Shell Petroleum Development Company in the Niger Delta

Kizler-1

Shell Petroleum Development Company in the Niger Delta:

Modernizing Nigeria’s Oil Exploitation for Profit, the Environment and Local Populations

Josh Kizler

March 10, 2011

EPM 4230: Energy Fundamentals

Instructor Arthur Purcell, PhD
Introduction

In over 30 years of oil mining, the Ogoni nationality have provided the Nigerian nation with a total revenue estimated at over forty billion Naira, thirty billion dollars. That in return for the above contribution, the Ogoni people have received NOTHING.(Saro-Wiwa 1995, 68)

Dissimilar to the recent Deep Horizon or 1989 Exxon Valdez oil spills, in which oil expeditiously spewed into earth’s waters, Nigeria’soil experience is listless, painful, and seemingly endless. The link between oil wealth and the destruction of native enterprise is not unique to Nigeria, but common among oil bearing nations (Riddell 2003, 26). Quoted above, deceased poet and activist Ken Saro-Wiwa reduces decades of utter neglect by the Nigerian government and transnational corporations to one truth—the Nigerian people have not prospered from the oil on their lands. Amidst international opposition, the government confirmed its disinterest in entering into discussions with Saro-Wiwa by hanging him and eight of his colleagues for speaking against the devastation imposed by oil conglomerates.Equally guilty, locally-operating oil firms failed to intervene while continuing to earn billions of dollars (US) in revenues from Nigeria’s crude reserves.

Having long dismissed agricultural exports, Nigeria’s economy and leaders unilaterally depend on Nigeria’s oil reserves and the transnational corporations that exploit them. As Africa’s greatest oil-producing nation, Nigeria’s wealth continues to escape a populous which as a majoritylives below the poverty line.Extending the resourcefully-rich and economically-poor dichotomy is the Niger Delta, which sources 95 percent of the country’s oilbut has slightly higher poverty rates than Nigeria as a whole (Aaron 2005, 127).The Nigerian government, transnational oil companies, and the oil mining central to their operations are wholly to blame. Environmental catastrophe from oil mining shapes local life, with subsistence farmers and fisherman consigned to intoxicated soils and watersheds, residents accustomed to the constant flash of oil flares, and females traveling greater distances to find potable water.Through the freedom that the government allows foreign investors to desecrate the environment in return for their economic inputs, the government directly profits from such local turmoil (Kiel 1992). Encouraged by the government’s land entitlements and non-regulatory environmental schemes, the Shell Petroleum Development Company (SPDC/Shell) leads the rush for Nigeria’s oil.

The SPDC is a powerful, wealthy corporation with no concerns but those of its shareholders. The SPDC’s operations in the Delta would be unacceptable by the people or government in any developed nation. Essentially voiceless, Delta residents continue to protest peacefully, and to allow violence and theft to penetrate their lands by other Nigerians who target the oil firms’ staff and infrastructure.The tapping of pipelines, kidnapping of rig workers, and the threat ofsuch incidences has prevented oil infrastructure within the Delta from operating at peak capacity. Such activism has become the most effective method to combat SPDC’s irresponsibility in the Delta. Shell, “responsible for about half of Nigeria’s daily output of 2.6 million barrels of oil”, has at times experienced the halving of production levels as a result of such action (Aspen Publishers 2007).Shifting from a negligent, deleterious, operating approach driven by short-term profits to one of long-term principles could produce economic gains for the firm. SPDC is limited byboth its shareholdersand the Nigerian government from reforming its operating procedures,but well positioned to benefit from pursuing a greater degree of corporate responsibility.

Background

History

In 1908, the exploration of Nigeria’s marshlands by a German company seeking bitumen deposits illustrated the country’s potential for natural resource excavation (Walker 2000, 72-73). Shell first explored for Nigerian oil in 1937 while the region was still under British colonial rule, anddiscovered its first commercial oil field in 1956 (Boele, Fabig, and Wheeler 2001, 75). Between1973 and 1983 the surge of Nigeria’s oil industry drastically shifted the country’s economy away from agricultural dependence to that of oil reliance(Walker 2000, 71).Per 2009 statistics, peak production exceeded two million barrels per day with Nigeria positioned as the world’s fourteenth greatest and Africa’s greatest oil producer (EIA under “Top World Oil Producers, 2009”).

Politics

Per the Land Use Act of 1978 and successive constitutional clauses, the Nigerian government retains exclusive rights to the country’s oil reserves, while proportions of the accrued revenue are allocated to the communities where the oil is mined.While the Nigerian constitution originally provided for a 50% allocation to such regions actual allocations have been much lower(Boele, Fabig, and Wheeler 2001, 76). Exemplifying the extent of the government’s eminent domain is a 1999 constitutional clause, which states that “the entire property in and control of all mineral oils and natural gas in, under, or upon the territorial water and the exclusive economic zone of Nigeria shall vest in the government of the federation”. When Nigeria joined the Organization of the Petroleum Exporting Countries (OPEC) in 1971 it was required to nationalize a majority stake in all of its oil endeavors, which was facilitated by the government’s ability to seize “any land needed for oil exploitation” (Boele, Fabig, and Wheeler 2001, 76). Therefore, the exploitation of Nigeria’s oil falls well outside the domain of Nigeria’s general population, and entirely within the jurisdiction of the Nigerian government.

The Nigerian government allows transnational corporations (TNCs) to acquire land at little or no costunder the premiserevenues produced from oil mining on those lands will be shared between the TNCs and the government. Considering the dearth of economic development in Nigeria,this profit sharing remains undetectable among the general population. Almost 100 percent ofrevenues are believed to benefitthe country’s elite government workers, suggesting that Nigerian lands are sold by the government with virtually no interest for the general population. This government corruption enables its leaders to become rich while simultaneously permitting TNCs to exploit Nigeria’s land and people without accounting to the government for their acts.

Compared to the rest of Nigeria, the Deltahas more highlighted poverty, with economic indicators such as good roads, electricity, potable water, housing, medical care, and educational facilities alllacking (Aaron 2005, 127).Operating through its Nigerian subsidiary SPDC, Shell controls roughly half the land in the Delta, and as the dominant foreign producer has been under intense international pressure to act more responsibly for the Delta’s environment and population(129). IllustratingShell’s irresponsibility in Nigeria is its involvement in hundreds of pending court cases for operations in-country, many of which concern oil spills (Frynas 2000, 161). In order to minimize its liabilities, Shell prolongs the legal proceedings in which it is involved in order to wear on plaintiffs’ resources,thereby inducing economic hardship on plaintiffs who must then cease their pursuit in the courts.

Environmental Impacts

In a 2007 article titled Shell Still Hell, the New Internationalist quoted Niger Delta resident Ifieniya Festavera stating “an oil spill flows through my river so I can't get fresh water. Gas flares give us acid rain—when we build houses the roof leaks within three to four months”.References to the Delta as one of earth’s most polluted places are attributable to the oil industry. Thousands of oil spills have destroyed wildlife, damaged soil fertility, and degraded watersheds. Higher acidic levels of the soil and hydrocarbon content of the water have had adverse chemical effects on biodiversity. Oil-polluted mangroveshave experienceda decline in fish, crustaceans, and the death of a large number of birds and mammals (Ipingbemi 2009, 10). Locals describe the impacts from oil spills to include air unsuitable for breathing, brackish water color, withering plant shrubs, and “crude oil estimated at half a meter thick (2009, 15).Adverse health impacts on humans include increased water-borne illness, transmission of pollutants via food crops, “aggravation of asthma, increased hospital admission for respiratory conditions, chronic lung diseases, bronchitis, and accelerated aging of the lungs” (Okoji 2002, 203).

Socioeconomic Impacts

Local populations depend almost entirely upon the environment for their livelihood, thus absorbing the environmental consequences of oil mining at the socioeconomic level. Lands previously used to farm are no longer conducive to crops and watersheds used to fish can no longer support aquatic life. Children have forcibly quit school as a result of their parents’ inability to pay tuition costs, and workers must seek alternative sources of income in order to support their families (Ipingbemi 2009, 13). People and farms have been displaced by “the intricate traversing and overlay of oil pipelines and rigs within the region” (Onwuka 2005, 658), whilepersonal commutes havebeen rerouted.Resource competition existed between ethnicities independently of oil companies, but ethnic disputes have augmented in determining who receives compensation for oil spills based upon ownership of the spoiled resource (Okoji 2002, 200).

Substandard Practices

Standard operating procedures with adverse impacts on the environment are acceptable worldwide, but Shell employs substandard tactics which augment its environmental footprint. Most oil mining requires geological and geophysical surveys involving the “cutting of traverses, seismic operations, identification of rock formations…the vegetation is cut down, the terrain is dotted with seismic holes while seismic explosions scare away wildlife and cause buildings to crack or collapse” (Okoji 2000, 717). Drill rigs require the assembly and erection of heavy equipment, modification of the underlying ground support, the building of new roads, the cutting of new water channels, or expansion to existing infrastructure (717). Leaks occur accidentally during oil transport and waste is produced at various steps in the excavation process. All the above describe oil-industry norms in no way unique to operations in the Delta, though several procedures specifically employed in the Delta would not be accepted elsewhere (Aspen Publishers 2006).

Specifically in the Delta, pipelines used to transport oil are greatly susceptible to corrosion and technically inferior to those used in developed countries. Gas flaring techniques, reserved for emergency situations in developed countries, are systematic in SPDC’s daily operations. Oil spills, whether from local sabotage, malfunction, or SPDC malfeasance, are responded to slowly and remediated partially.“According to Shell data, the company’s equipment and errors were responsible for fifty-three spills in 2008, a total that would lead to immediate action anywhere in the developed world” (Chavkin 2010, 24).The ubiquity of Shell’s usage of substandard practices in Nigeria suggests that the firm implements such practices as standard operating procedure and an accepted cost of doing business.

Gas flaring, the process by which the gaseous byproducts of oil mining are burned on-site, is permitted only in emergency situations in developed countries, but routine to Shell’s Delta operations. “The proper use of flares is a good engineering practice because flares can prevent damages, fires and explosions, and injuries to employees” (EPA, 1). But the routine usage of flaring causes “unacceptably high releases of sulfur dioxide and other noxious pollutants”(1). Developed countries re-inject these gases back into the ground or contain or transport them for commercial or industrial use, while oil flaring is permitted and used only for the release and burning of over-pressured gases which might otherwise cause an explosion.Shell attributes the decades-long absence of re-injection and containment infrastructure in the Delta to the Nigerian government’s failure to meet its financial obligations.So Shell uses gas flares 24 hours per day, causing environmental effects that include thermal conduction, particulate emissions, and high radiant energy, while“changing night into daylight, preventing sound sleep and scaring away wildlife”(Okoji 2000, 721-722).

Oil spills, while not intentional, could also be considered part of Shell’s operating procedures, in that more spills have occurred in the Delta than any other place on the planet.From 1989-2000, there were 2252 incidents of oil spills, with approximately 536,000 total barrels of oil spilled, of which only 4.3 percent was recovered (Ipingbemi 2009, 9). Thevarious causes of spills include the separating of or damage to pipelines, leakage, oil tank overflow, and sabotage by Nigerian groups. Shell, often been blamed for using outdated pipelines which are more susceptible to corrosion than modern pipelines, counter-blames local populations for intentionally causing spills to receive compensation. Furthermore, the percentages of oil spills which Shell asserts were caused by sabotageare strikingly inconsistently across media sources and citations (Human Rights Watch 1999).

Operational Conflict

Oil spills have become central to speculation and blame regarding the environmental degradation in the Delta. Shell’s passing of guilt onto thelocals for “sabotaging” pipelines in order to receive compensation as mandated under Nigerian law is standard practice. However, Shell’s reasoning suggests that locals, by their own free will, have decided that their most profitable response to their current plight involves the sabotaging of their own lands. Premising such a theory concurrently with the fact that the majority of locals depend upon the land for their survival infers that locals might have finally forfeited the well-being of the land. Perhaps this is attributed to the irreparable damage to the land caused by oil excavation sofarmers and fisherman can no longer use it. However, compensation provided by industry to locals is neither guaranteed nor particularly prosperous, therefore placing suspicion on the notion that the Nigerian population would disvalue its greatest resource—the environment.

The allegation that locals would resortto consciously destroying their own environment, used as habitat and workplace, for incendiary gain, is debatable.During a spill, 88.4% of locals run at a loss during spills, while 8.9% make less profit than normal (Ipingbemi 2009, 17). Furthermore, the compensation provided by industry is often menial, only equivalent to the gains derived from one harvest cycle of the damaged resource. Mango trees have been observed to provide fruit for as long as 300 years, rendering the industry’s basis for compensation off one harvest cycle grossly inadequate and inequitable. Locals who depend on mangoes and similar crops for their livelihood would briskly learn that industry compensation is insufficient in meriting its invitation through intentional sabotage. Considering that the risks of a spill exceed the loss of livelihood, it is not in the best interest of the populations most dependent on the land to ruin it. Considering the continuance of oil spills throughout Shell’s presence in the Delta, the hundreds of thousands of barrels of lost oil, and Shell’s ability to maintain profits, it seems more logical to blame Shell.

The industry status quo has not been to prevent oil spills from happening, but rather to perceive them as a standard risk and accepted consequence of doing business in the Delta. While there should be economic incentives in place for industry to prevent spills, the opposite is more truthful. Instead of voluntarily investing in infrastructure which might safeguard against the frequency of spills, Shell has deferred to compensating locals and forfeiting any oil spilled, which represents pennies in comparison to oil retained.Furthermore, response time to spills is often slow, even during the presence or threat of fire(Ipingbemi 2009, 14). Delays in response time have been attributed to locals attempting to increase the resulting incendiary gain from greater damage wrought by the spill (Aaron 2005, 132). Furthermore, “an oil company has an economic self-interest in claiming sabotage in court as it can escape compensation payments to communities” (Frynas 2000, 161). Shell’s entireapproach to the Delta, including its slow responsiveness to oil spills and its claims against locals in both the media and the courts, suggest that Shell thrives from an operational standard of scapegoating and irresponsibility.

If spills have been unsuccessful in thwarting industry’s unadulterated exploitation of the Delta, local rebel groups have at times severely limited production outputs. The least abrasive tactics of these groups—tapping into pipelines and siphoning oil—if not vindicates local populations at least identifies the root of some of the oil spills. Such local groups may reside outside the vicinity of areas impacted by the pipes they tap into, or such groups might flee in commerce with the oil. More striking is the recurrence of hostage-taking by these armed militia groups, which typically return the hostages for a ransom. When serious, threats by rebel groups have at times led to reduction in Nigeria’s oil exports by as much as 20% (Aspen Publishers 2006). Rebel groups are not representative of those local groups most affected by the mining, and considering that several leaders have been paid off, the groups’ mission is likely driven by profit rather than social justice. This should not discount Ken Saro-Wiwa and advocacy groups which defend the rights of Nigeria’s people and have a genuine interest in protecting the Nigerian people against big business.