Nigeria: Oil and Gas Operations Fragile – Shell

Nigeria: Oil and Gas Operations Fragile – Shell

Vanguard (Lagos)

3 June 2008
Posted to the web 3 June 2008

Hector Igbikiowubo
Lagos

THE Anglo – Dutch oil giant Shell has described oil and gas expoloration and production in the Niger Delta as fragile given the prevalent threat of hostage taking and threat of attacks, while pointing out that in the last four years it has made $93 billion in CCS earnings, invested $60 and paid $55 billion dividends to shareholders.

These disclosures were made during a media video webcast addressed by the Jeroen Van Der Veer, the Group Chief Executive and other directors of the group last week.

“In terms of the security situation. I mean, as Jeroen said, positive progress I think but early days on the funding side. Security situation, I’m pleased, so we talk about the Delta and the Western Delta. The situation has improved over the last months, and we’ve been able to get some restoration and some improved access. But there are other areas where we still have the threat of attacks and hostage takings and so forth. So it’s a fragile situation.

“Where the federal government and the state governments are acting in concert we see generally some improvements, which have enabled us to get access. We still have around 140,000 barrels a day that’s Shell’s share shut in at the moment. We do see progress in restoring it. But I’m never going to predict at what pace or sustainability until the situations stabilize.

Bunkering, which is crude theft, is still going on to quite an extent and I know it concerns the federal government and the state governments greatly,” Malcom Brinded, one of the directors of the company said.

Speaking earlier, Jeroen said there are clearly two key problems in the Nigerian operating environment for Shell and that these are safety and the funding.

“We have two key problems in Nigeria. The security in the Delta and because we take safety very serious for our staff, that if they can’t work safely there, then we stop operations. And that is basically we have an important part of our onshore production shut in now for nearly two years.

And a second problem again for the onshore production were the funding problems. On both, I was ten days ago in Nigeria. I talked to various ministers, to the management of the state owned company and we had a meeting with the president. We made considerable progress on the funding issue and basically we agreed on the kind of concept and how to take it forward. But funding this is all big figures. So the precise numbers behind it are, of course, fairly important, whilst on the concept we agreed that we have still more work to be done.

On the safety situation, we see some progress. There’s a lot of attention to it but I think we are still not there as yet. I would like to say as well in Nigeria that our offshore operations and LNG plant, as Linda reported, they are – they were running well,” Jeroen disclosed.

He also said that in the last four years the company has made $93 billion of CCS earnings, adding that ‘now that of course fairly large numbers’.

“What did we do with that? We invested, in four years, $60 billion. And we are still on the steady increase of that investment.

What did we do for the shareholders? We paid back in the form of dividends and buy-backs over the last four years, $55 billion. Shell is now the leading investor in capital spending in the energy world. It is of course our largest program in our history. And we are, at this moment, in capital investments and projects, we are the largest investor of all the international oil companies.

We are also the leading contributor of dividends into the financial markets. Last year, 2007, Shell paid $9 billion of dividends. This is, by the way, the largest dividend payout in our industry as well.

If I look at building new heartlands, I would like to concentrate today on our portfolio and strategy. We have a consistent outlook of our industry. As our industry is, of course, full of challenges, but we like to see challenges as good opportunities. Our strategy is unchanged. It is more upstream and profitable downstream. I say always internally in Shell that if you have a company who has to change their strategy every year, that is not a good strategy.”

So I feel good that our strategy is unchanged and we feel good about it.In our strategy, we have a strong focus on capital discipline. But what are our priorities? Our first priority is safety. Process safety and personal safety. The second priority is operational excellence in the portfolio that is on-stream today.

And then we would like to have all our, preferably all our assets, that’s our ambition, in the top quartile compared to the industry. Our third priority is strong project management. And our fourth priority, below, the last one, is technology. We see technology as a key differentiator for Shell.

We are aiming to move our portfolio into top quartile. In top quartile, if you benchmark something to the competition, you have to do that on a fair basis. Apples-with-apples, as we say. So deep water with deep water, Oil Sands with Oil Sands, a complex refinery with a complex refinery.

In this way, I’m looking to have top quartile performance. Basically we look at operational rates or availability, so the part that makes the value; on the cost side, unit costs, apples-with-apples; but also we look top quartile for emissions, for the environmental behavior of our assets,” he disclosed.

Jeroen further disclosed that the company is not only investing but divesting and looking at ways and means of rejuvenating the portfolio and to find the right balance to create long-term shareholder value.

http://allafrica.com/stories/200806030102.html

This website and sisters royaldutchshellgroup.com, shellnazihistory.com, royaldutchshell.website, johndonovan.website, and shellnews.net, are owned by John Donovan. There is also a Wikipedia segment.