By JAD MOUAWAD
Published: April 5, 2007
LAGOS, Nigeria, April 4 — A year after being forced to shut more than half of its oil operations in Nigeria because of militant violence, Royal Dutch Shell says that it has reached an agreement with local communities allowing it to return safely to the Niger Delta and that it expects to resume full production within five to six months.
Shell lost about 500,000 barrels a day in production from its fields in the western part of the oil-rich delta after a rebel group called the Movement for the Emancipation of the Niger Delta, or MEND, attacked several production and export operations in early 2006, forcing their closings. Since then, continuing violence in the region has curtailed up to a fifth of Nigeria’s total oil production.
Armed activists in the delta, seeking a greater share of the country’s oil revenue for the underdeveloped region, have attacked facilities owned by Shell and other foreign oil companies, and kidnapped foreign and local employees.
Shell, the biggest operator in Nigeria, still pumps about 500,000 barrels a day from the eastern delta region and from several large offshore platforms. The company has previously outlined plans to resume operations in the delta, and there is no guarantee that it will succeed this time.
The recurring violence in the Niger Delta has contributed to the rise in oil prices in recent years, and has slowed Nigeria’s plans to bolster its production. But any resumption of production in Nigeria would be welcomed by global energy markets, which remain edgy because of tensions in the Persian Gulf. Nigeria is the biggest oil producer in Africa.
“We see this year as a year when we start clawing back our production,” Basil E. Omiyi, Shell’s managing director for Nigeria, said in an interview on Tuesday in Abuja, the Nigerian capital. “I don’t see anything standing in our way of restarting our production.”
Because of the shutdowns, Nigeria is currently producing about two million barrels a day. If the Shell production is restored, Nigeria will be exceeding its OPEC quota, which currently is about 2.2 million barrels a day. The government aims to increase production to four million barrels a day by 2010, a target most energy executives here say will be difficult to reach.
Mr. Omiyi, in his first extensive public comments in over a year, said that in return for being allowed back in the western delta, Shell will “significantly” increase the amount of work it awards to local communities by shifting to local villages and businesses more contracts for services like food catering, barge or boat leasing, maintenance work and transportation.
His comments were an indication that the company might have found an accommodation with some of the groups behind the past year’s violence. Mr. Omiyi said he had not received any security guarantees from militant groups like MEND, nor had he negotiated with them. Yet he said he felt confident enough to allow his workers back in the fields.
In recent weeks, the company has sent teams to inspect damage to its infrastructure in the western delta and has begun repairs to pipelines, flow stations and other infrastructure.
“What has changed is that the level of violence in that particular region has gone down,” Mr. Omiyi said. “We’ve had a series of dialogue with the communities. The communities depend on the oil and gas industry for a significant amount of income in the region and everybody has got to a point where they are saying, ‘Let’s drop the political part of this, and let’s get back to business.’ ”
Shell’s optimism contrasts with the tense situation in Nigeria, where elections are scheduled for April 14 and 21. These would represent the first transition from one civilian government to another; since its independence in 1960, Nigeria has alternated between civilian and military rule. But preparations have been marred by legal skirmishing and violent power struggles.
In the delta, where most of the country’s oil production is concentrated, political tensions have largely fueled the armed militant movement, which has focused on oil companies, hoping to force the government to inject more money into the region. Activists from the delta states complain that the region is neglected by the federal government and has high levels of corruption and mismanagement.
Gangs have been increasingly active in taking foreign hostages, especially expatriate oil workers, and releasing them only after ransoms have been paid. So far this year, more than 70 foreigners have been kidnapped, though most have been quickly freed. The last four hostages were released on Wednesday.
Mr. Omiyi declined to provide a figure on how much business Shell might be willing to shift to local companies or individuals in the delta states. But he said the new approach would eventually inject much more money into the local economies than under Shell’s current community development programs.
“What we intend to do when we get back is to actually let the communities provide significantly more of the services we need than they currently do,” he said. “It’s just another way of ensuring that they benefit from our day-to-day presence.”
Human rights groups and other organizations have long criticized oil companies, and Shell in particular, for the way they manage their relations with local communities, saying they tend to favor some groups over others, or local chiefs and rulers over the communities at large, breeding jealousies and rivalries.
Mr. Omiyi described the plan to resume production as part of a new strategy by Shell to involve local communities more closely in its operations. He said the breakthrough was a result of the combined efforts of the government, local authorities and local communities to end the violence.
Nearly half of Shell’s production in Nigeria had been interrupted since February 2006, after a critical loading platform linked to the Forcados export terminal was blown up. The attack created a chokepoint that forced Shell to shut most of its fields and interrupt production.