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Nairaland Forum / Nairaland / General / Politics / After Fuel Subsidy, Will Gej Make Shell A Scapegoat? (745 Views)
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After Fuel Subsidy, Will Gej Make Shell A Scapegoat? by NiIntel: 7:06pm On Jan 04, 2012 |
The sale of these marginal fields such as OML 40, referring to oil and gas assets that have yet to be developed due to difficult location, infrastructure, and access, are bringing about a sharp increase of participation by indigenous companies. New players in the Nigerian oil sector include Mike Adenuga’s Consolidated Petroleum, Femi Otedola’s African Petroleum (AP) Consortium, Elcrest, and Neconde Energy. There are other indigenous companies which are actually backed by international finance, such as Oando (China), Perenco (Afren – a Nat Rothschild entity), and Equinox Group (Gazprom). But the reasons motivating Shell’s divestitures may be more complex than the challenges of violence, insecurity, and public scrutiny. After all, the company has survived some of the roughest periods of Nigerian history, including the murder of activist Ken Saro-Wiwa by the Abacha regime, which resulted in a $15 million lawsuit settlement. In 2008, attacks by militant groups such as the Movement for the Emancipation of the Niger Delta (MEND) had reached such heights, that Shell was forced to steeply cut production, driving global oil prices to record highs well above $120 a barrel. And yet, despite these harsh circumstances, the company persevered and held on up to the 2009 amnesty, which helped production recover. The problem for the company may be bigger than just oil spills, theft, and attacks, as some observers point to the pending passage of the Petroleum Industry Bill (PIB), which would revolutionize the tax and royalty structure for international oil companies doing business in Nigeria, carving out a sphere of participation in production and exploration (as opposed to simply regulation) for parastatal companies. First proposed in 2008 by the presidential administration of Umaru Yar’Adua, the PIB is a complex, 100-page document that has been repeatedly stalled in the legislature due to controversy and disputes over its contents and purpose. According to the former Minister of the Federal Capital Territory of Abuja, Nasir El-Rufai, international oil companies such as Shell stoutly oppose the passage of the PIB and are actively lobbying against it because the bill contains new royalties structures for offshore production (because the Nigerian government forfeited these rights in a 1991 agreement). And while the PIB remains stalled, much-needed foreign investment is put on hold. According to one analyst interview by The Financial Times, “The wait for the adoption of the PIB is very damaging. It’s why the big new investments have been put on hold. The impact becomes exponentially more problematic [because] if reserves don’t get replaced, there is the risk of production capacity in Nigeria dropping for the first time in 30 years.” As demonstrated by the overwhelming protests and public outrage over President Goodluck Jonathan’s decision to remove the fuel subsidy at the New Year, there is a strong social aspect to the country’s economic policies concerning the energy sector. For most citizens, who live on less than $2 a day, the fuel subsidy was seen as the only way that the oil wealth was shared – and, with its removal, there could be increased public support for the passage of the PIB that aggressively targets the traditional energy players with higher taxes and more difficult conditions. For the moment, public anger is directed toward President Jonathan and a small group of advisers. But if this pressure translates into real political costs for the administration, it is possible to imagine President Jonathan finding a scapegoat in the foreign oil companies, and satiating voters with promises to pass the PIB and enforce payments on environmental clean-up costs. If that’s the case, Shell’s divestitures may accelerate, while local companies – which are in no way more accountable – will take over more and more critical onshore production fields, posing an unknown risk to global energy supplies. Continue reading full article here. http://www.nigeriaintel.com/2012/01/04/shells-declining-role-in-nigeria/ |
Re: After Fuel Subsidy, Will Gej Make Shell A Scapegoat? by efisher(m): 8:06pm On Jan 04, 2012 |
Nice article. They have divested a significant number of assets. Some affected OMLs are 4, 26, 38, 41 and 42. OML 30 is still in the oven. I heard a number of staff were also "sold" along with the assets. The concern is whether the new operators will fare better in terms of corporate social responsibility and environmental issues. |
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