Shell sells some Egyptian assets for up to $926 mil as part of divestment strategy

Dubai — Two Shell units plan to sell some upstream assets in Egypt for up to $926 million in a bid to focus on other operations in the North African country amid company plans to downsize future upstream operations globally.

Shell Egypt and one of its affiliates will sell the assets to subsidiaries of Cheiron Petroleum Corp. and Cairn Energy for a base consideration of $646 million and additional payments of up to $280 million between 2021 and 2024, depending on the oil price and result of further exploration, Shell said in a statement.

The sold assets include Shell Egypt's interest in 13 onshore concessions and the company's stake in Badr El-Din Petroleum Co., it added. The transaction is subject to regulatory and government approvals and is expected to be finalized by the second half of 2021.

Shell Egypt recently acquired seven new offshore concessions in the West Mediterranean, the Red Sea and in the West Nile Delta.

The deal "will enable Shell to concentrate on its offshore exploration and integrated value chain in Egypt, including seven new blocks in the Nile Delta, West Mediterranean and Red Sea," said Wael Sawan, Shell's Upstream Director. "It will help Egypt maximize the potential of its onshore assets through new investment, helping secure energy and revenue for years to come."

Lower reserves

Shell has estimated its 2020 reserves replacement ratio would be minus 53%, reflecting lower prices, postponed investment decisions and asset sales, it said Feb. 4. For the first quarter, Shell expects its upstream output would be in a range of 2.40 million-2.60 million b/d of oil equivalent, up from fourth quarter 2020 levels of 2.37 million boe/d, but well below the Q4 2019 level of 2.76 million boe/d, it added.

The company plans to slim down its future upstream and refining operations and direct more spending to grow its low-carbon businesses, the company said Oct. 29, flagging for the first time that its oil production has likely already peaked

Shell wants to pursue more "value over volume" by simplifying its upstream assets to nine core positions; Brazil, Brunei, Gulf of Mexico, Kazakhstan, Malaysia, Nigeria, Oman, Permian and UK North Sea.