Royal Dutch Shell is trying to exit an oil-rich but violent part of Nigeria.  The Anglo-Dutch energy giant has had early talks with Nigeria-based companies over selling them four oil-production blocks and a major pipeline in the southern Niger Delta. Shell has sent confidential financial information on the assets to at least two dozen suitors.

Selling the Nembe Creek Trunk Line—which moves oil through the Delta to the Atlantic coast—would be Shell's biggest move yet to exit onshore crude production in a region that has caused problems for decades. Over the past year, the Nembe Creek line has had multiple punctures and closures, and at least one fire.  The resulting environmental cleanups and financial losses have been a drag on profits for Shell. Now, Shell is trying to get rid of the infrastructure in favor of focusing on potentially less-problematic natural-gas production and offshore oil drilling.

Shell operates the pipeline and oil blocks with a 30% ownership stake. State-owned Nigeria National Petroleum Corp. owns 55%, Total SA of France owns 10% and Eni SpA of Italy owns 5%.

Shell could face hurdles to selling its pipeline. The company says it supports the Nigerian government's efforts to have indigenous firms take over onshore oil assets, but Nigeria-based oil firms have had trouble getting financing to buy assets from international companies in recent years.

Shell can get almost 400,000 barrels of oil a day from its Nigeria installations, but its production has suffered as a result of oil theft and vandalism in recent years. Other companies are also suffering from the unrest in the Delta. Italy's Eni said Wednesday that oil theft in Nigeria contributed to a decline of more than 3% in its oil and gas production in the first nine months of the year. Nigeria's national oil company also said this week that "relentless attacks on major crude arteries" have hurt the country's economy.
The Nembe Creek pipeline has been a particular target, even after Shell invested over $1 billion to rebuild it in 2011. The pipeline was shut for much of this year, taking 150,000 barrels per day offline. It reopened briefly in the fall but was shut again after new oil-theft incidents, which have totaled at least 60 this year on the line. Shell says at least three-quarters of the spills are due to sabotage or puncturing of pipelines by thieves trying to siphon off oil. Others are from maintenance problems or pipeline breakdowns, bringing criticism on Shell from environmental groups and, this month, from a Norwegian government advisory body, which recommended the country's $780 billion oil fund keep a close watch on Shell spills in the Delta.

The United Nations Environment Program in 2011 called Shell's control and maintenance of the infrastructure in the area "inadequate." Shell says it has made progress on addressing the issues raised in the report and is committed to cleaning up all oil spills from its facilities.

Despite Shell's backing of the government's push to see Nigerian companies take over local infrastructure, oil thieves who used to steal from the Nembe Creek line will continue stealing if the owners are unknown to those who live near the pipeline.  Local owners will need to settle the community by paying money to avoid vandalism.  (WSJ, 10/30/2013)