstrata Might Snap Up Shell's Nigerian Assets

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Written by Richard Finlayson, Senior International Editor for Industrial Info Resources (Sugar Land, Texas)--As far back as 2009, Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) was reported to be looking for buyers for its Nigerian onshore oil assets. This followed a long period of attacks by militant groups on its facilities. Now, Glencore Xstrata (LSE:GLEN.L) (Baar, Switzerland), a commodities and mining major, is said to be interested in acquiring Shell's Nigerian assets.

Shell Petroleum Development Company, Shell's local subsidiary, is the operator of a joint venture (JV), in which state-owned Nigerian National Petroleum Corporation (NNPC) holds a 55% stake, Shell 30%, Total S.A. (NYSE:TOT) (Paris, France) 10% and Eni SpA (NYSE:E) (Rome, Italy) 5%.

Total and Eni also are selling their stakes, which are estimated to be worth a combined $3 billion. Shell will sell the 97-kilometer Nembe Creek pipeline.

The withdrawal from Nigeria by the three companies has been driven by militant attacks and a spate of court cases, which have made the operating environment difficult.

Shell has been blamed by local inhabitants for oil spills and the resulting environmental damage, which, in turn, has spurred the militant groups to attack the oil installations.

If the Glencore Xstrata acquisition goes ahead, the assets, which are valued at around $5 billion, are unlikely to fetch that figure because of the attacks, which have cost Shell many millions of dollars in profits since 2006.

For related information, see March 6, 2014, article - Glencore Xstrata Suffers Weak Commodity Prices in 2013, but Sees Progress Ahead for Projects, and June 25, 2013, article - Shell Joint Venture Invests $3.9 Billion to Secure Nigerian Oil & Gas Supplies.

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