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Shell's pullout from Nigeria's onshore oil sector shows the difficulties oil majors face in Africa's largest exporter, but it also raises expectations that indigenous firms might reverse the Niger Delta's output fall, according to industry executives and analysts.
Shell, which founded Nigeria's oil sector, is the most well-known Western corporation to leave the Delta, an area plagued by pollution, oil theft, and pipeline vandalism. Those problems have hindered government budgets, productivity, and investment for years.
The company's decision to sell its subsidiary to five primarily local businesses aligns with a growing pattern of Western energy companies selling their onshore oil resources in Nigeria. ExxonMobil, Eni of Italy, Equinor of Norway, and Addax of China have all agreed to sell assets in the country in recent years.
"Nigeria has had well-established problems in policy in the oil sector, and the FX policy concerns have put constraints on investments. That's probably partially why you have seen the majors pulling out and disinvesting to some extent," said Andrew Matheny, senior economist with Goldman Sachs.
"It explains a significant portion of the decline in oil production in recent years."
President Bola Tinubu took office last May, pledging to remove obstacles faced by producers, including ending crude theft and pipeline vandalism. But seven months into his presidency, the asset sales, which were well underway before his election, highlight the inexorable changes to the country's oil sector.
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