[size=14pt]Don’t Blame Shell For All of Nigeria’s Problems[/size]
http://thefastertimes.com/internationalenergy/2009/08/03/dont-blame-shell-for-all-of-nigerias-problems/


[size=13pt]I recently watched a web Q&A session on Nigeria that was hosted by Shell. While it was not one of the most thrilling ways to spend an hour and a half, it was instructive to watch a major oil company trying to deal more or less forthrightly with its role as the largest oil operator in what is arguably the planet’s most troubled petro-state.

On the Shell side of the chat were six executives, including two Nigerians. On the other side were 445 registered participants—ranging from NGO representatives to concerned citizens, some of them Nigerians—and they were asking tough questions.

The overall sense one got from Shell was one of a company that is cognizant of the oil industry’s poor track record in Nigeria, and which these days is legitimately trying to be a good corporate citizen under difficult circumstances.

From the questions it was clear that Shell has a very serious reputation problem in Nigeria due to the sins of the past, in particular the environmental degradation of the Niger Delta. Largely because of this history, Shell will be pounced on for anything they do wrong in Nigeria—and for a lot of other things as well. On balance this seems to me to be a good thing. But the fact remains that beating up on Shell is pretty much irrelevant for helping solve Nigeria’s real problem, which is bad government.

Shell is the foreign oil company with the biggest presence in Nigeria, and has been for a half-century. It operates a joint venture that accounts for roughly 40% of Nigerian oil production and manages most of the country’s onshore oil infrastructure, including 6000 kilometers of pipelines.

Since 2006 Shell (and other Nigerian operators as well) have been forced to shut in large volumes of oil production due to severe security threats resulting from conflict in the Niger Delta. Total Nigerian crude oil production, which reached 2.6 million barrels per day in 2006, is now running at just below 1.5 million barrels per day. This disruption of Nigerian supply was one of the real-life factors that allowed speculators to push oil prices to its bubble price of nearly $150 per barrel last year.

Many of the questions and answers posed to Shell during the Q&A were about two environmental issues: oil spills caused by pipeline ruptures, and the flaring of natural gas. On these issues the Shell executives acknowledged the seriousness of these problems while trying to explain the constraints they face in solving them. They argued that most pipeline ruptures in Nigeria today result from attempts to tap into pipelines and steal oil. When ruptures do occur, the security situation makes it difficult to clean up the resulting spills quickly.

On the issue of gas flaring, Shell pointed to the $3 billion that its Nigerian joint venture have already spent to reduce flaring by 30%, while arguing that these investments have now stopped only because the state oil company NNPC refuses to fund its share of the remaining $3 billion that will be required. I was only partly swayed by this argument, since there are ways to proceed with investment programs in Nigeria even when NNPC fails to fund its share, but frankly I don’t think Shell deserves the opprobrium it was getting on this issue.



Overall I thought that there was too much attention on these environmental issues from the questioners. The presence of the oil industry in the Niger Delta has been an environmental and thus a human catastrophe: Of this there is no doubt. But most of this damage was done in the 1960s, 1970s, and 1980s, and my sense is that the impact of the oil industry’s present activity in the Delta is not of great significance when compared with the sad legacy of past operations.


Of greater concern for Nigeria today are poverty, conflict, and underdevelopment, all of which have the same deeper source: bad government. Here are the two sharpest questions and answers from the dialogue which touched on this theme, both answered by Shell’s Country Chairman for Nigeria:


Fiona
Does Shell believe that pollution and environmental damage associated with the oil industry (including oil spills, gas flaring, waste disposal, river dredging) over the past five decades has contributed to poverty and conflict in the Niger Delta?

Basil E. Omiyi
Yes, but even more so is the baseline demand of the people of the region for the Federal Govt. to grant them greater share of the oil proceeds (a political matter) as well as corruption, criminality, and general poor governance.

. . .

Angelo de souza
hello, I would like to ask: is shell optmist about peace in delta (end of militancy, vandalisation, kidnapping and so) as a result of the amnesty proposed by the govt?

Basil E. Omiyi
Given the fact that the political demand by the people in the Niger Delta for a greater share of the oil income is the main cause of the crisis in the region (as every person in the region will tell you) and not pollution or other secondary issues, I believe that the current dialogue between the Federal Govt and the people of the region if approached honestly and generously will lead to a solution.

I have mixed feelings about Omiyi’s focus on the division of oil revenues between the federal government and the states in the Niger Delta. (Currently the Delta gets 13 percent with the balance going to the central government and other states.) True, the perceived unfairness of this division is a serious political problem and part of what is driving militant groups like the Movement for the Emancipation of the Niger Delta. The people of the Delta certainly deserve to benefit more from the oil that is produced from beneath their land. Yet at the same time I find it hard to believe that shifting control of some billions of dollars of revenue from one group of Nigerian political elites to another would really help normal people.

But Omiyi is right on track when he says that Nigeria’s fundamental problems are “corruption, criminality, and general poor governance.” I suppose some might criticize this comment for not sufficiently acknowledging Shell’s share of the historical blame for Nigeria’s problems. But if we look at the present and the future, it is clear that Shell and the oil industry in general can do little or nothing to change Nigeria’s fundamental course. That is up to Nigerians, and particularly the political elite.

I feel obliged to mention in conclusion that there is an argument to be made—actually a rather powerful argument—that oil (or more properly, an economic orientation toward the export of natural resources) is at the center of the political and economic pathologies of a malformed petro-state such as Nigeria. The seminal book on the so-called “curse of oil” remains Terry Karl’s The Paradox of Plenty. But that’s an argument focusing on structure rather than the evil deeds of oil companies or corrupt governments—and a topic for another time.[/size]