Royal Dutch Shell Group .com

Financial Times: Deep well of troubles in Nigeria


By Michael Peel

Jun 09, 2004


A curtain of palm fronds hangs over the gate of the Shell Petroleum Development Company of Nigeria's pipeline manifold near the Eriemu oilfield, southern Nigeria. Above the entrance to the facility, which processes 54,000 barrels of crude a day, a length of ragged red material is tied to the barbed wire.


Both adornments have been added by local people protesting against the company, explains Prophet Peter Onovaye Oroviekovie, a community leader: the coloured cloth is a sign of war, while the palm leaves are a traditional warning for Shell employees and members of the security forces to keep away. "No SPDC man can come here, unless he wants to possess sickness and promote death," Mr Oroviekovie says with a laugh.


The scene illustrates the breakdown in the relationship between oil multinationals and local people in the Niger Delta, Africa's most significant oil producing region. Members of the Opherin community blockaded another Shell facility for several days in April in a protest aimed at forcing the company to resurface a potholed road. Shell says it will not rebuild the road but has agreed to greater dialogue with the community.


During the blockade Shell shut down 4,500 barrels a day of oil output: another commercial impact of working in an environment characterised by poverty and pollution, violent criminal activity and deep local anger at the failure of multinationals and corrupt governments to bring social development.


The unrest in the delta has worsened since the start of last year and has affected oil companies that operate onshore, including ChevronTexaco of the US, France's Total and Eni of Italy.


Last month five Nigerians and two US oil workers were killed after an attack on a boat sent by Chevron to determine if it was safe to restart 140,000 barrels a day of swamp production that has been shut down for security reasons since March last year. The incident, thought to be the first killings of expatriate oil workers in Nigeria, prompted Chevron to withdraw staff from swamp areas and send them to "safe havens".


Shell's entanglement in the Niger Delta's troubles is the deepest of any company. The Anglo-Dutch oil group established its position under the British colonialists who ruled Nigeria until 1960, shipping its first oil in 1958. Today Shell is the operator of a government-controlled joint venture that accounts for almost half of Nigeria's 2m-barrels-a-day production. The country accounts for almost 10 per cent of Shell's worldwide output and is one of its main focuses for developing new fields, many of them offshore: when Shell was forced to downgrade 3.9bn barrels of its proven global reserves earlier this year, one-third of the change came in Nigeria.


Nigerian oil is plentiful and of a high quality that commands a premium price. Earlier this year, Shell announced a programme of job cuts and administrative changes that were intended to reduce production costs from $2 to $1.50 a barrel. The price of Nigerian crude is about $36 a barrel.


The perception that Shell is making large profits and putting nothing back into the Niger Delta is strong around the Eriemu field, where local workers contracted to work at a company flow station readily explain why they joined last month's protest. They say acid rain caused by the burning of natural gas, a waste product from oil production, erodes the zinc roofs of their houses. As they talk, a child wanders towards the nearby jungle where a sign warns local people to "stop oil pipeline vandalisation". Shell says that in 2002, community disturbances and sabotage disrupted 39.4m barrels of production, equivalent to more than a month's output.


Behind the flow station, a waste natural gas flare rises high over a perspiring group of local women workers. They have arranged scores of wooden racks in a circle around the fire to dry their crop of tapioca, a white grain derived from cassava. The area, which is easily reachable by an ungated footpath, has a warning sign: "Danger!!! Entering of the flare area by unauthorised persons and tapioca drying at your own risk."


Beatrice Afokeya, one of the women, says the practice is risky but helps dry the tapioca more quickly for use by a community that is short of food and has seen few benefits from oil production. "We are aware that there may be some health implications but we don't seem to have any clinic," she says. "From year to year it's the same situation here."


The comments contrast with Shell's commitment, made almost 10 years ago, to improve its troubled relations with delta communities. The shift was a response to heavy international criticism of the company after the 1995 executions of Ken Saro-Wiwa and eight other delta social activists by the then military government. Shell says it has increased its budget for community work from less than $50m in 1998 to $67m in 2002; the company reckons three-quarters of its new projects, which range from skills training to healthcare funding, are successful.


Many people inside and outside the delta dispute this and say Shell's strategy has been a failure. The company is accused of spending heavily in certain favoured areas - so-called "host communities" next to production facilities - while ignoring others entirely. Activists say money is wasted on capital projects that communities cannot afford to run: in a report published earlier this year, Christian Aid, the British non-governmental organisation, described the Niger Delta as a "veritable graveyard" of non-functioning water systems, health centres that have never opened and schools where no lessons have ever been taught.


The longstanding community unhappiness is overlaid by the increasingly violent activities of youth militias armed with weapons that are flowing into the region. Fighting between members of the Ijaw and Itsekiri ethnic groups, who are involved in a bloody dispute over political representation and access to oil-rich land, has led to scores of deaths and last year caused the temporary shutdown of more than a third of the country's oil production.


The Nigerian army says the groups are buying arms from the proceeds of large-scale illegal siphoning of oil from pipelines: the theft, which also involves government officials, members of the armed forces and foreigners, cost Shell an estimated 6m barrels in 2002.


Harriman Oyofo, Shell's external relations manager in the oil city of Warri, claims many of the company's problems reflect the activities of a criminal minority rather than widespread public unhappiness. The tensions with communities that do exist often arise because Shell is being asked to perform a social function that should be the responsibility of government.


Asked if he thinks Nigeria's notorious corruption is part of the reason for the underdevelopment of the delta's swamp-based communities, Mr Oyofo says it is not Shell's place to make such criticisms.


Mr Oyofo says Shell has no plans to withdraw from the delta's swamps despite the security problems. Oil company workers are regularly kidnapped: Shell reported 24 hostage-taking incidents in 2002, although this was down from 45 the previous year. Mr Oyofo says Shell employs unarmed private security guards, although he denies local claims that the company controls members of Nigeria's security forces and has its own armed police.


Mr Oyofo says Shell's Warri office will stay open, although he admits the company's operations have become more difficult since contract companies working in areas such as seismic testing decided to leave the city to go somewhere safer. "We need them nearby so we can plan and we can talk," he says. "Now we have to schedule meetings days ahead so we can meet them."


The turmoil is another facet of a deepening social crisis in which big oil companies are both intimately involved and affected. Back at the Eriemu oilfield, Mr Oroviekovie hovers around the entrance to the manifold. "We want to enjoy some amenities from SPDC," Mr Oroviekovie says. "Because we have been abandoned and ignored."


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