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Delta blues

Financial Times: LEADER: Delta blues

Jun 15, 2004

After the battering it has received over its shrinking oil reserves, Royal Dutch/ Shell could have done without more debate about its future in Nigeria, where it obtains almost a 10th of its production. A consultants’ report commissioned by the company has suggested it might have to withdraw from its extensive onshore operations in the Niger delta within the next five years because of violence in the region.

Shell says it has no such intention. But deteriorating security in Africa’s chief oil-producing zone demands that it and other oil majors undertake a fundamental rethink of the way they interact with the communities in which they operate.

Nigeria is probably the most graphic example of the “oil curse”, the link between oil and corruption, conflict and poverty in developing countries. Oil revenues, channelled through central government, have concentrated power and wealth and undermined other activities. Nigeria, once a farm exporter, now imports food and exports little except oil, gas and people. The Niger delta has become a zone of turbulence, fuelled by unfulfilled expectations of prosperity. In the midst of ethnic feuding, oil companies have had to face sabotage and blockades and large-scale theft of crude, the proceeds of which are used in part to buy arms.

Violence, which at one point last year led to 40 per cent of Nigeria’s oil output being shut down, has recently surged again. Chevron withdrew staff from swamp locations in April after two US oil workers and five Nigerians were killed and voiced concern about the future of its operations.

Shell, the first company to start exploring in Nigeria more than 50 years ago and the largest of the country’s six oil joint ventures, has been especially vulnerable. It was heavily criticised during a furore in 1995 over the execution of writer Ken Saro-Wiwa and eight other men after protests in the Ogoni area of the delta. Since then, it has put considerable effort into community projects, but with questionable success. The company accepts that its development activities “may have been less than perfect”.

But oil companies cannot act as substitute governments. The bigger cause of the Niger delta’s troubles has been the lack of effective or responsible government. Nigeria has taken some steps to correct this. In particular it has signed up to the UK-inspired Extractive Industries Transparency Initiative, publishing details for the first time of how oil money is distributed. A military crackdown on criminal activity in the Niger delta has proved costly, however, causing scores of deaths.

Big oil companies are likely to come under increased pressure. But local communities would not gain if they pulled out, as western operators did from war-torn Sudan, leaving less accountable Chinese, Malaysian and Indian state companies to fill the gap. The important thing is to face their responsibilities, not shy away from them.

Leaked Shell Nigeria Report PEACE AND SECURITY IN THE NIGER DELTA: December 2003

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