Shell to Boost Oil and Gas Output in Nigeria Amid Decline in Renewable Revenues

Shell Petroleum Development Company (SPDC) has reportedly made the decision to increase its oil and gas production in Nigeria in the coming months.

This development comes as a result of a significant decline in revenue from renewables, according to anonymous sources familiar with the matter.

Concerned about the unexpected dip in revenue, Shell Plc, the parent company, has allegedly instructed its Nigerian affiliate, SPDC, to ramp up production of oil and gas in the country. The company’s renewable arms, including SPDC’s All On, have been generating revenues as projected, which has prompted the oil giant to refocus its efforts on oil and gas production until 2030.

An unnamed source revealed, “Shell did not anticipate such a decline in revenue, especially given the global shift towards reducing oil investments and increasing support for renewables. Now, the company is grappling with lower income due to sluggish oil and gas exploration, and investors are starting to voice their concerns.”

According to Reuters, Shell’s Chief Executive Officer, Wael Sawan, is determined to restore investor confidence by ensuring that oil and gas profits continue to flourish. At an upcoming investor event, Sawan is expected to announce the abandonment of a target to reduce oil output by one to two percent annually. This decision comes as Shell has already achieved its production cuts goal through the sale of assets such as its US shale business.

Earlier, Shell had planned to sell its stake in SPDC but halted the process due to a Supreme Court ruling that demanded a wait for the outcome of an appeal regarding a 2019 oil spill.

The Supreme Court’s decision upheld a lower court ruling that prevented Shell from selling its assets in Nigeria until a dispute over a $1.95 billion compensation awarded to a Niger Delta community for the spill was resolved. Shell intended to sell its 55 percent stake in SPDC, which it operates, as the joint venture continues to grapple with numerous spills primarily caused by theft.

However, sources suggest that SPDC is considering a more diplomatic approach to address its internal issues with local communities. Sawan, who assumed the role of CEO in January with a commitment to improving Shell’s performance and closing the gap with its competitors, emphasized that oil and gas would remain central to Shell’s operations for years to come. He insisted that efforts to transition to low-carbon businesses should not come at the expense of profits, marking a departure from his predecessor’s strategy.

In recent months, Shell has abandoned several projects in offshore wind, hydrogen, and biofuels due to projected weak returns. The company is also divesting its European power retail businesses, which were once seen as vital to its energy transition.

Despite these changes, Shell reported record profits of $40 billion last year, largely attributed to robust oil and gas prices.

Sawan has indicated that the 2021 target to reduce oil output by 20 percent by the end of the decade is currently under review. The company’s oil production in the first quarter of 2023 stood at approximately 1.5 million barrels per day, reflecting a 20 percent decline from its 2019 production of 1.9 million barrels per day.