Shell’s Nigerian oil block sales are heading for a messy conclusion due to a tussle over who operates the fields, sources close to the deals said, highlighting the complex nature of doing business in Africa’s largest energy industry.

Shell, according to Reuters, along with foreign oil major partners, Total and Eni, have agreed to sell their share in four onshore oil blocks which Shell operates in the Niger Delta wetlands but they need ministerial approval.

Deals for the blocks, one of which attracted a bid of over $1 billion, have already been agreed and a 10 per cent deposit paid. These payments triggered a 180-day window for the deals to be completed, the first of which expires at the end of this month, according to sources involved.

The Nigeria National Petroleum Corporation (NNPC), which owns the majority stake in the blocks, is at loggerheads with the buyers because it says its subsidiary will take over from Shell as operator of the fields once the deals are completed.

But some buyers of the blocks are not willing to complete the deals if NNPC is the operator.

A consortium led by Poland’s Kulczk Oil Ventures agreed a deal for Shell’s block OML 42, while independent energy firm Eland Oil, in partnership with Nigeria’s Starcrest, has agreed to buy OML 40. Niger Delta E&P and Petrolin won OML 34 and Conoil, owned by Nigerian billionaire Mike Adenugu, picked up the biggest block OML 30.

Financial backers will not want to lose their initial funding, in one case topping $100 million, while NNPC and Shell will want deals to go through to realise financial returns, so a compromise should be found.

The likely scenario is that NNPC becomes the “operator” of the blocks and then farms out the development of the fields to another firm. This could be the buyer of Shell’s share or another contractor and potentially a host of other companies in between, sources close to the deals told Reuters.
-Nation