Vanguard: Shell suspends restructuring, counts losses

Written by Leon Usigbe and Tordue Salem    
Tuesday, 12 February 2008 

ABUJA — Shell Petroleum Development Company (SPDC) yesterday revealed that it has suspended its planned restructuring of the company which attracted controversy but insisted that the exercise would save the company about $200 million annually when eventually effected.

But the Group Managing Director (GMD) of Nigerian National Petroleum Corporation (NNPC), Engineer Abubakar Lawal Yar’Adua believes that the restructuring was being carried out without due consultations with the stakeholders.

According to Shell Managing Director, Mr. Mutiu Sumonu the suspension which has already been communicated to the staff was necessary to enable it come to an agreement with its senior partners as well as create a synergy between SPDC and its subsidiary, Shell Nigeria Exploration Company (SNEPCO).
 
He was speaking at a meeting with the House of Representatives Committee on Petroleum Resources (Upstream) led by Hon. Tam Brisibe which had summoned him to explain the restructuring that was meant to lead to the retrenchment of many of its Nigerian staff.

Rationalizing the exercise, Sumonu explained that the issue was not just about retrenching staff but the survival of Shell, which he said was at the verge of collapse because of declining production and soaring cost engendered by the crisis in the Niger Delta and lack of access to  production areas.

“We used to produce one million barrel per day but due to the Niger Delta crisis, we are struggling to meet up with half of that. There is no access to our production in the west and we have maintained our staff strength up till this moment.

“We took a look at our future development plan covering 2008 to 2012 and discovered that business is already half of what it ought to be. The whole business output requires that we take some action in the  interest of the business, he said.

Also speaking at the hearing, the NNPC GMD remarked that even though NNPC as the senior partner was aware of Shells problems, the company failed to carry out necessary consultations before embarking on the restructuring exercise.

He cited the low performance of the oil company which he said was costing Shell about $1.2 billion saying however that the federal government was making arrangement to bail out Shell and other such companies through a special financial package it would arrange for them in next one week.

According to him, “we are aware of the Ogoniland issue and the question of vandalization as it concerns Shell and other oil companies. We hope to be able to overcome that soon. We had written to Shell to suspend the retrenchment that would have affected 3000 Nigerians especially now that the government is trying to stabilize.

He expressed fears that if the restructuring was allowed to go on as planned, it would affect transparency.

The GMD also remarked that many Nigerian staff of Shell have been prevented from progressing in the company adding that if the synergy Shell was talking about would affect the Joint Venture partners, then there was the need for further discussions before any restructuring could be carried out.

He however noted that NNPC was not against restructuring of Shell, but it has to be done over time.
 
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