Shell venture sheds another Nigeria stake - Oil & Gas Journal

Shell venture sheds another Nigeria stake - Oil & Gas Journal

WHEN WILL SHELL GET IT RIGHT IN THE NIGER DELTA?

According to Professor Luke Danielson, "Truly successful projects must be successful for investors, local communities, and host national economies. Increasingly, it appears that there is little opportunity for success in one of these dimensions without success in all of them. A project that has terrible results for investors is not going to benefit anyone else very much. A project that burdens the government of a poor country with all kind of costs of social dislocation and environmental problems while providing little or no revenue to deal with them is likely to have a long list of other problems. The idea that the company is going to be highly successful at meeting its own expectations without meeting the expectations of other key players is increasingly difficult to accept.”  “Sustainable Development in the Natural Resource Industries: New Perspectives, New Rules, and New Opportunities.”

The above is a perfect picture of the situation in the Niger Delta. Presently, in the Niger Delta, 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 civil society created an atmosphere that makes performance at projected level commercial impracticable, thus making it difficult comparatively, for Shell to remain in operation like most new oil companies in the same region, or at the same level that it was many years back. 

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 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. In similar vein, sustainable development of the local communities provides more stability than armed security network. 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.

It is sad that Shell is relinquishing its right to lucrative oil blocs and operations in the Nigerian Niger Delta, with ecstatic vigor after more than 50 years of a very profitable venture. I would rather they remain and find ways to improve on the sour relationship between its management in Nigeria and the   local communities.

I know what is wrong, and I can fix the problem. All I want is a free hand to run and manage the Government Relation or Public Affairs Department as the Director of Public Affairs - not more than one year contract with an office in Warri or Port Harcourt - and Shell will be back in the game again firmly and secured.