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Nigeria: Niger Delta – Financial Crisis Hits Shell


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Chika Amanze-Nwachuku

Production looses arising from the protracted Niger Delta crisis and alleged inability of the Nigerian Government to properly fund its own share of the Joint venture has put the Shell Petroleum Development Com-pany of Nigeria (SPDC) in a financial crisis.

THISDAY checks revealed that the Royal Dutch Company is cash-strapped and has been finding it difficult to meet some of its financial obligations.

A Shell Spokesman, Precious Okolobo, who admitted that the company’s operations in Nigeria was being hampered by many factors including funding, security and access, resulting in unreasonably high operating costs, however said “staff payments- whether for those in regular employment or on contract – continue to receive priority.”

He said although the company’s Joint Venture (JV) was currently experiencing a temporary shortfall in funding but that SPDC had continued to meet all of its obligations to its staff.

However, THISDAY learnt from company sources that the activities of militants and funding challenges have caused serious set backs in the company’s joint venture operations as well as the domestic gas projects to the extent that the company now finds it difficult to pay some contract staff.

Sources also attributed the current staff reduction being planned by the company to the financial shortfall, adding that some of the incentives the staff used to enjoy have been withdrawn.

“The situation is bad. We are in serious financial crisis. So the company has resolved to embark on a major staff down -sizing. For instance, before now, the company used to send its staff abroad for seminars, workshops and training programmes. These programmes are now being done online due to lack of funds to finance them” a source revealed.

It was learnt that no fewer than 3,000 staff of the company might be laid off in a major re-structuring that will be announced by the company soon.

The exercise which was to have been carried out last year but put on hold was viewed by some industry watchers as ‘a ploy to get rid of Nigerian staff.

Okolobo, however, maintained that the exercise was not targeted at Nigerians but was meant to strengthen its operation as well as pave the way for its continued interest and that of its numerous partners.

Reacting to the latest development, Okolobo denied reports that the company was no longer meeting its financial obligation to staff, insisting that staff payments – whether for those in regular employment or on contract – continue to receive priority attention.

“Staff payments – whether for those in regular employment or on contract – continue to receive priority attention and we aim to meet all such obligations,” he said.

Okolobo said Shell and Nigerian National Petroleum Corporation (NNPC) had agreed on the principles for future funding of the JVs.

“It is true that the SPDC Joint Venture is currently experiencing a temporary shortfall in funding. Shell and the NNPC have negotiated the principles for a deal for future funding. These will be subject to further detailed agreements – and it is therefore not proper to give details of the discussions, speculate on the outcome and too soon to comment on potential financial impact or production impacts from any agreement.

“Staff continue to undertake learning programmes in accordance with business priorities and individual development needs,” Okolobo said.

On the restructuring, the spokesman said changes were bound to happen as the company’s operations in Nigeria continue to be impacted by many factors.

“Shell operations in Nigeria continue to be impacted by many factors including funding, security and access and these have resulted in unsustainably high costs, so change needs to happen.

“We have been engaging the government and the other Joint Venture partners on the restructuring and its implementation. Generally, good understanding and appreciation of the exercise now exists and Shell is also able to take their concerns on board.

“An improved atmosphere for progress with the restructuring has been achieved. We are introducing a severance programme for Nigerian and expatriate staff, which will lead to staff reduction and we are committed to retaining the existing legal entities and maximising Nigerianisation. It is too early to comment on the extent of the reduction.

“We work closely with the government and our in-house unions on the severance programme. It is not true that the severance programme is targeted at Nigerians.”

Continuing, he said, “all staff – Nigerian and expatriate – will be affected. We have achieved a lot over the more than 50 years we are active in the country and are continuously looking for ways to increase the Nigerianisation in our companies by employing and developing Nigerian talent inside and outside the country.”


Niger Delta militants have continued to launch series of attacks on Shell’s facilities, a development that resulted in production shut-in of over 400,000 barrels per day. Minister of State for Petroleum, Odein Ajumogobia, SAN, had at a recent workshop in Abuja hinted that Nigeria still records production shut-in of over one million barrels per day owing to the crisis in the oil-rich region.

Specifically, Ajumogobia disclosed that Shell’s production capacity had dropped to about 700,000 barrels per day from the normal one million barrels produced, a development, which, he said placed Exxon Mobil, which produces 800,000 barrels as the biggest oil producer.

Managing Director of Shell Petroleum Development Company (SPDC), Mr. Mutiu Sunmonu, had in the wake of the continued attacks, admitted that the Niger Delta crisis had impacted negatively on the company’s operations but however debunked reports of the planned pull out, saying “Shell has come to stay”.

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He confirmed that due to the heightened insecurity, the company was unable to produce some 477,000-barrel per day in its Western area of operations.

Throwing more light on the funding issues between SPDC and the Federal Government, Sunmonu affirmed that funding problems had made it difficult for the company to meet both joint venture and contractual agreements and explained that the Joint Venture partners agree a work programme every year which they fund in proportion to their holdings (Nigerian National Petroleum Corporation 55 percent, Shell 30 percent, Total 10 percent and Agip five percent).

“We started in 2007 with an agreed work programme of $6.6 billion, subject to funding. When the funding was eventually made known to us, it came at $2.7 billion, creating a gap of some $3.9 billion.



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