An era in Nigeria's history of oil exploration is coming to a close with London-headquartered Shell signalling its exit from the West African nation's shores after operating there for 68 years.
The British conglomerate, which started exporting oil from the Niger Delta when the country was still in the throes of being colonised in 1956, announced on January 16 that it is selling off its onshore assets in the region for US $1.3 billion.
The consortium of Nigerian firms buying these onshore assets will pay an additional $1.1 billion against prior receivables and cash balances pertaining to the oil giant's Nigerian operations.
The assets affected by the sale include 18 oil mining leases, which cumulatively account for crude reserves totalling 458 million barrels.
If the number of barrels is multiplied by the current price of crude, the proceeds would be much higher than the price at which Shell is selling the assets.
Multiple lawsuits
So, why would Shell sell such high-value onshore assets at a seemingly giveaway price?
The British oil giant, which is only second to American behemoth ExxonMobil in the global oil and gas industry, has had to deal with a slew of lawsuits over the years.
All of these cases involve the alleged adverse impact of Shell's activities in the Niger Delta, damaging both the livelihood of communities and the region's fragile ecosystem.
The members of the oil-producing communities feel they don't get a fair share of the wealth Shell is extracting from their land.
Some of the lawsuits have resulted in the company paying the host communities millions of dollars in compensation.
In one instance, Shell Petroleum Development Company of Nigeria Ltd was forced to agree to pay $15.9 million to communities and individual claimants in the Niger Delta after a prolonged legal battle that started in 2008.
Four Nigerian farmers had taken Shell to court over oil spills originating in the company's pipelines between 2004 and 2007.
The legal battle culminated in the landmark 2021 judgment by The Hague Court of Appeal, which found Shell liable for pollution caused by the leak of four oil pipelines in the Niger Delta.
Official endorsement
The Nigerian government, whose consent is required for Shell to make a smooth transition, has thrown its weight behind the sale deal, according to the country's junior minister of petroleum resources, Heineken Lokpobiri.
As soon as the announcement was made public, people began speculating about what it meant for the country. Some believe that Shell leaving Nigeria, as some multinationals had previously done, could damage the country's brand equity.
But is that the case? Experts and stakeholders believe Shell's move to sell off its onshore assets is a win-win for it and the indigenous players in the oil and gas industry.
"The truth of the matter is that the IOCs (international oil companies) prefer offshore (situated at sea some distance from shore) to onshore because of fewer challenges," Muhammad Saleh Hassan, chairman of Skymark Energy and Power Ltd, tells TRT Afrika.
"Onshore operations have become more of a liability to the oil giant than an asset. The company is still operating in Nigeria. Just that it is going offshore, as mentioned earlier."
Hassan says he isn't the only one to see Shell's move as an opportunity rather than a setback for the oil and gas sector.
"It will open a window for investors aiming to put their money in Nigerian indigenous oil and gas companies that are coming up, particularly firms like Eroton, Seplat and a few others that have people who learnt their trade in the same IOCs they aim to replace."
Minister Lokpobiri shares this optimistic sentiment, saying that divestment by IOCs in onshore operations will spur profitability and economic stability.
