The coming months would see Shell Petroleum Development Company increase its oil and gas output in Nigeria, The PUNCH has learnt.
Sources, who do not want their name in print because they were not authorised on the issue, told our correspondent that Shell Plc had ordered its Nigerian affiliate to ramp up oil and gas production in the country due to the significant decline in revenue from renewables.
According to the sources, Shell’s renewable arms, including SPDC’s All On are generating revenues as projected, which spurred the oil giant to mandate SPDC to increase its oil and gas production into 2030.
“Shell did not expect its revenue to take a tumble, especially with the way the world went about winding down on oil investments and pumping money into renewables. Now, its revenue is suffering because investors are beginning to complain of low income due to slowed oil and gas exploration,” a source told The PUNCH.
Reuters had recently reported that a company source said Shell’s Chief Executive Officer, Wael Sawan wanted to keep oil and gas profits booming in order to regain investors’ confidence.
“Sawan will announce at an investor event next week the scrapping of a target to reduce oil output by one per cent to two per cent per year, having already largely reached its goal for production cuts, mainly through selling oil assets such as its US shale business,” three sources to Reuters.
Shell had earlier put up its stake in SPDC for sale.
However, reports emerged later that the company had halted the plans due to a Supreme Court ruling to order to wait for the outcome of an appeal over a 2019 oil spill.
The Supreme Court last June 16 upheld a lower court ruling that stopped Shell from selling its assets in Nigeria until a dispute over a lower court decision to award a Niger Delta community $1.95b in compensation over the spill was resolved.
Shell wanted to sell its 55 per cent stake in SPDC, which it also operates, as the joint venture struggles with hundreds of spills that are caused mostly by theft.
However, sources added that SPDC considering a “more diplomatic” approach to resolve its internal issues with the local communities.
“Sawan, who took the helm in January with a vow to improve Shell’s performance as its shares lag rivals, said oil and gas will remain central to Shell for years to come, insisting that efforts to shift to low-carbon businesses cannot come at the expense of profits.
“His more cautious approach to the energy transition marks a change in tack from his predecessor Ben van Beurden who introduced the carbon reduction targets and the energy transition strategy”, Reuters report said.
Shell scrapped in recent months several projects, including in offshore wind, hydrogen and biofuels, due to projections of weak returns. It is also exiting its European power retail businesses, which were seen only a few years ago as key to its energy transition. At the same time, Shell reported record profits of $40bn last year on the back of strong oil and gas prices.
Sawan previously flagged that the 2021 target to cut oil output by 20 per cent by the end of the decade was under review.
Shell produced around 1.5 million barrels per day of oil in the first quarter of 2023, representing a 20 per cent decline from 2019 production of 1.9 million bpd.
The IOC did not give an official respond inquiries made by The PUNCH.
However, a press statement later released by company, disclosed that Shell Nigeria Exploration and Production Company paid a total of $907m as taxes and royalties to the Nigerian government last year as its operations continued to contribute to the national purse to finance development.
Punch
