. Reaffirms strong ties with Nigeria
By Clara Nwachukwu
Shell Companies in Nigeria (SCiN) said it paid about$986 million in corporate taxes and royalties paid to the Federal Government of Nigeria in 2021 amid lower production volumes.
This amount is $86 million higher than the $900 million the companies paid in 2020.
Although the Shell companies comprise Shell Petroleum Development Company of Nigeria Limited (SPDC); Shell Nigeria Exploration and Production Company Limited (SNEPCo); and Shell Nigeria Gas Limited (SNG), only SPDC and SNEPCo paid the taxes and royalties.
In its Nigeria Briefing Notes for 2021 Business Activities released yesterday, Shell explained that the larger share of the$986 million was paid by SNEPCo $562 million, while SPDC paid the balance of $424 million
Note that SPDC has a 30% share in the SPDC joint venture (SPDC JV) which produces oil and gas in the Niger Delta; SNEPCo produces oil and gas in the deep waters of the Gulf of Guinea; and SNG provides gas to industrial and commercial customers.
“In addition, Shell Gas B.V. holds a 25.6% shareholding in Nigeria LNG Limited (NLNG) which produces and exports LNG to European and other markets.
“SPDC and SNEPCo also own All On Partnerships for Energy Access Limited (All On), a not-for-profit company limited by guarantee for the purpose of improving access to energy in Nigeria,” Shell said in the Briefing Notes.
Despite the high level of oil theft and vandalism of pipelines, the taxes and royalties were realised from combined production volumes of 493,000 barrels of oil equivalent per day (bopd) from SNEPCo’ Bonga and SPDC JV, down from 614,000 in 2020.
“The decline was largely a result of divestment action and activity curtailment due to heightened security issues in the Niger Delta,” Shell said.
Relationship with Nigeria
In the light of the above, the Country Chair, SCiN, Osagie Okunbor, in his message in the Briefing Notes, said Shell is reviewing “options for its onshore Nigeria portfolio,” even as “relationship with Nigeria remains strong.”
“We may be changing the content of our portfolio but this is because we intend to focus future investment in Nigeria on deep-water exploration and production, and expanding our gas distribution network for domestic and international customers,” Okunbor added.
Accordingly, he continued: “In 2021, the Bonga field’s oil mining lease (OML) 118 and its production sharing contract (PSC) were renewed for another 20 years. This lease underpins our deep-water operations. Its renewal opens up further opportunities for Shell in Nigeria.
“We also successfully launched the Shell Energy Nigeria business line to expand the gas distribution solutions being championed by SNG. I am confident that this move will extend the efforts of Shell in delivering gas for power and industrial use across the country. Natural gas is a critical component of Nigeria’s economy and is very significant for the country’s energy transition.
“The growing global market for LNG is also driving the development of Nigeria LNG’s expansion with the construction of Train 7, which will increase production capacity by 35% from the current 22 million to 30 million tonnes a year.”
The decline was largely a result of divestment action and activity curtailment due to heightened security issues in the Niger Delta.
Production, security challenges
Although SCiN paid higher taxes and royalties in 2021, production volumes dipped substantially compared with the previous year.
According to the Nigeria Briefing Notes, of the 493,000 boepd, SPDC JV produced 383,000 in 2021, compared with 497,000 a year earlier.
“The fall in output was largely a result of curtailed oil production because of heightened security issues, such as crude oil theft and illegal oil refining,” Shell said in the Notes.
It added that “Production numbers were also down as a result of divestment action, including the sale of SPDC’s 30% interest in OML 17 for $533 million.
“In the last quarter of 2021, crude oil theft from pipelines across the region increased ostensibly as a result of rising oil prices, which made the activity more profitable.”
Due to the heightened security risks, Shell said “production in some areas has been put on hold. The situation is impacting operators across the Niger Delta.
“The Nigerian National Petroleum Corporation (NNPC) has reported that crude thefts in 2021 reached 200,000 barrels per day – a quarter of onshore production.”
