…Global Gas faults Shell’s $2.4bn asset sale to Renaissance
By Charles Ebi
Global oil prices edged higher yesterday, recovering from the previous session’s losses, as a slightly optimistic market outlook provided a lift despite light trading ahead of the Christmas holiday.
Brent crude futures gained 42 cents, from $72.63 or 0.6%, to settle at $73.05 a barrel, while U.S. West Texas Intermediate ,WTI, crude futures rose by 38 cents, or 0.6%, reaching $69.62 a barrel as of 0742 GMT, Reuters reported.
Analysts at FGE noted that benchmark prices are likely to remain stable around current levels in the short term due to reduced trading activity during the holiday season.
“As activity in the paper markets decreases and market participants stay on the sidelines until they get a clearer view of 2024 and 2025 global oil balances, prices should see limited movement”, they remarked in a note.
The analysts highlighted supportive supply and demand dynamics in December that contributed to their less bearish outlook.
“Given how short the paper market is on positioning, any supply disruption could lead to upward spikes in structure”, they added, signaling potential volatility if unexpected events occur.
Other market watchers echoed similar sentiments, forecasting a positive trajectory for oil in the coming months. Neil Crosby, assistant vice-president of oil analytics at Sparta Commodities, commented on shifting views regarding long-term balances.
“The year is ending with the consensus from major agencies over long 2025 liquids balances starting to break down,” Crosby said. He pointed to the U.S. Energy Information Administration’s ,EIA, latest short-term energy outlook, which now forecasts a draw in 2025 liquid balances despite expectations of increased OPEC+ production next year.
In addition, China’s announcement of a plan to issue 3 trillion yuan ($411 billion) in special treasury bonds in 2024 to stimulate its struggling economy bolstered market sentiment. As the world’s largest oil importer, China’s fiscal measures are expected to drive energy demand. “This is likely to provide near-term support for WTI crude at $67 a barrel”, said Kelvin Wong, senior market analyst at OANDA.
Attention is also turning to economic signals from the United States, the world’s largest oil consumer. Recent data showed a mixed picture but offered some reasons for optimism. November saw a surge in new orders for key U.S.-manufactured capital goods, driven by strong demand for machinery.
Additionally, new home sales rebounded, indicating that the U.S. economy remains resilient as the year concludes.
While market participants tread cautiously due to uncertainties surrounding the global economic outlook and energy policies, the pre-Christmas trading session reflects a market still poised for potential gains as 2024 approaches.
The Nigerian National Petroleum Company ,NNPC, Limited has slashed the ex-depot price of Premium Motor Spirit ,PMS, commonly known as petrol, from ₦1,020 to ₦899 per litre.
This price reduction is part of the government’s efforts to align with the competitive dynamics brought about by the deregulation of the fuel sector. It is expected to foster increased competition among oil marketers, potentially leading to cost savings for consumers.
Analysts have forecasted that PMS prices could decrease even further by the end of January 2025, citing a combination of factors including a global decline in crude oil prices and the recent strengthening of the naira against the dollar.
However, it remains to be seen how the Nigerian market will respond to the recent slight increase in global oil prices, and whether the local market will maintain the downward trajectory in fuel costs.
Meanwhile Global Gas and Refining Limited has alleged that the Nigerian Upstream Petroleum Regulatory Commission’s ,NUPRC, reported approval of the sale of $2.4 billion in onshore assets of the Shell Petroleum Development Company ,SPDC, to Renaissance Africa Energy Company Limited, a local oil and gas consortium, “undermines the rule of law but also sets a dangerous precedent for corporate governance in Nigeria”.
Mr. Kenneth Yellowe, Chairman, Global Gas, disclosed this in a statement.
He maintained that his company expresses disappointment that the development allegedly “undermines a court injunction restraining the Nigerian government, through the Nigerian Upstream Petroleum Regulatory Commission ,NUPRC, from granting approval” to Shell.
Previously Reuters report, had stated that the divestment approval was announced by Renaissance in a statement last Wednesday and the approval was reportedly given by the Minister of State for Petroleum Resources, Heineken Lokpobiri.
The Federal High Court in Abuja had on November 11, 2024, set January 22, 2025, for Shell and Global Gas to report on their out-of-court settlement efforts regarding the latter’s allegation that Shell failed to supply wet gas in accordance with the terms of their Gas Processing Agreement ,GPA, dated March 15, 2002.
According to Africa Report, Shell’s $5bn investment in the Bonga North project was instrumental in persuading the government to approve the sale of the onshore asset, which was initially agreed at $1.3bn.
Reacting, Yellowe stated that when his company learned about the impending divestment, his lawyers immediately approached the court for protection by filing a motion seeking an injunctive order to restrain the NUPRC from granting the needed ministerial approval, which the court directed that the parties should meet to explore amicable settlement options.
“Global Gas is completely at a loss for words that NUPRC, even after swearing to an affidavit, undertaking as to injunction in respect of the appellant/applicant’s motion on notice dated and filed 2/9/2024, has inexplicably granted consent, in violation of the court order.
“This defiance not only undermines the rule of law but also sets a dangerous precedent for corporate governance in Nigeria. The sudden and unlawful approval of this divestment during ongoing negotiations is an affront to justice and fairness”, he added.
He faulted Shell for contemplating such a move at this time, considering the spate of pending court cases and actions against the divestment.
“This is particularly unfortunate, considering that Global Gas has been in negotiation with Shell concerning its lingering loss, which has caused great pain and anguish to Global and its investment partners, most of whom are foreign investors”, he added.
Global Gas called on the Nigerian government, regulatory authorities, and international stakeholders to hold Shell accountable for its actions, approve stricter enforcement of court rulings, and increase oversight of multinational corporations operating in Nigeria.
In 2021, Shell announced its intention to divest its Nigerian onshore assets due to the incompatibility of its long-term energy transition strategy with the operational challenges in Nigeria, such as theft and oil spills.
After a pause in the divestment process in 2022, Shell resumed talks in June 2023 to sell its 30% interest in the joint venture known as SPDC, which operates onshore and in shallow-water oil and gas fields.
With the new administration of President Bola Tinubu, which began in May 2023, advisers recommended closing outstanding divestments sought by international oil producers to enhance petroleum output.
Some months ago, NUPRC established a divestment framework to oversee the evaluation of applications for ministerial consent regarding the Shell Petroleum Development Company of Nigeria Ltd. ,SPDC, divestment process.
However, civil society groups, led by Amnesty International, called on the Nigerian government to block Shell Plc’s proposed sale of its onshore oil business in Nigeria.
Renaissance Consortium later announced the signing of a landmark transaction with Shell International PLC to acquire its entire shareholding in The Shell Petroleum Development Company of Nigeria Limited ,SPDC.
For the Shell Petroleum Development Company of Nigeria Limited ,SPDC, deal with Renaissance Consortium, NUPRC later revealed that documents had been submitted by SPDC and are “undergoing due diligence”.
Meanwhile, in a statement on September 11, 2024, NUPRC’s Head of Public Affairs and Corporate Communication, Mrs. Olaide Shonola, denied reports claiming that the Commission had accepted Shell International Plc’s bid to sell its onshore assets to Renaissance in a transaction worth $1.3 billion.
In October 2024, NUPRC reportedly rejected the proposed $1.3 billion sale of onshore oilfields to the Renaissance Group, citing the buyer’s lack of qualification to manage the assets, according to a Reuters report.
At the FHC in Abuja, Global Gas is seeking the court’s leave “to preserve the applicant’s rights against the intended divestment/sale of SPDC’s onshore facilities as publicly announced by its parent company, Shell PLC”.
But its counter-affidavit, SPDC’s Legal Counsel, Global Litigation ,Sub-Saharan Africa, Mr. Kingsley Osuh, informed the court that the dispute between his company and Global Gas is already before the Supreme Court for final determination.
He added that the applicant’s claims are for liquidated sums, specifically a compensation figure for an alleged breach of contract, and if the claim is upheld by the courts, the SPDC, as a corporate entity, is capable of paying the compensation to the applicant.
