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Shell in Nigeria

From page 6 of “Royal Dutch Shell and its sustainability troubles” – Background report to the Erratum of Shell’s Annual Report 2010

The report is made on behalf of Milieudefensie (Friends of the Earth Netherlands)
Author: Albert ten Kate: May 2011.

PART ONE

Shell in Nigeria

In oil production, Nigeria is the most important country for Shell. During the period 2006-2010, Nigeria accounted for about 16% of Shell’s worldwide production of oil and liquid natural gas. During the year 2009, production falls due to disrupting activities by militant groups in the Niger Delta reached their peak for the time being. During the year 2010, production climbed back again, with Nigeria accounting for almost 19% of Shell’s worldwide production of oil and liquid natural gas.

Nigeria’s share in the profits of Royal Dutch Shell has been estimated at an annual average of USD 1.8 billion over the period 2005–2009, representing 7.3% of Shell’s total profit and 10.4% of its profits from upstream operations. Shell’s business in Nigeria seems to do well.

Shell’s Nigerian activities are divided among three companies. The largest is the Shell Petroleum Development Company of Nigeria Ltd (SPDC). SPDC is also Nigeria’s largest oil and gas joint venture. Most of its oil production takes place onshore in the Niger Delta. Shell is the operator of SPDC and has a 30% stake in the joint venture. SPDC has been pumping oil for more than 50 years in the Niger Delta. The other businesses of Shell in Nigeria refer to liquefied natural gas (LNG) for export, and offshore oil operations (among other the Bonga field). This case focuses on Shell’s onshore activities in the Niger Delta. This is the area where most environmental problems are manifested (such as oil spills and gas flares) and where oil production has caused severe conflicts.

The Niger Delta, resembling the South of Nigeria, is made up of fertile wetlands. It is one of the most densely populated regions of Africa. It has more than 30 million inhabitants. Subsistence farming and fishing are the mainstay of the people. The number of communities hosting oil / gas facilities in the Niger Delta is estimated at 1,500.

The SPDC-activities in the Niger Delta, as operated by Shell, are spread over some 30,000 square kilometres (about three-quarters the size of the Netherlands) and include a network of more than 6,000 kilometres of flowlines and pipelines, 86 oil fields, 1,000 producing wells, 68 flowstations, 10 gas plants and two major oil export terminals at Bonny and Forcados.

Nigeria is a poor en corrupt country. It ranks number 142 (out of 169 countries) in the Human Development Index of the United Nations6 and number 134 (out of 178 countries) in the Corruption Perceptions Index.7 Over-reliance on crude oil and gas (accounting for about 95 per cent of foreign earnings and over 80 per cent of federal budget) has weakened investment in other vibrant sectors of the economy, including agriculture. The oil sector employs just one per cent of the labour force. Many reports and studies have reiterated that, despite its vast resources, Nigeria ranks among the countries with the widest gap between their poorest and richest citizens. Its 54.4 percent official poverty prevalence translates to about 70 million poor persons. Within the last decade the traditional challenges facing Nigeria – mass poverty and unemployment, absence of transformation and prevalence of high inequality – have remained largely unchanged.

THE COMPLETE 73 PAGE REPORT (with reference sources)

Further examples from this section of the report will be published in the coming days.

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