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Financial Times: R Dutch Shell to rethink its Nigerian security

R Dutch Shell to rethink its Nigerian securityBy Carola Hoyos and Alison Maitland in London andDino Mahtani,in Lagos
Published: May 16 2006 03:00 | Last updated: May 16 2006 03:00

Royal Dutch Shell, whose annual meeting takes place today, was having to “rethink completely” its security in Nigeria after recent kidnappings and attacks on installations, Jeroen van der Veer, Shell's chief executive, said.

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“You have to rethink completely and pull up your socks,” he told the FT. “We now have experiences that we didn't have before, so you have to do things differently.”

Militant attacks have cut 455,000 barrels per day of oil production and coincided with the kidnappings of several Shell oil contractors. Production has not returned to normal in the world's eighth-biggest oil exporter since the last significant attack in February.

It has emerged that Shell, which is Nigeria's largest foreign oil producer, has issued a tender for about 70 boats to renew its fleet and strengthen security in the Niger Delta. Shell also has more trouble with corrupt employees in Nigeria than anywhere else in the world. “Every year in Nigeria we have to ask people to resign. Nigeria is probably our most difficult country from that point of view,” Mr van der Veer said.

Asked about Shell's use of two contract companies run by local militant activists, he said it would be “a hell of a job” to screen all of its 20,000 contractors in the country for their political affiliations. He said it was important to use contractors from local communities because it enabled them to “see some of the 'goodies' coming back home”.

A draft Shell document obtained by the FT said the company was hoping for reconciliation to allow it to re-enter Ogoniland, a part of the delta that Shell had abandoned in 1993 after violent protests against environmental damage.

Life for Shell in Nigeria is not expected to become easier anytime soon. Mr van der Veer said he had been advised by his senior local staff to expect more turbulence ahead of Nigeria's presidential election next year. Compared with many of its rivals, Shell and its closest peer, BP, have a reputation for taking sustainable development seriously.

However, concern over Shell's record on community relations and the environment in several parts of the world is likely to surface at today's annual meeting.

A resolution by British and Irish church groups highlighting projects in the Niger Delta, Russia's Sakhalin island and Corrib in Ireland has raised “significant concerns relating to the loss of production, environmental costs and reputational risk” faced by the company.

The board is asking shareholders to reject the resolution from the Ecumenical Council for Corporate Responsibility, which calls on Shell to collaborate with local people before work on projects begins and to use independent social and environmental impact assessments.

Shell's directors said the demands “are adequately addressed through existing company practices and policies”.

Pensions and Investment Research Consultants (Pirc) has advised shareholders to vote against the directors' remuneration packages, finding “the upper and lower performance targets to be insufficiently challenging”.

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