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The Financial Times: Nigerian moves come at time of turbulence for Shell


By Michael Peel

Financial Times; Mar 22, 2004


Royal Dutch/Shell's decision to cut jobs and close offices in Nigeria, one of its most important countries of operation, comes amid a shift to offshore production and a series of problems that have disrupted output from existing onshore facilities.


Nigerian union leaders are expecting between 20 and 30 per cent of the company's 5,000 jobs to go, although Shell insisted last night that it was "premature to speculate" on what the final number might be.


Shell's decision to put out a statement today on the restructuring, which was flagged up some months ago, is likely to be seen as a sign of preparation for one of the company's biggest and most painful shake-ups in almost 50 turbulent years of producing oil in Nigeria.


The brief statement says only that Shell plans to close offices and create a "single corporate centre" although it gives no details. The company links the restructuring to cost-cutting and its target to raise oil production from about 1m to 1.5m barrels of oil a day by 2006.


Shell is expected to drill an increasing amount of oil offshore in the Gulf of Guinea, meaning that the company will need less land-based infrastructure and is likely to experience fewer problems with community protests.


Chris Finlayson, managing director of Shell's Nigeria operation, told the Financial Times last week that the company was in the process of a review to decide how exactly the restructuring would be done.


He played down talk by union leaders of jobs cuts in the 20 to 30 per cent job range, adding that no targets had been set and no discussion on numbers had taken place with the unions.


"The size of any cuts have most definitely not been decided," he said. "That will only come in perhaps another 3 to 6 months, at the point of which we have gone through the full design of the organisation."


A Shell official confirmed last night that the company planned to move more staff towards the centre of oil-production in the Niger Delta, where the company has bases in the cities of Port Harcourt and Warri. Asked if this meant the company was going to close Shell House, its towering headquarters in Lagos's old Lagos Island commercial district, the official said: "We will not close the Lagos office. We will move [people] to where the operations are."


Nigeria, where Shell made its first shipment of oil in 1958, is the source of about 10 per cent of the company's oil production.


The country has also provided a staging post in the careers of senior officials such as Sir Philip Watts, the former chairman who was ousted this month.


As the country's biggest oil producer, accounting for almost half the national output of 2m barrels a day, Shell has been a target of the biggest community protests against the oil industry over issues such as pollution and employment policies.


The company was forced to overhaul its community relations policies after heavy international criticism over the 1995 execution of Ken Saro-Wiwa and eight other activists from the Ogoni region by the then military government.


Violence between members of ethnic groups in the region around Warri forced oil multinationals including Shell to temporarily shut down about more than 750,000 barrels a day of production a year ago.


Shell has faced a further problem of large scale oil theft from onshore pipelines and wellheads: it says it suffered losses as high as 100,000 barrels a day in the first quarter of last year, although the company and the government say the number has dropped sharply since.


Shell's Nigeria operation came under further scrutiny earlier this year when it was revealed that the country accounted for one third of the company's January 3.9bn barrel downgrade of its global proven oil reserves. Company officials say the reorganisation is not linked to the reserves downgrade, which stunned investors and led to the departure of Sir Philip Watts.


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