Strategic Asset Recalibration: TotalEnergies' Bonga Divestment Fuels Growth Priorities

This divestment fits TotalEnergies' ongoing portfolio reshaping, focusing capital on higher-margin, low-emission operated assets while maintaining core output. The $510 million sale of its non-operated Bonga field stake to Shell and partners specifically aligns with the company's 2024 strategy to streamline its upstream portfolio by exiting higher-cost, non-core assets. This move frees up capital to redirect towards priority projects like the Ubeta gas development, which boasts a favorable cash breakeven below $45 per barrel oil equivalent. Despite exiting this non-operated position, TotalEnergies retains a significant operational footprint in Nigeria, sustaining 209,000 boe/d in production there in 2024. By shedding lower-margin, non-operated stakes like Bonga, TotalEnergies enhances overall portfolio efficiency and focuses resources on assets where it has greater operational control and sustainability benefits, such as the lower-carbon-intensity Ubeta gas project. The capital generated directly supports this strategic shift towards higher-performing, lower-emission assets.

Shell's Deepened Bonga Commitment: Strategic Focus with Lingering Liabilities

Shell solidified its operational dominance in Nigeria's Bonga field by acquiring TotalEnergies' 12.5% non-operated stake, contributing to Shell's current 65% controlling interest in the OML118 production sharing contract (PSC). According to financial reports, the $510 million transaction, with Shell paying $408 million for a 10% share and Eni taking 2.5%, marks a significant asset consolidation for Shell in the region. The Bonga field, a major Nigerian producer since 2005, maintains substantial output capacity at 225,000 barrels of oil equivalent per day (boe/d). This transaction leaves TotalEnergies with 11,000 boe/d of active Bonga output following the divestment. As official statements confirm, TotalEnergies' exit aligns with its broader 2024 strategy of streamlining its upstream portfolio, focusing capital on lower-cost, operated gas and offshore oil projects like the Ubeta gas development. This shift aims to reduce cash breakeven points and enhance sustainability metrics. Shell's increased stake positions it to leverage potential future growth, notably the planned Bonga North field targeting 110,000 barrels of oil per day (bopd) by 2030.

However, Shell's enhanced control brings heightened responsibility for navigating Nigeria's challenging operational environment. The country's regulatory landscape remains volatile, posing significant execution and cost overruns risks for major projects. Furthermore, the pending ministerial approval for the transaction means decommissioning liability transfers are not yet finalized, creating regulatory uncertainty. These unresolved liabilities represent a potential long-term financial burden, especially if regulatory requirements or costs escalate unexpectedly over the field's decades-long lifecycle. Careful management of these obligations will be critical for Shell's realized returns.

Resource Reallocation Synergy

TotalEnergies' $510 million divestment of its non-operated stake in Nigeria's Bonga field exemplifies strategic portfolio pruning. This move sheds lower-yield exposure to redirect capital toward higher-return operated assets like the Ubeta gas project. Proceeds from such selective asset sales directly fund initiatives targeting output acceleration and cost reduction in core operations. The company emphasizes that this approach sharpens focus on operated gas and oil assets, aiming to lower cash breakeven thresholds and enhance overall sustainability. While divesting non-operated positions with potentially higher operational costs, TotalEnergies maintains a substantial operational footprint in Nigeria.

The reallocated capital targets concrete operational improvements at Ubeta, aiming for a 20-30% acceleration in gas output while driving the cash breakeven point below $45 per barrel of oil equivalent. Redirecting resources from non-operated stakes to projects where TotalEnergies retains operational control allows for more direct leverage over cost structures and production timelines. This shift towards assets under direct management aims to maximize value extraction and improve margin resilience in a competitive market environment. The company's strategy prioritizes low-emission, operated projects that offer greater control over efficiency gains.

Despite exiting its non-operated position in Bonga, contributing 11,000 boe/d, TotalEnergies maintains a robust 209,000 boe/d production capacity in Nigeria through its operated assets. This demonstrates the effectiveness of its selective divestment strategy – shedding non-core elements while preserving and enhancing its operational base. The focus remains on optimizing the value of its core portfolio, particularly in gas projects where it holds operational control and can directly influence cost performance and output growth. The maintained production level underscores the company's continued significance as a major player in Nigeria's energy sector, even as it streamlines its asset mix.

Capacity expansions at Ubeta face execution risk and require sustained capital allocation to low-carbon assets. The success of breakeven targets hinges on operational efficiency gains and project cost discipline.

Shell's Growing Nigerian Burden

Shell's acquisition of TotalEnergies' 12.5% non-operated stake in Nigeria's Bonga field (OML 118) has significantly increased its liability exposure. The deal makes Shell the operator with a 65% share, inheriting full decommissioning obligations for the aging offshore complex. This is particularly risky amid Nigeria's persistent regulatory volatility, where shifting government policies or enforcement actions could inflate cleanup costs far beyond initial estimates. While the $408 million payment secures control of the 225,000 bpd field, the hidden cost of future decommissioning remains a major, potentially hidden, financial liability.

The Ubeta gas project, critical for Shell's cost reduction goals, faces significant execution risks that could delay its anticipated cash-flow improvements. While TotalEnergies divested its Bonga stake to prioritize operated gas assets like Ubeta, the project's timeline and budget remain vulnerable to the usual frictions of operating in West Africa – including potential security challenges, infrastructure bottlenecks, and cost overruns. Without concrete updates on Ubeta's progress, investors must assume the risks of further delays and higher-than-forecast capital expenditures, which would push back the expected reduction in cash breakeven.

TotalEnergies' strategic shift – selling non-operated stakes like Bonga to focus on operated assets – means its near-term growth upside from major expansions like Bonga North (targeting 110,000 bpd by 2030) is negligible. The field is explicitly external to TotalEnergies' portfolio post-divestment, with Shell and Eni holding the controlling interests. While the expansion remains a key long-term asset for the consortium, TotalEnergies derives no direct revenue or production benefit from it. Its growth story now hinges entirely on successfully executing its own operated projects like Ubeta, where risks remain high.