Posts under ‘Africa’

Published February 07, 2012 Dow Jones Newswires

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“No Shell person or NNPC has come here in respect of the report. But as I talk to you, they are drilling. The same Nigerian Army and police that are supposed to protect the Nigerian people will carry them to go and put more benzene (into the environment). If we take laws into our hands, you hear (restiveness) and violence.” The accusations have been put before Shell in an email for weeks, but the company did not respond.

An eminent group of scientists and professionals have sent a collective communication to the Norwegian Government Pension Fund recommending disinvestment in the oil giant Royal Dutch Shell on ethical grounds.

By John Donovan

An eminent group of scientists and professionals have sent a collective communication to the Norwegian Government Pension Fund recommending disinvestment in the oil giant Royal Dutch Shell on ethical grounds.

The pension fund has already dis-invested in several mining and forestry companies “known to cause severe environmental and human rights related harm in their operations.”

If the campaign is successful, which focuses on Shell’s horrendous track record in Nigeria, Royal Dutch Shell would be the first oil and gas company the fund would exclude from its portfolio.

The joint recommendation, sent last Friday, is printed below.

January 27, 2012                                          via email: postmottak@etikkradet.no

Professor dr. juris Ola Mestad, Chairman
Council on Ethics
Norway Government Pension Fund
Etikkrådet for Statens pensjonsfond utland
Postboks 8008 Dep
0030 Oslo, Norway

RE: Recommendation that the Norway Pension Fund exclude holdings in Royal Dutch Shell due to the severe environmental and social harm caused by Shell’s long-term negligence in the Niger Delta, Nigeria

Dear Chairman Mestad,

We, the undersigned conservation scientists and professionals from around the world, write to you today asking you to take action on a matter of significant importance regarding corporate social responsibility and ethical investment.

We are aware of the laudable ethical standards your Council on Ethics has established with which to screen all investments made by the Norway Pension Fund, in particular its environmental standards.  We commend you for the previous divestments the Fund has made in mining and forestry companies known to cause severe environmental and human rights related harm in their operations.

We note that Section 2 of your Guidelines for the observation and exclusion of companies from the Government Pension Fund Global’s investment universe states, (inter alia):

3) The Ministry of Finance may, on the advice of the Council of Ethics, exclude companies from the investment universe of the Fund if there is an unacceptable risk that the company contributes to or is responsible for: a) serious or systematic human rights violations, such as murder, torture,
deprivation of liberty, forced labour, the worst forms of child labour and other
child exploitation;
b) serious violations of the rights of individuals in situations of war or conflict;
c) severe environmental damage; d) gross corruption; e) other particularly serious violations of fundamental ethical norms.

(4) In assessing whether a company shall be excluded in accordance with paragraph 3, the Ministry may among other things consider the probability of future norm violations; the severity and extent of the violations; the connection between the norm violations and the company in which the Fund is invested; whether the company is doing what can reasonably be expected to reduce the risk of future norm violations within a reasonable time frame; the company’s guidelines for, and work on, safeguarding good corporate governance, the environment and social conditions; and whether the company is making a positive contribution for those affected, presently or in the past, by the company’s behaviour.

Chairman Mestad, Jan. 27, 2012

Page 2.

In this regard, some members of our group and associates have worked for years on the impacts of oil production in the Niger Delta, and we conclude that Shell has for decades caused severe environmental and social harm in the region.  Evidence of this includes, but is not limited to, a history of repeated oil spills at Bomu Manifold, Korokoro flow station and Ejama-Ebubu in the minority Ogoni region of the Niger Delta (See Ogoniland Environmental Assessment, UNEP 2011).  Further, Shell is well aware of the damage it continues to cause, and has not taken necessary action to remedy the continuing problems. We feel Shell’s long-term negligent behavior in the Niger Delta satisfies the Fund’s standards for exclusion as set forth in Paragraphs 3 and 4 of your Ethical Guidelines referenced above.

Although Shell is clearly required by Nigerian law (as well as its own corporate policies) to conduct its oil and gas production, transportation, refining, and export operations with best available international standards, it has knowingly and consistently violated this requirement in Nigeria for decades.    Shell is required to meet these high standards in oil infrastructure integrity, spill prevention, prevention of third party damage, monitoring and maintenance of facilities, spill response, spill restoration, and financial compensation.   However, Shell repeatedly ignores such requirements for regular inspection and maintenance of oil facilities, upgrading pipelines and production facilities to best available standards, and prompt and effective response to oil spills (See Double Standards: International Standards to Prevent and Control Pipeline Oil Spills, Compared with Shell Practices in Nigeria, Steiner, 2008/2010).

To begin to address these issues, some of the signatories to this letter organized and conducted the first preliminary environmental damage assessment of oil impacts across the Niger Delta in 2006, in collaboration with many Nigeria scientists and communities, and found the Delta to be one of the most severely oil-impacted ecosystems in the world (Niger Delta Natural Resource Damage Assessment and Restoration Project – Phase I Scoping Report, Nigeria Conservation Foundation and IUCN/CEESP, 2006).   The 2006 study estimated that the average volume of oil spilled in the Niger Delta each year equaled that spilled by the Exxon Valdez in Alaska in 1989 – officially reported to be about 220,000 barrels.  It is our conclusion that most of this environmental injury in the Niger Delta is due to the largest and oldest petroleum producer in the there– Royal Dutch Shell.

In 2006 our group recommended to the United Nations Environment Programme (UNEP) that it conduct a comprehensive environmental damage assessment of oil impacts in the Delta.  Subsequently, UNEP did conduct an assessment of oil contamination in Ogoniland (part of Shell’s operating area in the Delta), and published its final Ogoniland Environmental Assessment last year (UNEP, 2011).  The UNEP report agreed with our 2006 assessment, confirming that the region has been continuously and severely damaged by oil.   Again, this is Shell’s operating area.

Chairman Mestad, Jan. 27, 2012

Page 3.

It is evident to our group, and many others working and living in the Niger Delta, that Shell has consistently violated its legal and ethical obligations in Nigeria, it is well aware of this continuing problem, it knows how to correct the problems, and yet continues to operate negligently and with impunity.

And it is clear that Shell’s behavior in the Delta does not constitute isolated and infrequent accidents.  Rather, the company’s willful negligence has continued over several decades.  Mr. Chairman, we feel it is time the international community takes a strong stand against such ongoing corporate malfeasance.

Thus, we were delighted to see the Council’s Annual Report 2009 state the following:

The Council is also going to investigate more closely the Fund’s investments in coal mines in light of the many accidents in this industry, and is as well as looking into oil pollution in the Niger Delta in light of the many oil spills in the region over a prolonged period and the impact this may have on the environment and human health (emphasis added).

Clearly, it would be unethical for the Norway Fund to continue “profiting” from its investments in Shell, while Shell is “profiting” from its continuing negligence regarding the environment and people of the Niger Delta.

We applaud your investigation of environmental and social injury caused by oil operations in the Niger Delta. By way of this letter, we respectfully encourage the Council on Ethics to recommend full divestment and exclusion of all holdings of the Norway Government Pension Fund in Royal Dutch Shell, Plc. and its subsidiaries, due to the consistent and severe environmental and social harm caused by Shell’s negligent oil and gas operations in the Niger Delta, Nigeria.

We recognize that this would be the Fund’s first exclusion of holdings in the petroleum sector, and as such, feel this would send a powerful message to the petroleum sector globally.  We also feel divestment by the Norway Fund will provide strong motivation for Shell to improve its environmental and social performance in Nigeria and globally.  Such action would similarly motivate other companies operating in the Delta in which the Fund is invested.

Please do not hesitate to contact any of us if you need other information.  We would also invite the Council on Ethics to conduct a fact-finding mission to the Delta if you so desire.

We look forward to your decision on this important issue.

Chairman Mestad, Jan. 27, 2012

Page 4.

Respectfully (in alphabetical order),

Gordon Abiama, Director, Africa Centre for Geoclassical Economics, Yenagoa, Bayelsa State, Niger Delta, NIGERIA

Pastor Innocent Adjenughure, Executive Director, Institute for Dispute Resolution, Niger Delta Study Group on Extractive Sector (NIDESGES), Delta State, NIGERIA

Ben Amunwa, Researcher, Platform, London, UK

Nnimmo Bassey, Environmental Rights Action (ERA), NIGERIA

Dr. Grazia Borrini-Feyerabend, President, Paul K. Feyerabend Foundation, SWITZERLAND

Dr. Bram Büscher, Associate Professor of Environment and Sustainable       Development, International Institute of Social Studies, Erasmus University NETHERLANDS

Dr. Crystal Fortwangler, Anthropologist, USA

Ken Henshaw, Programmes Manager, Social Action, NIGERIA

I. Herbert, Sustainable Environment and Economic Resources (SEERs), USA

Janet Howitt, Environmental Safety Group, Gibraltar, UK

Kira L. Johnson MSc, Conservation Biologist, USA

Sandra Kloff, Consultant, Marine and Coastal Management, NETHERLANDS

Ronald Leger, CANADA

Janaki Lenin, Writer, INDIA

Father Père Félicien Mavoungou, Commission épiscopale Justice et Paix Brazzaville, REPUBLIC OF CONGO

Akpobari Celestine Nkabari, Ogoni Solidarity Forum-NIGERIA and Social Action, NIGERIA

Chairman Mestad, Jan. 27, 2012

Page 5.

(Signatures continued)

Abiri Oluwatosin Niyi, Sustainable Nigeria, NIGERIA

Faith Nwadishi, Publish What You Pay/Koyenum Immalah Foundation, NIGERIA

Legborsi Saro Pyagbara, International Advocacy Officer, The Movement for the Survival of the Ogoni People (MOSOP) NIGERIA

Alfredo Quarto, Executive Director, Mangrove Action Project, USA

Dr. Kristin Reed, author of Crude Existence, USA

Geert Ritsema, International Affairs Coordinator, Friends of the Earth, NETHERLANDS

Paul Siegel, Conservationist, Dakar, SENEGAL

Richard Steiner, Professor, University of Alaska (ret.) Oasis Earth, Anchorage Alaska, USA

Dr. Makere Stewart-Harawira, Associate Professor University of Alberta, Edmonton, CANADA

Rev. David Ugolor, African Network for Environmental and Economic Justice (ANEEJ), NIGERIA

Dr. Geert van Vliet, Economist, CIRAD, FRANCE

Weirt Wiertsema, Senior Policy Advisor, Both Ends, NETHERLANDS

Nicholas Winer, Just Conservation, SPAIN

By Vincent Nwanma – Jan 29, 2012 10:36 PM GMT

Jan. 29 (Bloomberg)– Nigeria will “soon” ask for compensation for an oil spill from Royal Dutch Shell Plc (RDSA), Europe’s largest oil company, President Goodluck Jonathan said.

A spill last month from the 200,000 barrel-a-day Bonga field off Nigeria, which produces nearly 10 percent of Nigeria’s crude, led Shell to stop production from the facility, the company said on Dec. 21. The export line at Bonga leaked almost 40,000 barrels of crude during a tanker loading, according to Shell estimates, making it Nigeria’s worst offshore spill in more than a decade.

Nigeria will be asking for compensations “with a view to reaching an amicable solution to the problem,” Jonathan said in a meeting with Ban Ki-Moon, the United Nations secretary- general, on the sidelines of the 18th African Union Ordinary Session of the heads of state and governments in Addis Ababa, the Ethiopian capital, according to a statement e-mailed today.

A phone call by Bloomberg to Shell’s office in Lagos, Nigeria, after hours was unanswered, and there was no answer at the mobile phone number of a company spokesman

To contact the reporter on this story: Vincent Nwanma in Lagos at vnwanma@bloomberg.net

To contact the editor responsible for this story: Dulue Mbachu at dmbachu@bloomberg.net

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TO VIEW THE COMPLETE DRAMATIC GRAPHICS FROM THE UK GUARDIAN ARTICLE ‘UNLOVEABLE SHELL – GODDESS OF OIL’ – CLICK HERE - TAKES SHORT TIME TO LOAD

Shell, which until 1993 was the major oil producing company in Ogoni, was forced to leave the area following widespread protest spearheaded by MOSOP over alleged human and environmental rights abuses.

Wednesday, 18 January 2012 00:00 Kelvin Ebiri, Port Harcourt

HOPE for resumption of oil and gas exploration in Ogoni, has been rekindled by the new leadership of the Movement for the Survival of the Ogoni People (MOSOP).

Wed Jan 18, 2012 2:47am EST

* JV to focus on “transformational” plays in Atlantic

* Comes as big oil groups boost exploration spend

By Tom Bergin

LONDON, Jan 18 (Reuters) – Royal Dutch Shell is teaming up with independent explorer Tullow Oil to explore for oil in the Atlantic, in a sign the biggest oil companies accept dramatic measures are needed to turn around their weak record on finding oil.

Tullow said on Wednesday the planned partnership would focus on making “transformational” discoveries in “underexplored frontier basins”.

In the past decade and a half, independent explorers have led the way in opening up new multibillion barrel oil provinces in Africa and South America.

The collapse of oil prices to $10 barrel in the 1990s killed the appetite of industry leaders like Shell and Exxon Mobil for exploration in frontier areas. Instead they focused on less risky, but less lucrative investments, such as developing large, known finds.

The oil giants are now increasing their exploration budgets but analysts doubt they can quickly turn around their reliance on acquisitions of oil fields or smaller producers to replace the oil and gas they pump each year.

Shell’s plan to tie up with Tullow could provide a shortcut to its effort to boost discoveries, by tapping into Tullow’s expertise and a culture that encourages exploration risk-taking.

The venture builds on Shell’s entry into Tullow’s exploration licence in French Guiana in 2009, where the partners announced a significant discovery last year.

Tullow has grown from an industry minnow in the 1990s into Europe’s largest independent oil explorer, with a market value of over $20 billion, on the back of major discoveries in Uganda and Ghana.

SOURCE ARTICLE

Judd-Leonard Okafor

12 January 2012

The environmental group, Friends of the Earth Nigeria, says the oil corporation Royal Dutch Shell must be held accountable for pollutions from its facilities, stopping it from causing further pollution and ensuring it deploys appropriate technology to deal with spills.

The group’s stance came after Senate committee on environment and ecology summoned the company, along with the environment ministry officials and two agencies in the wake of a 150km wide spill from a facility belonging Shell at Bonga, some 120km off the Nigerian coast

The two agencies are the National Oil Spill Detection and Response Agency, NOSDRA, and National Environmental Standards and Regulation Enforcement Agency (NESREA).

At the height of the spill, Friends of the Earth said it didn’t “expect anything meaningful” to come out of the summons, calling it “cosmetic.”

Philip Jakpor, media head at Friends of the Earth Nigeria, said, “We must hold these corporations accountable. They must not pollute our environment, they must deploy the same technologies that are effective that they use in other parts of the world here. There must not be double standards. And if they are liable to prosecution, you should go ahead and prosecute them.”

The group said it didn’t believe NOSDRA would be able to independently verify Shell’s claim that only around 40,000 barrels of oil leaked into the ocean.

“Most times the information that is made public is actually information from the same industries that do the pollution,” Jakpor told Daily Trust. “So, in this case we don’t believe their claim. We believe it would be far, far more than that.”

Independent bodies who monitored the spill hinted the amount of oil dumped in the ocean could exceed Shell’s claim.

But the Senate committee which summoned NOSDRA and the three other parties expressed doubts as well about whether the agency is equipped to handle the job.

The committee chairman Bukola Saraki said NOSDRA lacked vessels and now “relies almost exclusively on the grace and benevolence of the oil companies, in this case, Shell.”

Meanwhile, the oil company insisted last week it successfully completed cleanup of spill from the Bonga offshore oil field, resuming production there on January 1.

The company’s manager in Nigeria Mutiu Sunmonu claimed satellite and aerial imagery confirmed the leak “could not have reached coastlines in the eastern Niger Delta, as some media articles have suggested.” In updates the company posted on the net, he said the images of the spill reported came from a third party spill, “which appeared to be from a vessel, in the middle of the area that we had previously cleaned up.”

Copyright © 2012 Daily Trust. All rights reserved.

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By Oluwakemi Dauda, Jan 10, 2012

Some communities in Delta, Bayelsa and Akwa Ibom states have alleged the destruction of their farms and land in the oil spill at Shell Nigeria Exploration and Production Company (SNEPCO). Over 4,000 barrels of oil were spilled from Shell’s Bonga facility.

Describing the spill as the worst in the country since 1998, the communities, in a letter, called on Nigerian Maritime Administration and Safety Agency (NIMASA) and the Federal Government to assist their people, whose waters, have been polluted.

But when The Nation contacted the image maker of Shell, Mr Precious Okolobo on Saturday night, he said Shell is waiting for the report of the sample taken to the United States (US) to determine the impact of the spill on the shore, adding that his organisation is doing everything possible to clean up the environment.

“We have taken a sample of the oil in the beach to the United States. Not until the result is out, nobody is expected to talk of compensation. The National Oil Spill Detection and Response Agency (NOSDRA) has even confirmed that there was no way the spill could have got to Akwa Ibom State,” Okolobo said.

But in the petition sent to NIMASA, The Nation gathered that the affected communities complained that their source of livelihood, especially fishing, was affected by the impact of the oil spill.

The affected communities which included the people of Age and Oroibiri 1 and 2, according to sources at NIMASA, said the letter became necessary because Shell’s response to the spill fell short of national and international standards.They urged NIMASA to ensure that Shell pays for devastating their environment and the ecosystem.

The communities, according to the sources, also accused Shell of embarking on propaganda while they described the spill as massive that has affected birds, vegetation and other aquatic creatures in their domain.

Shell, the communities alleged, instead of addressing the problem embarked on propaganda to shift responsibility. This, the community insisted, is a diversionary tactic and urged Shell to make the name of the suspected third party public if it has any.

The people of the affected areas, have vowed to hold Shell responsible for anything that happens to them and their environment if it fails to prove beyond reasonable doubt that a third party was involved.

The communities, the sources said, are therefore, calling on the Federal Government, the National Assembly and NIMASA to send a delegation, which should include maritime reporters to the area for an on-the-spot assessment of the total devastation of their waters and their areas.

When contacted, a senior official of NIMASA confirmed the petition and urged Shell to be alive to its responsibilities by cleaning the waters and paying compensation to the affected communities and making remediation in line with national and international standards.

No national or multinational company, such as Shell, the official said, can do what the oil giant has done in the country in terms of environmental depredation and behave as if nothing happens.

When the spill was announced, NIMASA, the official said, made a sea and radio broadcast to all mariners and issued a marine notice in one of the daily newspapers to the public on the spill to curtail the spread to other areas, but Shell, he alleged, failed to act promptly.

Also, the Deputy General Manager, Public Affairs, NIMASA, Hajia Lami Tumaka, said so many members of the affected communities have come to their offices in Port Harcourt and Lagos, urging the agency to come to their aid.

“Yes, the people of the affected communities have contacted our offices and the director-general has allayed their fears and assured them of positive response to their yearning to avoid the breakdown of law and order in the area.”

The agency, she said, would enforce global maritime watchdog conventions as it relates to the management of the nation’s marine environment in this case.

On the discovery made by the team sent to the area by NIMASA, the image maker said: “As our technical crew approached these communities, the first thing that greeted them was the sight of coastline demarcated by oil leak and petroleum fumes. The community informed us that the spill drifted to the location on December 21, 2011.

‘‘For instance, at Age community, it was discovered that the oil spill affected its community coastline. At Orobiri One and Two, the aquatic environment was devastated by the spill impact. Water samples are collected from these communities. We were informed by these communities that other government officials and state personnel had earlier visited the communities.”

SOURCE ARTICLE

06 Jan 2012

By John Iwori

As efforts to curtail the oil spill at Shell Nigeria Exploration and Production Company’s Bonga Facility continues, the Nigeria Maritime Administration and Safety Agency (NIMASA) has described the incident as a national disaster.

Describing it as the worst oil spillage to hit the country since 1998, the management of Nigeria’s apex maritime regulatory body called for urgent assistance for the affected community, whose waters have been polluted.

According to the management of the agency, which is the eye of the global maritime watchdog, International Maritime Organisation (IMO) in Nigeria, millions of aquatic life forms, which the people of the affected communities depend upon for survival, have been destroyed as a result of the oil spill.

Director General of NIMASA, Mr. Ziakede Akpobolokemi, stated this at a briefing in Lagos to give an update on the effect of the Shell’s Bonga facility.

Akpobolokemi, flanked at the briefing by top officials of the agency, including the Executive Director, Maritime Safety and Shipping Development, Dr. Ishiaku Shekarau, said the management of the agency has been informed by Shell about the incident and the need for a joint visit to the facility.

He stated that the joint visit would comprise NIMASA and other government officials as well, and noted that the source of livelihood of the affected communities, especially fishing, has been greatly affected due to the impact of the oil spill.

The NIMASA Director General said besides the negative impact on peoples’ means of livelihood, they no longer have potable water to drink as their source of water has been polluted by the oil spill.

“Further to the report of the preliminary investigation conducted by the agency in respect of Bonga Oil field on December 21, 2011, NIMASA representatives were at the leak location assisting in the rescue effort of the victims of the coastal community within Delta and Balyesa states, namely Aage and Orobiri one and two communities. They used boats from Warri to scrutinise these areas.

“At age community it was the discovered that the oil spill has affected the entire community coastline. At Orobiri one and two the aquatic environment was completely devastated by the spill impact. Water samples are collected from these communities. We were informed by these communities that other government officials and state personnel had earlier visited the area as well,” he said.

He said if Shell was sure that there was spill from third party as earlier alleged, “why are they making frantic effort to get to these almost inaccessible communities.”

“As our technical crew approached these communities, the first thing that greeted them was the sight of coastline demarcated by oil leak and petroleum fumes. The community informed us that the spill drifted to this location on December 21, 2011”, he noted, adding that the community has embarked on personal effort to clean the affected area.

As part of the agency mandate, he told reporters that officials of the agency had carried out an over-fly of the area to observe the extent of the spread of the spill and the danger posed to marine flora and fauna.

He also said the agency’s team is currently at the spilled location to assess the response efforts to ensure strict compliance with relevant regulations.

He added that the agency was in contact with Shell and the Nigerian Oil Spill Detection and Response Agency (NOSDRA) to ensure that adequate measures are put in place to prevent further degradation of the marine ecosystem.

SOURCE ARTICLE

James Kimer on January 4, 2012.

As the second largest energy company in the world after Exxon-Mobil, Royal Dutch Shell has been a major player in Nigerian oil and gas from the beginning, overseeing the first commercial export of oil from the country in 1958 from the Oloibiri Field.  Their success over the years has been notable, with operations are spread over 30,000 square kilometres in the Niger Delta, including 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.

But after a number of accidents, attacks by militants, and political scandals, is Shell’s honeymoon with Nigeria coming to an end?  Some recent events and transactions indicate a shift in the Dutch company’s strategy in the country, opening a window of opportunity for new operators.

The past year has battered and bruised Shell’s operations in Nigeria, with both environmental issues and political risk increasing.  Just this week, the company was forced to conduct emergency repairs on a sabotaged trunkline pipeline in Nembe Creek, Bayelsa State, where more than 200 barrels of oil were siphoned off by thieves, forcing Shell to cut production by 70,000 barrels a day during the repairs.  Sabotage and theft by militant gangs is currently on the rise following a brief lull since its height in 2005, while the company reportedly suffers the loss of between 70 to 200 barrels of oil stolen per day.

In December 2010, Shell also experienced its worst oil spill in Nigeria in the past decade, as more than 40,000 barrels of crude oil was spilled at the offshore Bonga Field (the accident being caused by tanker mishap instead of the usual sabotage).  According to a report in the Washington Post, “Some environmentalists say as much as 550 million gallons of oil poured into the delta during Shell’s roughly 50 years of production in Nigeria — a rate roughly comparable to one Exxon Valdez disaster per year.”

As a result, political pressure against Shell has also been mounting from civil society.  The Environmental Rights Action/Friends of the Earth (ERA/FoEN) has been on the offensive since the spill at Bonga Field, issuing statements demanding that the government secure independent verification of spillage data while enforcing clean-up payments.  The company’s environmental and human rights record has been under scrutiny at the highest levels, with the United Nations Environment Programme (UNEP) issuing a harsh report in August 2011 that examined the ecological and public health ramifications of oil spills in Ogoniland.  One of the UNEP report’s key findings included the following:  “Control and maintenance of oilfield infrastructure in Ogoniland has been and remains inadequate: the Shell Petroleum Development Company’s own procedures have not been applied, creating public health and safety issues.”

Even before all these issues came about, there were indications that Shell may be scaling back its exposure to Nigerian energy.  Shell is the 30% owner of the joint venture Shell Petroleum Development Company of Nigeria Limited (SPDC), which also features major stakeholders such as the state-owned NNPC with (55%), TotalFinaElf (10%) and Agip (5%), which together is responsible for a whopping 50% of all oil production in the country.  However in November 2011, Shell completed the sale of its shares in two major oil producing blocks (OML 26 and OML 42), while at the same time they are working to close ongoing deals to sell their stakes to three other blocks (OML 30, 34 and 40).

Representatives from the company are keen to express that these sales do not represent the beginnings of an “exit strategy.”  According to statements made by SPDC Managing Director Mutiu Sunmonu to NEXT Newspaper, “what we are doing is consolidating our operations to strengthen even our future in Nigeria. We are in Nigeria for the long haul. Some of these assets are of more value to indigenous companies than the multinationals. The sale of marginal oil fields is an exercise aimed at growing indigenous capacity in the upstream oil and gas industry.”

However, it appears that in fact the divestiture strategy is aimed at offloading the most vulnerable assets  in the company’s portfolio – the ones located onshore, and therefore susceptible to attacks, kidnappings, theft, and sabotage, indicating a declining confidence in the state’s ability to maintain law and order in the Delta region.  In recent years, Shell has experienced a steep decline in production among its onshore assets in Nigeria.  In 2009 Shell CEO Peter Voser said that due to violence in the Delta region, production has slacked to 120,000 barrels per day from the previous 300,000 barrels per day.

“The overall security situation is still very fragile, the government had some success with their amnesty programme and we are looking now towards the next few weeks to see how this influences the whole security situation,” Voser told Reuters. “But it would be by far too early to say that it has improved. We are still dealing with the same kind of issues.”

Two years later, it looks like Shell might be losing patience.  The sale of these marginal fields such as OML 40, referring to oil and gas assets that have yet to be developed due to difficult location, infrastructure, and access, are bringing about a sharp increase of participation by indigenous companies.  New players in the Nigerian oil sector include Mike Adenuga’s Consolidated Petroleum, Femi Otedola’s African Petroleum (AP) Consortium, Elcrest, and Neconde Energy.  There are other indigenous companies which are actually backed by international finance, such as Oando (China), Perenco (Afren – a Nat Rothschild entity), and Equinox Group (Gazprom).

But the reasons motivating Shell’s divestitures may be more complex than the challenges of violence, insecurity, and public scrutiny.  After all, the company has survived some of the roughest periods of Nigerian history, including the murder of activist Ken Saro-Wiwa by the Abacha regime, which resulted in a $15 million lawsuit settlement.  In 2008, attacks by militant groups such as the Movement for the Emancipation of the Niger Delta (MEND) had reached such heights, that Shell was forced to steeply cut production, driving global oil prices to record highs well above $120 a barrel.  And yet, despite these harsh circumstances, the company persevered and held on up to the 2009 amnesty, which helped production recover.

The problem for the company may be bigger than just oil spills, theft, and attacks, as some observers point to the pending passage of the Petroleum Industry Bill (PIB), which would revolutionize the tax and royalty structure for international oil companies doing business in Nigeria, carving out a sphere of participation in production and exploration (as opposed to simply regulation) for parastatal companies.  First proposed in 2008 by the presidential administration of Umaru Yar’Adua, the PIB is a complex, 100-page document that has been repeatedly stalled in the legislature due to controversy and disputes over its contents and purpose.  According to the former Minister of the Federal Capital Territory of Abuja, Nasir El-Rufai, international oil companies such as Shell stoutly oppose the passage of the PIB and are actively lobbying against it because the bill contains new royalties structures for offshore production (because the Nigerian government forfeited these rights in a 1991 agreement).

And while the PIB remains stalled, much-needed foreign investment is put on hold.  According to one analyst interview by The Financial Times, “The wait for the adoption of the PIB is very damaging. It’s why the big new investments have been put on hold. The impact becomes exponentially more problematic [because] if reserves don’t get replaced, there is the risk of production capacity in Nigeria dropping for the first time in 30 years.”

As demonstrated by the overwhelming protests and public outrage over President Goodluck Jonathan’s decision to remove the fuel subsidy at the New Year, there is a strong social aspect to the country’s economic policies concerning the energy sector.  For most citizens, who live on less than $2 a day, the fuel subsidy was seen as the only way that the oil wealth was shared – and, with its removal, there could be increased public support for the passage of the PIB that aggressively targets the traditional energy players with higher taxes and more difficult conditions.

For the moment, public anger is directed toward President Jonathan and a small group of advisers.  But if this pressure translates into real political costs for the administration, it is possible to imagine President Jonathan finding a scapegoat in the foreign oil companies, and satiating voters with promises to pass the PIB and enforce payments on environmental clean-up costs.  If that’s the case, Shell’s divestitures may accelerate, while local companies – which are in no way more accountable – will take over more and more critical onshore production fields, posing an unknown risk to global energy supplies.

SOURCE ARTICLE

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