The Guardian: Shell 'may have to leave Nigeria'
Friday June 11, 2004
The embattled Anglo-Dutch oil giant Shell was today facing fresh embarrassment as an internal report said it could have to pull out of Nigeria because of violence in the Niger delta region.
The confidential report, dated December 2003 and obtained by the Bloomberg news agency, was commissioned as part of the company's efforts to help develop a "peace and security strategy" in the area.
It said violence in the Niger delta, where a majority of Nigeria's oil reserves are located, kills around 1,000 people each year.
The 93-page survey - carried out by WAC Global Services, Nigeria-based specialists in conflict resolution - said Shell itself "feeds" the violence, and may have to leave the area by 2009.
The oil company admitted that conflict "had the potential to get worse" if no action were taken, but did not agree that it would have to withdraw.
"The government and local communities must take the lead, but we are determined to help," Simon Buerk, a Shell spokesman, said. He added that Shell was creating partnerships with non-governmental groups and aid organisations to help local communities in the delta region.
"We have signed a partnership with USAid [the US Agency for International Development] to develop capacity in agriculture, health and business enterprise, and with Africare [a non-governmental organisation] on reducing deaths from malaria," Mr Buerk said.
The Niger delta is rich in oil but is also an area of great poverty, creating a volatile situation. The two million barrels of oil pumped from the delta each day provide more than 90% of Nigeria's foreign income, but the delta communities have little to show for it beyond contamination and violence, with youths resorting to hostage-taking and extortion.
Emmanuel Etomi, the community development manager for the Shell Development Company of Nigeria, said on Shell's website: "I live in a society in serious conflict. This is being fed by corruption, poverty and high unemployment among youth in a region where little of the oil wealth has been returned to the people."
Mr Etomi, alluding to the report commissioned by Shell, said research by conflict experts had highlighted how the company "sometimes feeds conflict by the way we award contracts, gain access to land, and deal with community representatives; how ill-equipped our security team is to reduce conflict; and how drastically conflict reduces the effect of our community development programme".
The confidential report comes at an already difficult time for Shell, which is struggling with the aftershock of downgrades of its oil reserves by one fifth. The downgrades were followed by the resignation of chairman Sir Philip Watts and explorations director Walter van de Vijver.
Around one third of the recent reserves downgrade came in Nigeria, where oil and gas account for 10% of Shell's current production.
With Nigeria a thorn in its side, it was little small surprise that Shell was considering a 20% reduction of its Nigerian workforce, although cutting 1,000 jobs in a poor country could further strain the company's relations with the Nigerian government.
Those are already difficult, with the civilian government of Olesegun Obasanjo trying to recover hundreds of millions of pounds worth of tax credits handed to oil companies during previous military dictatorships.
Shell's record in the Niger delta has come under fire from environmental groups, including Friends of the Earth. Brian Shaad, a parliamentary campaigner for the group, who has just returned from the Niger delta, said it was unlikely that Shell would get out of Nigeria because it accounted for an important chunk of the company's production.
"What is clear from meeting a number of communities is that Shell is not meeting its environmental and social expectations of the community," he said. "However, many leaders do not want Shell to necessarily pull out, but to behave itself."
Mr Shaad spoke of frustration among the delta communities because their first point of contact with the company often came through Shell's security forces, a situation he described as "guns first".
He said there was also frustration among those working for Shell, because workers were employed by subcontractors rather than the company, meaning that they did not get the full benefits accorded to full Shell employees.
Mr Shaad also criticised the Nigerian government for what he called lax standards in regulating the behaviour of oil companies, which have long stood accused of not cleaning up oil spills and pipeline blowouts.
The problems at Shell have attracted the attention of Calpers, the largest US pension fund, which has demanded a high-level review of its boardroom structure. The California public employee's retirement scheme has put the oil group on its annual list of companies needing to boost performance.