In this post we will be looking at a brief history of shell in Nigeria, its structures and stakes, shell Nigeria oil spill and shell deep water work.
INTRODUCTION.
First crude oil shipment was made from Nigeria by Shell in February 1958, while it also commissioned the Bonny Terminal in April 1961. Ten years after the commissioning of Shell’s Bonny Terminal, in September 1971, Shell’s Forcados Terminal was also commissioned. The first participation agreement was signed in April 1973 with the Federal Government with government acquiring 35 per cent shares in the companies. In April 1974, the Second Participation Agreement was when the Federal Government increased its equity to 55 per cent; in July 1979, the Third Participation Agreement, through the Nigerian National Petroleum Corporation (NNPC), and it increased its equity to 60 per cent. But in August 1979, the Fourth Participation Agreement resulted into BP’s share-holding to be nationalized and NNPC acquired 80 per cent while Shell had 20 per cent. Shell remains the Nigeria’s oldest energy company, and has a long term and continuing commitment to the country, its people and the economy. Shell companies in Nigeria produce oil and gas from land and swamps in the Niger Delta and from deep-water reserves some 120 kilometres off the coast. It also operates Nigeria’s largest liquefied natural gas (LNG) plant, which it exports all over the world. The largest contribution by Shell companies in Nigeria is through the taxes and royalties they pay, the energy they produce as well as their commitment to support and finance community development initiatives in the Niger Delta.
HISTORY OF SHELL IN NIGERIA.
Shell started business in Nigeria in 1937 as “Shell D’Arcy” and was granted an exploration license. In 1956, Shell Nigeria discovered the first commercial oil field at Oloibiri in the Niger Delta and started oil exports in 1958. Prior to the discovery of oil, Nigeria like many other African countries strongly relied on agricultural exports to other countries to support its economy. Many Nigerians thought the developers were looking for palm oil. The entry of Shell D’Arcy Exploration Company into the search for oil across the entire Nigeria colony in 1937 marked a watershed in the history of oil and gas resources in the Niger Delta region. The Anglo-Saxon Petroleum was renamed by that of the Shell Overseas Exploration Company on the official license in 1937. The exploration eventually resulted in a large commercial oil discovery in the Niger Delta area. Seismic surveying began in Eastern Nigeria, and Enugu became the seat of a temporary headquarters for the company. The colonial government had also granted Shell Company about 15,000 square miles of land along the coast of Lagos, and the company had begun exploration in places such as Nsukka, Okigwi-Afikpo, Port-Harcourt, Benin City, Cross River. The concentration of the exploration in these centers was the result of an earlier seismic survey by the Nigerian Bitumen Company, which found oil in large quantities in the eastern Delta. Once oil had been discovered Shell as well as other international oil companies rapidly expanded their operations. As Nigeria was beginning its own independent existence, Shell was involved in drilling wells, laying pipelines, constructing refineries, building port facilities, developing flow stations and exploring for new oil. They were creating a sizeable number of new but short-term jobs, typical for the startup and construction phase of mining companies, as well as many on-going positions. They were as well contributing to the government through taxes and royalties. During the Biafran war, they withdrew temporarily from the Delta. The war had in part been occasioned by disputes over the degree to which regional, local, and/or the federal governments should be able to control the wealth created by oil production. In order to enhance production of oil, the federal government had also undertaken practical steps to maximize the oil wealth, adopting an open-door economic policy that permitted oil companies both local and international an equal access to exploration and production rights in the Ijaw area by doing this, the government had laid a strong foundation for the development of Petro-business in the country, and for maximum profits. Consequently, indigenous oil companies were registered and obtained licenses for oil drilling from the petroleum ministry, particularly Henry Stephen Delta Oil, Niger Oil Resources, and the Niger Petroleum Company which later became significant oil business ventures in the country. The Shell Petroleum Development Company of Nigeria emerged as the major role-player in the oil sector, recording total oil business estimated at 49.12 percent of the country’s total. Closely related were Chevron Nigeria and Mobil Oil, with a total production capacity valued at 15.9 percent and 12.3 percent respectively. Other oil companies, such as ELF Nigerian Services, Agip Oil Company, Nigus Petroleum and Dubril Oil Company accounted for about 22.6 percent of production. The high percentage recorded by Shell-BP points to the monopoly of rights enjoyed by the company during the colonial period, when it had exclusive rights for oil exploration in the whole country.
SHELL STRUCTURES AND STAKES.
Shell is one of largest businesses in the world with sales in 2000 of almost $94 billion. Technically Shell is not one company but a group of more than 200separate companies governed overall through two legally independent but collaborating holding companies in the Netherlands and Great Britain. Overall, these companies employ more than 100,000 workers and operate in more than 120 countries. A six-person Committee of Managing Directors provides executive direction to the overall Shell group. The Shell Group of companies are involved in exploration and production of petroleum, the distribution and marketing of refined products, chemical manufacturing, as well as various other activities they list under the broad category of Renewables.
- Shell Petroleum Development Company
Shell Petroleum Development Company (SPDC) is the largest fossil fuel company in Nigeria, which operates over 6,000 kilometres (3,700 mi) of pipelines and flowlines, 87 flow stations, 8 natural gas plants and more than 1,000 producing wells. SPDC’s role in the Shell Nigeria family is typically confined to the physical production and extraction of petroleum. It is an operator of the joint venture, which composed of Nigerian National Petroleum Corporation (55%), Shell (30%), Total S.A. (10%) and Eni (5%). Until relatively recently. It operated largely onshore on dry land or in the mangrove swamp.
- Shell Nigeria Exploration and Production Company
Shell Nigeria Exploration and Production Company (SNEPCO) was established in 1993. It operates two offshore licenses, including for the Bonga Field.
- Shell Nigeria Gas
Shell Nigeria Gas (SNG) was established in 1998 for Shell Nigeria natural gas activities and natural gas transmission system operation.
- Shell Nigeria on Oil Products
Shell Nigeria Oil Products (SNOP) – The principal activity of the company was the marketing and distribution of refined petroleum products, lubricants and industrial chemicals.
- Nigeria Liquified Natural Gas
Nigeria LNG (NLNG) is a joint venture for liquefied natural gas production. Shell has a share of 25.6% in this company and is also its technical adviser. Other partners are Nigerian National Petroleum Corporation (49%), Total (15%) and Eni (10.9%).
SHELL NIGERIA OIL SPILL.
In addition to the spills caused by ‘oil bunkering’, oils spills can also occur as a result of the quality of the equipment being used to extract and transport the oil. These spills are referred to as ‘operational spills’ and can be caused by corrosion, a lack of regular maintenance of the equipment, and overall underinvestment in the equipment being used. 18.7% of the spills reported by Shell since 2011 are labeled to be ‘operational spills’. Oil spills can also occur as a result of natural hazards causing damage to pipelines.
In 1970, there was an oil spill from a Shell pipeline caused primarily by corrosion and operational failure resulting in over 250 barrels of oil spilled. The resulting effects included the pollution of the surrounding air, water, and soil, as well as, a loss of the surrounding ecological and aquatic species. Health problems in the surrounding areas were also cited as an impact of the oil spill. In 1978, another spill from a Shell pipeline due to corrosion and operational failure was reported to have leaked 580,000 barrels of oil. The resulting impacts were air, water, and soil pollution in the area of the spill.
In 2006, a team of experts in environmental assessments from Nigeria, the United Kingdom, and the United States were independently organized to conduct a Natural Resource Damage Assessment in the Niger Delta. They concluded that over the past fifty years, around nine million to thirteen million barrels of oil had been estimated to have spilled in the Niger Delta. Shell is responsible for around fifty percent of the oil production in Niger Delta. Between 1998 and 2009, Shell oil was responsible for 491, 627 barrels of oil spilled, averaging about 41,000 barrels per year.
SHELL DEEP WATER WORK.
Shell has a long history of developing energy projects using its knowledge, experience and proven deep-water technologies to unlock new resources safely and efficiently. Delivering many major projects around the world in countries including Brazil, the USA, Nigeria, and Malaysia. Shell has helped develop many of the deep-water technologies and processes that energy companies use today. It has helped set new designs standards for the world’s tallest platforms. And it has pioneered safe operations at the deepest wells around the world. Shell was also the first major offshore operator to apply round-the-clock, real-time monitoring of drilling operations from shore. In the Gulf of Mexico lies Shell’s Stones project. Operating in around 2,900 metres (9,500 feet) of water, Stones is a floating production, storage and offloading (FPSO) facility which produces oil and gas from reservoirs nearly 30,000 feet below sea level. Thousands of kilometres away off the coast of Sabah, Malaysia, lies Shell’s Gumusut-Kakap platform, a project that produces oil from 19 deep-water wells in seas that are 1,200 metres (3,900 feet) deep. Tropical storms are common in this region. To anchor the platform securely, engineers used a remote-controlled robot to attach it to four giant mooring lines. These lines secure the platform against waves of up to eight metres (25 feet) and winds that can gust at hundreds of kilometres an hour.
Shell’s deep-water operations also boost economic growth and benefit local communities. At the Bonga North West project in Nigeria, 90% of people working on it are Nigerian. All five major engineering and construction contracts for the project were awarded to companies locally-headquartered or invested in the country. The five companies completed the project ahead of schedule, with no reported injuries to staff during 4.16 million hours of work.
CONCLUTION.
Shell in Nigeria was faced with the responsibility of finding ways to balance returns to overseas investors, the federal government which had a 55% interest in the Joint Venture, the government again that assigned tax rates, Delta residents who felt that it was minerals under their lands that produced the wealth in the first place as well various workers. While the Nigerian government had considerable power to determine basic rules within which Shell managed their financial wealth, Shell like other businesses in these kinds of settings retained room for various kinds of maneuvers. Our concern in this essay has been to explore what might be learned by reviewing how Shell managed the monetary, natural, and social resources with which it was entrusted. The increase in monetary wealth created by the oil production in the Niger Delta, the continuing poverty of the Delta residents, as well as the reduction in natural and social capital occasioned by the oil business. We have been interested in exploring what might be learned from reviewing this history so that these kinds of operations might prove more beneficial and less impoverishing to developing areas. As Shell Group now acknowledges forthrightly in their annual report, the business interests of companies must take into account the social and environmental impact of their operations.