The Shell Petroleum Development Company of Nigeria Ltd (SPDC) as operator of the Nigerian National Petroleum Corporation (NNPC)/SPDC joint venture (SPDC JV) announced that the SPDC JV (NNPC 55%, SPDC 30%, TOTAL 10%, NAOC 5%) has taken final investment decisions for the Trans Niger Pipeline loop-line (TNPL) and the Gbaran-Ubie Phase Two projects, both in Nigeria's eastern Niger Delta. The total capital investment for the two bundles of projects is around $3.9 billion. SPDC has also announced a strategic review of the interests that it holds in selected onshore leases in the SPDC JV.
SPDC Managing Director, Mutiu Sunmonu said: "The announcements demonstrate our long term commitment to Nigeria by clearly signaling our intent for the strategic direction of Shell in Nigeria."
New investment in Nigeria oil and gas
The Trans Niger Pipeline (TNP) is important for Nigeria, pumping some 180,000 barrels per day of crude oil to the Bonny Export Terminal and is part of the gas liquids evacuation infrastructure, critical for continued domestic power generation (Afam VI power plant) and liquefied gas exports.
Sections of the TNP have been heavily impacted by sabotage and crude oil theft. The design of the TNPL includes improvements which make the pipeline better protected against crude oil theft and sabotage, which should help to reduce pollution related to criminal activity which was a key aspect of a 2011 United Nations Environment Programme (UNEP) report on Ogoniland. The total capital investment for the TNPL project bundle is expected to be $1.5 billion.
The Gbaran-Ubie Phase Two project consists of five gas supply and infrastructure projects which are critical for the continued gas supply to the Nigeria Liquefied Natural Gas (NLNG) plant and the Gbaran-Ubie domestic power plant (IPP). The total investment for the Gbaran-Ubie Phase Two bundle is $2.4 billion. The expected peak production from these projects is 215 kboe per day (100%).
Mutiu Sunmonu commented: "These investments will help to secure energy supplies for domestic and international markets. The TNPL project demonstrates the tangible steps SPDC and its partners are taking to tackle the scourge of criminal activity - pipeline sabotage and crude theft in the Niger Delta, which is the cause of so much environmental and economic damage in this region."
Strategic review of SPDC interests in selected onshore leases
Shell's 100%-owned subsidiary, SPDC, announced the initiation of a strategic review, consultation with partners, and the potential exit from the interests it holds in some further onshore leases in the Eastern part of the Niger Delta, subject to partner and regulatory approvals. The SPDC JV produced around 750 kboe per day of oil and gas in 2012 from 28 Oil Mining Licenses (OMLs) across the Niger Delta, both onshore and in the near offshore. SPDC has been following a strategy of selective divestments of its onshore portfolio, concentrating the operating footprint into a smaller, more contiguous area, while supporting the Government's policy of encouraging investment by indigenous companies in the Nigerian oil and gas industry. Since 2010, SPDC has sold its interest in eight OMLs for a total of $1.8 billion.
Mutiu Sunmonu further commented: "Nigeria remains an important part of Shell's portfolio, with clear growth potential, particularly in deepwater and onshore gas. This strategic review marks another step in re-focusing the SPDC portfolio."
The Shell Petroleum Development Company of Nigeria Ltd (SPDC) is the operator of an unincorporated joint venture (SPDC JV) with the Nigerian state oil company NNPC, Total E&P Nigeria Limited ("TOTAL") and Nigerian AGIP Oil Company Limited ("NAOC").
TNPL is proposed to be executed by three indigenous contractors who have grown steadily over the past five years from medium sized companies to big players in the industry. The construction of the Gbaran-Ubie Phase Two project includes local and international companies. The estimated Nigerian Content value in terms of in-country manpower, goods and services that will be utilized in the execution of these projects is over 66%.
The social and economic benefits to the local communities are substantial. Aside from direct employment, many of the sub contractors will come from the local communities in line with the JV partners' local content commitment to develop capabilities within the Niger Delta region. There will also be direct social investment in skills growth and direct investment via the Global Memorandum of Understanding (GMOU) model.
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