The Oyo State Government and Shell Nigeria Gas have secured a $100 million investment deal to enhance Oyo State's energy infrastructure, contrasting sharply with Shell's potential full divestment from South Africa. This strategic collaboration includes the construction of a Pressure Reduction and Metering Station and the installation of pipelines across Oyo State, slated to transfer ownership after 20 years. Scheduled to commence operations soon, this project aims to supply approximately 50 million cubic feet of gas per day to local industries within 18 months, significantly boosting the state’s industrial capacity and aligning with Nigeria’s Decade of Gas Initiative.
The Oyo State Government announced this week a $100 million investment agreement between the state government and Shell Nigeria Gas. Under the terms, Shell will undertake the construction of a Pressure Reduction and Metering Station and lay pipelines on a Build-Own-Operate-Transfer basis with ownership transferred to Oyo State in 20 years.
The agreement was first agreed in 2020 and is now at the investment stage. The project targets the distribution of cleaner and more reliable gas energy to industries in the state with a potential for around 50 million cubic feet of gas per day. It builds on Shell's existing gas transmission and distribution network in the south of Nigeria which contains over 86 miles (i.e., 138 kilometers) serving more than 300 industrial customers.
Barrister Seuan Ashamu, Oyo State Commissioner for Energy and Mineral Resources, reacted to the signing in London as follows:
”We were in London to sign the final investment agreement for the Oyo State Government-Shell Nigeria Gas Infrastructure Development and Distribution project... With this agreement in place, we are looking forward to the first flow of gas to industrial, manufacturing and commercial entities as well as our independent power project in Oyo State in 18 months."
Ralph Gbobo, Managing Director of Shell, hailed the agreement as boosting Nigeria's energy security. He emphasized the benefits of natural gas which are that it is reliable, cost-effective, and eco-friendly.
“This initiative represents a watershed moment in our endeavor to expand energy supply to businesses in Nigeria, aligning with the country’s vision to drive progress through the availability of natural gas, as part of the Decade of Gas Initiative,” Gbobo remarked.
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Shell Exiting South Africa Entirely
At the same time Shell is expanding its investments and operations in Nigeria, it is pulling out of South Africa as reported by a number of media outlets in May. This is big news as Shell has operated in South Africa since 1902, employs thousands in the country, and has over 600 fuel stations in South Africa. It has invested hundreds of millions over the years.
Shell Has Recently Exited Major Investments in Nigeria Too
Shell recently announced plans to exit its onshore oil sites in Nigeria and the decision was triggered by hundreds of oil leaks and other sustained issues with its onshore business in the country. The assets were sold to Renaissance for consideration of $1.3 billion, and an additional cash payment of $1.1 billion for prior receivables and cash balances in the business. Shell has operated in Nigeria's onshore business for over a century and played a leading role in establishing Nigeria as an oil powerhouse.
Shell will maintain its offshore assets in Nigeria which are more profitable and trouble free. After selling the onshore assets, Shell's Nigerian businesses which remain intact are:
Shell Nigeria Exploration and Production Company Limited (SNEPCo), which produces oil and gas in the deepwater Gulf of Guinea,
Shell Nigeria Gas Limited (SNG), which provides gas to domestic industrial and commercial customers, and
Daystar Power Group, which provides integrated solar power to commercial and industrial business across West Africa.
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