The Anglo Dutch giant is apparently seeking to reduce its reliance on Nigeria – where it has been operating for 70 years - as a result of the government’s imposition of harsher terms on foreign businesses, due to start next month.
Although Shell’s operations in Nigeria have always been controversial – take the allegations that the firm was involved in the infamous events surrounding the death of Ken Saro-Wiwa in 1995 for example – the country has remained one of the key drivers of growth for Shell for many years. So the announcement marks a major shift in strategy for Shell.
New CEO Peter Voser is apparently keen to rebalance the firm's interests through new ventures in Qatar and the Gulf of Mexico, and to do so by cutting back its efforts in Africa.
Although th sale will still leave Shell with a major presence in Nigeria, the move may be a recognition by the firm’s new management that the cost of Shell’s tense relationship with the powers that be in the country – both reputational and otherwise - is becoming harder and harder to justify. Law suits seem to have become a fact of life on both sides, and Shell is reportedly fed up with the administration’s failure to do anything about ever-increasing levels of oil piracy from its facilities.
So Government plans to toughen up the terms and conditions for foreign firms, and to drive a much harder bargain on the renewal of some key contracts to boot, may have been just the excuse Shell was looking for.
Of course, the flipside to all this is that the Nigerian government’s reasoning – to open up the oil business to domestic operators – doesn’t seem unreasonable. It’s an industry which accounts for 75% of the nation’s economy after all, and it is currently dominated by western firms – Shell being the largest.
Although given that of the three potential buyers reported so far, two – Sinopec and Afren – are foreign, it’s just possible that there are other motives at play here, too. Nigeria is a notoriously hard-core place to do business, as MT reported recently in a major feature on the country.
Either way, downgrading its reliance on foreign oil firms is not going to be easy – many, like Shell, have been there so long they have become a major part of the commercial infrastructure. It’s going to be very interesting to see what happens.
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