Shell Spent 40% of Global Security Budget on Nigeria, Articles | THISDAY LIVE

Shell Spent 40% of Global Security Budget on Nigeria, Articles | THISDAY LIVE

Shell should reconstitute or take a second look at its office of Public Affairs (Government Relations) in Nigeria with a view to imbuing them with a new approach to sustainable development, social license and community engagement initiatives. When the leadership and the management team of Shell in Nigeria consider the  surrounding communities where they exploit oil as enemy territory and deal with the owners of land as expendable interest, the report should not be unexpected. The local communities and the people come first. Shell Global Management should blame Nigerian citizens who are in leadership positions within the Shell operation in Nigeria for their problems in the Niger Delta. They would rather spend money on security, bribing the local chiefs than investing proudly in the communities where they milk the black gold. We are not surprise by the report, because we wrote about the security and unfriendly relationship between Shell and the people in the Niger Delta extensively in the past.

The following is an excerpts from our article titled "Bonga Oil Spillage: Niger Delta, and Sustainable Development" posted January 02, 2012 (http://hamiltonatlarge.blogspot.com/2012/01/bonga-oil-spill-royal-dutch-and.html)

Presently, it cost Shell much more to provide security for its workers and facilities in comparison to what other oil companies, similarly situated, pay to maintain production at the same capacity.  The facts are whenever Shell declares force majeure; both Shell and federal government suffer enormous financial setbacks, running into millions of dollars in revenues, royalties, and taxes. When those are factor into the huge security budget and the replacement cost resulting from recurring expenses associated with burning and lootings, you would have much more than enough to finance the demands of the local communities before they escalate out of control into kidnapping proportion. According to International Finance Corporation (IFC)“before disputes escalate to settlement at international level, companies must ensure that they have in place adequate mechanisms for dispute resolution between its stakeholders and the communities. A grievance mechanism should provide a way for the communities to hold the company accountable, to be sure it take community inputs seriously, deal with them through a clear and transparence process, follow through with actions, and communication with the community.”

The interest of the local people overrides all other considerations. You cannot provide bread and butter for the local chiefs and made millions of dollars available to influential politicians to write off your taxes, and expedite contracting process, while 99.9% of the people do not have clean water to drink, cannot fish, and cannot farm.

Exploration of crude oil is intertwined with environmental hazards and other problems; therefore, same effort and resources should be devoted to managing exploration and disaster preventive measures and control.

The demand for the integration of human rights, human development and sustainable development within the framework of every investment agreements in the extractive sector, is not just an in intellectual exercise. It is real and achievable, if diligently pursued. Investment Treaties and Stabilization Clauses do not provide the kind of stability that developing some forms of relationship (social license) with the community provides. 

The earlier nation-states and foreign investors embrace and acknowledge the interests and concerns of indigenous people and inculcate those concerns into their final investment agreements, the closer we are to peace and sustainable human development in the mineral producing areas anywhere in the World. Nothing enriches shareholders value more than sustainable income.

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Finally, it is our firm belief that any IOC that values life, liberty, freedom, and fundamental human rights of others, especially people living in and around mines and rigs; any IOC with genuinely concern for living things, creatures, and the environment in and around its facilities; any IOC that values peaceful investment climate inherent in cordial business relationship with local communities, should not prevaricate on these issues and the solutions proffered. 

Therefore, we strongly hold that the number one problem facing multinationals in the extractive sector, especially in developing countries, Niger Delta in particular, is a failure of corporate responsibility. In addition, host nation should hold IOCs liable for any financial loss resulting from declaration of force majeure unconnected with natural disaster, or unforeseeable catastrophic occurrences. Also, we firmly believe that the health and environmental hazards prevalent in the oil producing areas and Niger Delta in particular, are preventable, and the economic deprivations and financial losses inherent in oil spillage and pollution are compensable. And that host nations and communities should demand for punitive damages where catastrophic occurrences are foreseeable, egregious, and preventable.

The United Nations has over the years developed numerous papers and articles on this very issue of integration of human rights and investors’ interests in natural resources agreements with host nations for the purpose of ensuring sustainable development. The one that I find most revealing and enliven, is the Rio Declaration of 1992. Four of the articles are reproduced below.

“Human beings are at the center of concerns for sustainable development. They are entitled to a healthy and productive life in harmony with nature...The right to development must be fulfilled so as to equitably meet developmental and environmental needs of present and future generations…In order to achieve sustainable development, environmental protection shall constitute an integral part of the development process and cannot be considered in isolation from it…Indigenous people and their communities and other local communities have a vital role in environmental management and development because of their knowledge and traditional practices. States should recognize and duly support their identity, culture and interests and enable their effective participation in the achievement of sustainable development.” UN RIO DECLARATION: Principles 1, 3, 4, & 24

December, 2011

The following is another excerpt from the article titled "Stabilization Clause versus Human Rights (an abridged version appeared on AIPN discussion Board on Linkedin)" that was posted on March 23, 2012.

Given the restive situation in the Niger Delta, it is trite to conclude that stabilization clauses standing alone, cannot guarantee the stability that investors desire in an economy. Presently, Anglo-Dutch Shell BP and AGIP are downsizing operations in Nigeria, because of the upsurge in vandalism, kidnapping, and the indiscriminate destruction of construction facilities by the militants in some parts of the Niger Delta. In fact, Nigerian government did not introduce a new tax regime, or changes the dynamics of the regulatory framework governing any PSA. The civil society created an atmosphere that makes performance at projected level commercially impracticable, thus making it difficult comparatively for Shell to remain in operation as it was 10 or 15 years ago. So, stabilization clause as a safety net is not full proof.

There must be in place mechanisms for resolving and promptly too, of disputes and disagreements between IOC and local communities  before they escalate to mass protest, vandalization of pipelines, and kidnapping of expatriate workers. No doubt, "grievance mechanisms will respond to project needs better if they are established early as measure to preempt rather than react to escalation of tension with surrounding communities."[ii]

Similarly, investment treaties and stabilization clauses do not provide the kind of stability that developing some forms of relationship (social license) with the community provides. Susan Joyce put it better, "the governments define the scope of legal compliance, but the broader scope of the responsibility to respect is defined by social expectations – as part of the company’s social license to operate."[iii]

In light of the foregoing, the call for integration of human rights, human development, and sustainable development initiatives within the framework of every investment agreement, shouldn't be seen as just another intellectual exercise. It must be encouraged in order to ensure peaceful co-existence between every IOC and local communities. Given the scale of   nationalization of foreign investments by host governments in the past decades, foreign investors and their negotiators must be circumspect of undue advantages and the often weak bargaining power of host nations during negotiation process. 

Suffice it to declare at this juncture that stabilization of the interests of local communities provides more stability than stabilization clauses in any investment agreement. In similar vein, sustainable development of the local communities provides more stability than convoluted taxation formular embedded via stabilization clauses into investment agreements by IOCs and their highly skilled and powerful Lawyers and Accountants. It is more about social license - engaging and interacting with the local people socially and economically. Based on indisputable facts, social license trumps stabilization clauses as far as investment stability goes in foreign soil. More emphasis should be on the office of Director of Public Affairs – an office with a positive and social mandate, with the ability to project positive social image of IOCs before the local communities.  Therefore, Lawyers, Accountants, and Geologists who represent some of these multinationals having investments or contemplating investments in developing countries should be cognizance of these developing trends in natural resources agreements and be conscious of the fact that stabilization clause has its limitations.

Thank you.