Impact of the Petrochemical Business in Nigeria - Focus on Shell

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Shell in Nigeria

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The Government documented 6,817 spills practically one a day for 25 years but analystssuspect the real number may be ten times higher. The Niger Delta is one of the worlds most

polluted regions

National Geographic, Sights and Sound of the Curse of the Black Gold,

February 20071

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Djeneba Sidibe

Summer 2007


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Djeneba SidibeSMPP 297, Summer 2007

SMPP 297

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Table of Content

I. INTRODUCTION...............................................................................................................................................3

II. BACKGROUND OF NIGERIA........................................................................................................................3

III. THE OIL INDUSTRY IN NIGERIA................................................................................................................5

IV. DESCRIPTION OF THE IMPACT THAT SHELL HAS ON THE ENVIRONMENT..............................8

V. LEGISLATION.................................................................................................................................................12

VI. WHY HAS SHELL FAILED ITS SOCIAL RESPONSIBILITIES AS A CORPORATION?.................12

VII. CONCLUSION..................................................................................................................................................14

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I. Introduction

The case study that I have chosen to discuss is about the impact of the petrochemical business inNigeria, more specifically in terms of global warming. I decided to discuss this topic not only

because it addresses corporate social responsibility issues by a British/Dutch corporation withoperations in the U.S. and the U.K., but also because it tackles corporate social and governmentresponsibility in Africa. As of January 2006, Nigeria had more than 35 billion barrels of provenoil reserves. It is the largest oil producer in Africa and the 10th largest producer of crude oil inthe world2. As of 2007, Nigeria is thefifth largest exporter of crude oil andpetroleum to the U.S.3.In the 1970s, the country saw an oilboom and joined the Organization ofPetroleum Exporting Countries

(OPEC). Most of the oil is extractedfrom the southeastern Niger Deltaregion and, over the years, the oilspillages in Nigeria have haddramatic effects on the environmentaland societal tissue of the country.The impacts are often reported in thenews, yet, so far, they have notechoed far enough for action to betaken.

In this paper, I want to a) describe theNigerian background and the oilindustry, b) assess the impact ofRoyal Dutch Shells oil drillingbusiness in Nigeria, and c)understand why they have failed theirsocial responsibilities as acorporation.

II. Background of Nigeria

It is important to understandNigerias background to understandthe climate in which Shell operates. Nigeria is situated on the gulf of Guinea and is surroundedby Benin, Niger, Cameroon, and Chad. With more than 133 million inhabitants, Nigeria is themost populous country in Africa.

History

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Federal Republic of Nigeria

Flag Coat of arms

Capital Abuja

Largest city Lagos

Official languages English

Government Federal republic

- President Umaru Yar'Adua- Vice President Goodluck Jonathan

Independence from the United Kingdom

- Declared and recognized October 1, 1960

- Republic declared October 1, 1963

Area

- Total 356,667 sq mi (31st)

- Water (%) 1.4

Population

- 2005 estimate 133,530,000

- 2006 census 140,003,542

- Density 374/sq mi

GDP (PPP) 2005 estimate

- Total $175.5 billion (47th)

- Per capita $1,188 (165th)Currency Naira () (NGN)
http://en.wikipedia.org/wiki/Flag_of_Nigeriahttp://en.wikipedia.org/wiki/Coat_of_arms_of_Nigeriahttp://en.wikipedia.org/wiki/List_of_national_capitalshttp://en.wikipedia.org/wiki/Demographics_of_Nigeriahttp://en.wikipedia.org/wiki/Lagoshttp://en.wikipedia.org/wiki/Official_languagehttp://en.wikipedia.org/wiki/English_languagehttp://en.wikipedia.org/wiki/List_of_countries_by_system_of_governmenthttp://en.wikipedia.org/wiki/Federal_republichttp://en.wikipedia.org/wiki/President_of_Nigeriahttp://en.wikipedia.org/wiki/Vice_President_of_Nigeriahttp://en.wikipedia.org/wiki/History_of_Nigeriahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/October_1http://en.wikipedia.org/wiki/1960http://en.wikipedia.org/wiki/October_1http://en.wikipedia.org/wiki/1963http://en.wikipedia.org/wiki/List_of_countries_and_outlying_territories_by_areahttp://en.wikipedia.org/wiki/List_of_countries_and_outlying_territories_by_areahttp://en.wikipedia.org/wiki/List_of_countries_by_populationhttp://en.wikipedia.org/wiki/Population_densityhttp://en.wikipedia.org/wiki/Gross_domestic_producthttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)http://en.wikipedia.org/wiki/Per_capitahttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capitahttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Nairahttp://en.wikipedia.org/wiki/ISO_4217http://en.wikipedia.org/wiki/Flag_of_Nigeriahttp://en.wikipedia.org/wiki/Coat_of_arms_of_Nigeriahttp://en.wikipedia.org/wiki/List_of_national_capitalshttp://en.wikipedia.org/wiki/Demographics_of_Nigeriahttp://en.wikipedia.org/wiki/Lagoshttp://en.wikipedia.org/wiki/Official_languagehttp://en.wikipedia.org/wiki/English_languagehttp://en.wikipedia.org/wiki/List_of_countries_by_system_of_governmenthttp://en.wikipedia.org/wiki/Federal_republichttp://en.wikipedia.org/wiki/President_of_Nigeriahttp://en.wikipedia.org/wiki/Vice_President_of_Nigeriahttp://en.wikipedia.org/wiki/History_of_Nigeriahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/October_1http://en.wikipedia.org/wiki/1960http://en.wikipedia.org/wiki/October_1http://en.wikipedia.org/wiki/1963http://en.wikipedia.org/wiki/List_of_countries_and_outlying_territories_by_areahttp://en.wikipedia.org/wiki/List_of_countries_and_outlying_territories_by_areahttp://en.wikipedia.org/wiki/List_of_countries_by_populationhttp://en.wikipedia.org/wiki/Population_densityhttp://en.wikipedia.org/wiki/Gross_domestic_producthttp://en.wikipedia.org/wiki/Purchasing_power_parityhttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)http://en.wikipedia.org/wiki/Per_capitahttp://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_capitahttp://en.wikipedia.org/wiki/Currencyhttp://en.wikipedia.org/wiki/Nairahttp://en.wikipedia.org/wiki/ISO_4217


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During the 16th century, the British colonized an African coastal area that is now known asNigeria. They kept on penetrating inland until the beginning of the 20th century. By then, theyhad established a protectorate to establish their trade businesses. Nigeria encompassed more than250 ethnic groups that were until then unrelated. The British governed the country byestablishing two separate regions in 1914, Northern and Southern Nigeria. In the south, they

introduced Christianity mainly to the Igbo (also spelled Ibo), while in the north, Islam prevailedwith the Hausa and Fulanis. In 1960, Nigeria gained its independence from the British. Sincethen, the country has been reorganized as a federation of 36 states spread over a surface two andhalf times that of California. For most, it is no surprise that, til this day, feelings of nationalism

are linked to very strong ethnic andreligious interests.While the country is rich in naturalresources such as natural gas,petroleum, iron, coal, and zinc,ninety-five percent of exports arein petroleum and petroleum

products. The country is the fifthlargest exporter of crude oil, afterCanada, Saudi Arabia, Mexico, andVenezuela.4Oil is mainly found inthe southeast of the country, theNiger Delta region, populated bythe Ogoni, Ijaw, Igbo, and Itsekiri.

Conflicts

Post-colonialism, Nigeria has had atumultuous history. In 1967, the

Nigerian Civil War erupted, when the southeast region of the Biafra declared its independence.The war was ignited by the short-lived coup led by Igbo officers and the violent confrontationthat ensued with the Muslim Hausa and Fulanis as a reprisal: Lieutenant Ojukwu declared theindependence of Biafra, a mainly Igbo populated region. In the process, he annexed other oil-richareas populated by the Ogoni and the Ijaw to gain access to the sea. The Federal Government inLagos refused the secession. The war lasted for three years and it is estimated that millions diedof famine and illness. Yet, in the past years, there has been a public resurgence of pro-Biafrasentiment among some Igbo who claim they are marginalized. This movement is led by aseparatist group, the Movement for the Actualization of the Sovereign State of Biafra(MASSOB).5 Also, clashes between Christians and Muslims (usually Igbo Christians and Hausaor Fulani Muslims) have been continuous since the end of the civil war.

Since independence, the country has been ruled by several military governments and plagued bycorruption. In the 1990s, the spotlight was brought on the plight of Ogoni people by theMovement for the Survival of the Ogoni People (MOSOP) and its leaders trial and execution(Ken Saro-Wiwa). Saro-Wiwa was a writer and businessman who became a political activistbringing to the forefront issues faced by his people. The 1990 Ogoni Bill of Rights demandedmore autonomy, more profits from the oil extractions, and reparations for the environmentaldamages made the southeastern region of the country, the Ogoni land, by Shell Petroleum. In

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1994, Saro-Wiwa was arrested for the third time and was tried and sentenced to death by theautocratic and sanguinary Abacha regime. He was executed in 1995 with eight other MOSOPmembers. The international community expressed outrage and Nigeria faced expulsion from theCommonwealth nations, suspension of bank loans, an UN Human Rights Commissioninvestigation, all while worldwide protests took place. Yet, these sanction had little effects

because the leading global economic powers did not want to slow the outflow of oil. Westerncountries are also afraid of destabilizing Nigeria because of the countrys economic andgeopolitical importance in Africa and beyond. It is believed that Shell aided and abetted andfacilitated the torture and death of Ken Saro-Wiwa. A 2001 Greenpeace report found that twowitnesses that accused them later admitted that Shell and the military had bribed them withpromises of money and jobs at Shell. Shell admitted having given money to the Nigerian military[].6 In 2003, Shell Nigeria acknowledged that we sometimes feed conflict by the way weaward contracts, gain access to land, and deal with community representatives.7 In 2002, a NewYork City court granted relatives of Ken Saro-Wiwa the right to sue Shell for a suit filed in 1996:it still might take years for the case to be heard in court.

The Current Nigerian CrisisThe latest Nigerian crisis is the consequence of years of abuse by the oil companies and thefailure of the local and federal governments in fulfilling basic needs. The local inhabitants havegrown to support the militant groups because they were neglected by officials and foreigners.The Movement for the Emancipation of the Niger Delta (MEND) has been leading the latestcrisis by attacking oil infrastructures and kidnapping foreign oil workers. MEND is an Ijawmovement that is demanding that both the Nigerian government and the MNCs listen and actupon their requests or get out of the Niger Delta. What are their requests? Simply put, MENDwants a share of the oil profits that are sucked out of the ground in the region and never make itback into their communities. The Ijaw want the control of their oil, their environment, their lives,their profits, and their future.

III. The Oil Industry in Nigeria

Description

The first discovery of oil in Nigeria was in 1956, close to Port Harcourt in the south of thecountry. Since then, all of the major oil companies have established more than 7,200 kilometersof pipelines, 159 oil fields, and 275 flow stations, their gas flares visible day and night frommiles away.8 By law, all oil companies have to enter the Nigerian oil market through a jointventure with the Nigerian National Petroleum Corporation (NNPC).The two biggest players are:1. NNPC: The NNPC is the Nigerian government-owned corporation through which it

regulates and supervises the country's upstream and downstream developments and thepetroleum industry as a whole. In 1972, the Nigerian government passed a law toguarantee its portion of the oil revenues. Over the years, several additional laws werepassed by the military governments: in 1975 a decree increases increased federalgovernment share in oil sector to 80%, with only 20% going to states; and in 1977 amerger of the Nigerian National Oil Corporation and the Federal Ministry of Mines andPower led to the creation of the NNPC.

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2. Shell Nigeria: Shell Nigeria is a joint venture operated by Royal Dutch Shell, whichholds 25.6%, while the NNPC holds 49%, TotalFinaElf holds 15% and Agip holds10.4%. Shell Nigeria is by far the largest oil multinational in Nigeria and it brings in 40%of the of the total crude oil production (880,000 to 1,000,000 barrels a day). Shell Nigeriais comprised of four different entities9 focusing on the upstream business but also doing

some downstream business through Shell Nigeria Oil Products :Shell Petroleum Development Company (SPDC)- Shell Petroleum Development Company (SPDC) is the largest oil and gas

company in Nigeria and has over 6,000 kilometers of pipelines and flowlines, 87flowstations, eight gas plants and more than 1,000 producing wells.

Shell Nigeria Exploration and Production Company (SNEPCO)- Shell Nigeria Exploration and Production Company (SNEPCO) is geared to

become Africa's leading deepwater oil and gas company. SNEPCO has made animmense contribution to technology transfer into Nigeria through the introductionof complex deep water technology.

Shell Nigeria Gas (SNG)- Natural Gas may be the driving force behind Nigerian industry by 2010.Shell Nigeria Oil Products (SNOP)

- A serious player in the downstream sector developing the market for Shellbranded products and services.

The organization that I will be focusing on is the SPDC, the petroleum branch of Shell Nigeriabecause it is the most important part of Shells business in Nigeria. The Company discovered thefirst commercial oil field in the country at Oloibiri Bayelsa State and the joint venture agreementfor the SPDC involves the NNPC, which holds 55%, Shell 30%, Total 10% and Agip 5%. TheSPDC employs more than 4,500 people directly of whom 95% are Nigerians. Some 66% of theNigerian staff members are from the Niger Delta. Another 20,000 people are employed indirectlythrough the network of companies that provide supplies and services.

Other Stakeholders

There are many stakeholders involved in the Nigerianoil business. The Nigerian Federal Government, thelocal government and authorities, activists and themedia, local communities, and the internationalcommunity are some of them.

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Civil

Society& NGOs

Civil

Society

& NGOs

Local & Intl.

Community

Local & Intl.Community Employees

Employees

CustomersCustomersState & Loca

Govt

State & Loca

Govt

Federal GovtFederal Govt

MediaMedia

Civil

Society& NGOs

Civil

Society

& NGOs

Local & Intl.

Community

Local & Intl.Community Employees

Employees

CustomersCustomersState & Loca

Govt

State & Loca

Govt

Federal GovtFederal Govt

MediaMedia


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The Nigerian Federal Government: Oil is a crucial source of revenues for the West Africannation: in 2003, oil receipts account for 80% of total federal receipts and it is estimated that theNigerian government has received $200 billion from oil exports between 1970 and 1990.10 TheNigerian government receives 60% of the profits from the field whereas the most Nigerians liveon less than a $1 a day. 11 This is not surprising since Nigeria is listed 146th out 163 countries on

Transparency Internationals (TI) 2006 Corruption Perception Index (CPI). 12

TIs CPI lists themost corrupt countries in the world. It is widely recognized that corrupt in all of its forms --bribery, embezzlement, extortion, cronyism, nepotism -- is an impediment to economic, human,environmental, and social development, as well as an obstacle to political stability. Corruptioncreates inefficiencies and distrusts in the system. The fact that Nigeria has had various militaryregimes in place also has been a key factor of the involvement of the government in the oilbusiness. Military regimes are known for their instability and each regime came to power with anumber of changes. In 2007, amid much controversy about fraud and (irregularities, a newpresident, Umaru Yar'Adua, took office. The government has yet to make climate change apriority.

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The Local Government: the local governments are key players in the oil industry in Nigeria.Most of the funds that are supposed to be redistributed from the federal government to the localcommunities go through local authorities and never reach the local populations. Also, demandsby the local populations never get heard at the federal level because the local representatives areeasily bribed. However that is not the extent of the role of the local governments. They havemade serious demands from Shell to obtain compensation for the damages to the environment.Nevertheless, when Shell and other oil companies make payments to the local government

officials, most of the money is siphoned into individual bank accounts. Thus, the localgovernment becomes the main bottleneck to an efficient and transparent usage of funds fromboth the federal government and the MNCs. The federal government and the MNCs know it butthey want to keep this system running to accommodate their own shady dealings, rather thanspending more money on environmental issues that affect the livelihoods of the localpopulations.The Activists and Media: it is through the activists and the media that alarms have beensounded about Shells involvement with the MOSOP and Ken Saro-Wiwas death, the oil spills,

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and the environmental consequences of Shells actions. Organizations such as Human RightsWatch, Transparency International, media outlets such as the National Geographic, BBC News,and the availability of news via the Internet and satellite, have renewed the pressure on theNigerian government and Shell to take action.The International Community: the international community is a key player because they are

the purchasers of oil and they are also the country of incorporation of the multinationals causingthe damage. Shell is a British/Dutch company and it clearly uses a double standard. It does notabide by the same rules in the U.K./Netherlands and in Nigeria. Various countries could putmore pressure on the Nigerian government to act, but those foreign governments then face boththeir taxpayers unhappiness when faced with higher gas prices, and the powerful oil lobbies.The Local Communities: the local communities of the Niger Delta suffer the most from theeffects of the oil business, yet they have the smallest voice of all, unless they take an extremestand such as the MOSOP, the Niger Delta Vigilante (NDV) or the Movement for theEmancipation of the Niger Delta (MEND) have done. In those instances, they have displayedtheir power to rock the oil prices worldwide and that they are a voice to be reckoned with.

IV. Description of the impact that Shell has on the Nigerian environment

Over the years, the impacts of Shells business practices have been documented by variousorganizations and media outlets. Not only is it because Shell is the largest oil producer inNigeria, but it is also because, for years, Shell has been brazen in its denial of the issues thataffected the region. Historically, Nigeria has had a combination of vast mangroves, wetlands,tropical forests and savannah grassland. Local populations have displayed safe environmentalpractices, which were interwoven with religious, mystical, and cultural practices. With thecolonization and the exploitation of oil, all of those practices were discounted. Yet, a few lawswere passed to protect the environment.

Socio-Economical Impacts: Although, oil revenues have increased throughout the years,unemployment, illiteracy, water-related diseases, and poverty are high in the Niger Delta region.Safe drinking water, proper sanitation, and electricity are scarce. The pollution of theenvironment has led sources of food and income to be destroyed. The large fishing industry isalmost no longer existent because of the polluted waterways. Moreover, the reliance on oil,caused Nigeria to fail to diversify its economy and to encourage new industries. On theirwebsite, Shell states that it is aware of the problems face in the local communities and that it iscontributing to the socio-economic development of the Niger Delta where [they] operate [They] are equally committed to supporting the government in promoting transparency andtackling corruption.

Ecological Impacts: environmental protection is atough issue to tackle in any developing country.Though several of Shells oil spills have beendocumented, several have gone unnoticed. Oil spillsare the most dramatic accidents and they usuallygarner more attention. It is estimated that from 1976to 1996, more than 79 million gallons of oil havebeen found their way into the environment. One of

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The mangrove forests of Nigeria rank asthe largest in Africa, the third largest in the

world. 7000 km2, of the African totalmangrove stock of 9,730 km2, is found inthe Niger Delta. The Delta is important forbiodiversity and human survival. Up to60% of fishes caught between the Gulf ofGuinea and Angola breed in the mangrove

belt of the Niger delta.

Environmental management of offshore oil

development and maritime oil transport,

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the biggest incidents was the March 1998 spill of 840,000 gallons in the mangrove forest fromShells Jones Creek Station. The accident, blamed on a pipeline failure, polluted the water andkilled the fish. A study by the World Bank documented the reasons for Shells spills in the NigerDelta, with the first cause being corrosion of equipment. It is also believed that to avoid taking

responsibility for damages to the environment, Shell has tried to use claims of sabotage to avoidcostly lawsuits or clean-up costs.14

Oil & Gas Flaring

Still, other events have occurred throughout the decades, endangering the ecosystem in the NigerDelta, such as oil flaring. Oil flaring refers to the practice of burning-off surplus combustiblevapors from a well, either as a means of disposal or as a safety measure to relieve wellpressure15. The practice contributes significantly to global climate change, and more specificallyglobal warmng, by adding about 350 million tons of CO2 in annual emissions 16.

Worldwide, the country that practices the most gas flaring is Nigeria. For the first 20 years or soof the industry, almost all the AG was flared: 2.1 billion cubic feet per day (bcf/d) or 92% in1981 for example. This percentage barely declined during the 1980s, standing at about 88% in1989. It seems to have reached about 2.6 bcf/d in the late 1990s, including venting, though bythen this was about 75% of all gas production17. This is 60% more than Russia, the second topgas flaring country.18 Indeed, Nigeria currently flares up to 75% of the gas it produces.Historically, the then-called Shell-BP was the first company to flare gas in the 60s because it isthe cheapest way to dispose of natural gas. During that same period, the British governmentpublicly stated that the practice was dangerous and that it should be discouraged. However, it didnothing to pressure Shell-BP to take the necessary actions or build the required infrastructures,

contrary to its national policies that minimized gas flaring in the U.K. Shell-BP never took itupon itself to invest in environmental protection, even though in the U.K. it was seen as a goodcorporate citizen. This is a blatant example of the double-standard in the corporate strategy of theorganization. I cannot help but think that had the British government taken a difference stance inthe 60s in regards to its former colony, the Nigerian gas flaring situation might have neverreached these catastrophic heights. At the time, the U.K. government was more interested in theprofits that were repatriated to Europe. Meanwhile in 1976, the U.K. passed a law banning theflaring of gas on its territory (section 12 of the Energy Act 1976).

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SPDC is the biggest oil company in Nigeria, it flares the most gas. Here is a table of SPDCsown figures in mmcf/d. It is worth mentioning that these numbers have been questioned andseveral CSOs have accused SPDC of underestimating the problem.

There several reasons why so much gas is flared in Nigeria:- Undeveloped domestic market for gas and gas products- Low gas and gas product prices

- Lack of gas infrastructure- Security issues- Minimal electricity transmission and distribution network19

Various stake holders have been calling for the national goal of zero flaring in 2008, but that goalis unlikely to be met. However in 2004, the government, the NNPC, and the GGFR met and inan effort to reduce GHG, they agreed to build carbon credit capacity building and focus on gasflaring reduction.

However, the Nigerian government is trying to reduce its dependency in oil and in doing so,increase its production of natural gas and develop opportunities for investment in that sector:Nigeria is believed to have an estimated 124 trillion cubic feet (Tcf) of proven natural gas

reserves - 9th largest in the world.20 Acid rain, which is acombination of sulphur dioxide and nitrogen oxides withatmospheric moisture, is one of the most visibleconsequences of gas flaring in Nigeria. Acid rains in theWest African nation have polluted waterways, killedvegetation and crops, and damaged infrastructures.

Nigeria signed and ratified the Kyoto protocol. It is part ofthe non-Annex 1 countries, meaning that it is not required totake any action to reduce its emissions by 5% compared to1990 levels by 2012 like the Annex 1 countries are.

Therefore, Nigeria is not as worried by the restrictionsimposed by the protocol but by the environmentalconsequences that will affect the country if emissions are notreduced globally. In the event of global warming, the countrycould face the following:

a) The low-lying lagoonal coasts would be threatened bysea-level rise, especially since the largest cities are onthe coast.

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b) Large amounts of environmental refugees migrating to the coastal areas because of risingtemperatures

c) Endangerment of food production and security, especially in the northern part of thecountry

d) Diseases, such as vector- and water-born illnesses and mutations of previously existing

diseases.e) Disruption of electricity generation and hydroelectric dams due to temperature increasesince Nigeria relies heavily on hydroelectricity (which accounts for over 36% share of itselectricity energy sources).

To address gas flaring several options are available to Shell Nigeria:- Capture and re-injecting the gas into the oil reservoir,- Capture and delivery through a pipeline to an end user, and- Capture and process the gas into liquids (that is, liquefied natural gas [LNG], gas-to-liquids

[GTL], or liquefied petroleum gas [LPG]) that can be transported and sold locally orinternationally.21

In general, choosing the appropriate option(s) depends on upstream conditions, such as fieldcharacteristics and the oil-to-gas ratio, downstream market opportunities for the recovered gas,and the legal and fiscal frameworks that may include various incentives and penalties.22 SPDChas been focusing on the third option, capturing and processing the gas to be sold as energy. In2001, SPDC outlined the following plan to stop gas flaring:

SPDC Corporate Strategy for Ending Gas Flaring in Nigeria, A Paper Presented by Basil Omiyi, then ExternalRelations Director, SPDC, at a seminar on Gas Flaring and Poverty Alleviation in Oslo, Norway, 18th-19th June,2001, page 13.

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The SPDC set 2008 as a deadline, until 2003, when it announcedThe SPDC had agreed to the 2008 deadline, until 2004, when it announcedconstruction of ...[gas gathering facilities]... will only be completed by the end of 2009,which means that gas flaring from the relevant flowstations will not be eliminated untilthat time.

Then in 2004, the SPDC followed-up:construction of ...[gas gathering facilities]... will only be completed by the end of 2009,which means that gas flaring from the relevant flowstations will not be eliminated until thattime. The culprit that SPDC blames in its 2006 Nigerian annual report? Sabotage: AtSapele, SPDCs facilities are completed but the gas uptake could not start due to sabotage.

Since then, no new updates have been made available by SPDC.

V. Legislation

The Federal Ministry of Environment is responsible for all activities undertaken to addressclimate change in Nigeria. In 1978-79, the federal government enacted the Land Use Act whichdeclared all minerals, oil, natural gas, and natural resources were the legal property of theNigerian federal government. In my estimation, this law also puts the burden of responsibilitymore heavily on the government than on other parties. In 1994, Nigeria signed the UNFramework Convention on Climate Change (UNFCC), whose ultimate objective is thestabilization of greenhouse gas concentrations in the atmosphere. In 2004, Nigeria signed theKyoto protocol, and then ratified it in 2005.

In 1996, the Federal Government of Nigeria prepared a report called "Vision 2010", in which itset 2008 as the flares-out date. In 2005, a Clean Development Mechanism was put in placethrough the Kyoto protocol mechanism and supported by the World Banks Global Gas FlaringReduction Public Private Partnership (GGFR) to reduce greenhouse gas emissions (GHG).

In 1984, the Nigerian government had passed the Associated Gas Reinjection Act: under section3 of the act, gas flaring is illegal. However, the law has never been enforced. In 2005, based onthat law, several local communities sued the NNPC and Shell to stop gas flaring. Thecommunities were acting with the support of the Environmental Rights Action/Friends of theEarth Nigeria (ERA), a nonprofit organization focusing on environmental issues.

VI. Why has Shell failed its social responsibilities as a corporation in Nigeria?

In 1996, Shell was the first energy company to publicly state its support of the 1948 UniversalDeclaration of Human Rights. In 2003, Shell was the first oil company in Nigeria to publish theamount they paid the Nigerian Government. Since 2000, the company has been pursuing a strongcommunity development strategy in the Niger Delta to promote sustainable social and economic

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development as well as partner and work with NGOs to build capacity. Yet, Shell still has waysto go.

There are several reasons why Shell has not been held accountable for its actions in Nigeria:- The lack of political stability and strong legal system: the successive regimes in Nigeria

have sought to enrich themselves and have used the MNCs to fatten their pockets. Thecivilian regimes that had more chances of creating a change were always short-lived.The lack of political stability has enabled Shell to use the military as its own police andtaken the law into its own hands by repressing protests and demonstrations in the NigerDelta. Both Shell and the Nigerian government confessed that Shell funded the militaryin the Niger Delta region: Under the auspices of "protecting" Shell from peacefuldemonstrators in the village of Umeuchem (10 miles from Ogoni), the police killed 80people, destroyed houses and vital crops in 1990.23 The rule of law in Nigeria appearsto be the rule of money. This leads to the next flaw, corruption. In contrast, Shell has awhole political and governmental infrastructure supporting them in the U.K. and theNetherlands.

- Corruption: After 50 years of oil in the Niger Delta [ ], corruption siphons as muchas 70 percent of annual oil revenues24. Corruption is rampant at several levels of theadministration of the country. This is due to partly due to poverty in a country where 70percent of its population living on a dollar a day, and 91 percent live on less than $2 aday. Gas flaring and other infractions can easily be concealed if the right parties arebribed. Another reason for the high levels of corruption is the lack of law enforcement.This can be traced to the decades of military rule, that obstructed freedom of speech,weakened the role of public institutions, and established a culture of unaccountability.Moreover, of all the oil producing countries, Nigeria has the highest cost of productionof about $6 per barrel, compared to 2 to 4 barrels in other countries. The high cost isattributed to corruption.25

- Lack of power of the local populations: there several groups living in the Niger Delta,and they speak different language. The lack of trust between each other leads tofragmentation of power and cohesiveness. None of the ethnic groups living in the NigerDelta is part of the major ethnic groups (Igbo, Yoruba, or Hausa). These smallercommunities and do not have the representation it takes to be heard. Whistleblowersand journalists who dare to talk are harassed by government officials and run the risk ofbeing thrown in jail Hence, the rise of militias to protest against Shells practices anddetrimental effect of gas flaring.

- Lack of education: over the year, there has been a better understanding of the impact ofShells action on the environment. The companys tactics were not understood. Thanksto the media and activists and a shift in worldwide mentalities towards the environmentthat is slowly changing.

- The international power of oil: oil is a precious commodity worldwide and theinternational community, especially the U.S. that is by far the largest consumer ofNigerian oil, is reluctant to put pressure on Shell or the Nigerian government, by fear ofraising oil prices. The U.K. which has a long-standing relationship with Nigeria, alsofinds itself in a tough position to try to regulate Shell in the U.K, but also trying topromote development in its former colony without straining their relationship. Oil isused for transportation, heating, cooling, and in almost all industries. Shell also has

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powerful lobbies in various Western countries in which it operates, especially in theU.S. For example, the U.S. has been quick to indict the Nigerian government and theMNCs verbally for human right violation, corruption, military coups, and forgedelections, but it has never taken action. The U.S. also cannot condemn Shells action inNigeria when itself has not signed the Kyoto Protocol The United Nations has

denounced the environmental actions and the human rights violations in Nigeria, but ithas yet to take any action. However, the U.N. singled out Shell for its actions in Nigeriain several reports in 1998.26

- Stronger public relations: over the year Shell has built a strong public relations divisionto promote a seemingly more socially conscious organizational image. With oil priceson the rise, the company could afford to ramp up positive publicity.

VII. Conclusion

It is estimated that Shell makes $170 to 190 million in profits out of Nigeria every year.27 That ishuge incentive to continue operating as usual. However, over the year, people across the globe

are realizing that environmental protection and corporate social responsibility (CSR) does notonly affect the local populations, but the globe. Issues such as global warming have broughtthose concerns to the forefront and the scandals of Enron and other large corporations havesounded the CSR alarm. The Nigeria government has promised to tackle the problem ofcorruption and is organizing, this year presidential elections. The country has recouped some ofthe $64 billion stolen by the Abacha regime and is re-investing it in infrastructures around thecountry. The international community has praised Nigerias efforts. Shell is talking aboutmaking changes while fighting tooth and nail to not pay any retribution to the populations whoselives they have destroyed over the years. Still the focus is more on economic development thanon climate change. True, Gores An Inconvenient Truth has resounded around the globe, but ittruly has not succeeded until action is taken. The flow of information and the shift in mentalitiesof environmentally-conscious investors are making Shell pause but not enough to radicallychange their strategies.

I believe at for years, the government, the MNCs, and the international community have allturned a blind to the situation in Nigeria. It is the governments responsibility to crackdown oncorruption, release illegally detained whistleblowers, enforce the law, and fight for its peopleagainst the environmental abuses committed by the MNCs. It is the MNCs responsibility to besocially responsible and mange in foreign land as they would in their home countries. It is theinternational communities and our responsibility as individuals to react to the danger to ourplanet and not reduce the value of a Nigerian life to a number at the gas pump. In the meantime,changes are slow to reach the majority of the population and groups such as MEND will keep ondemanding the right to control their destinies by any means necessary until they rest assured thefuture generations will have a land they can call their own.

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Food for thought:

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Not only have the oil, gas and mining industries not helped the poorest

people in developing countries, they have often made them worse off. Scores

of recent academic studies and many of the bank's own studies confirmed ourfindings that countries which rely primarily on extractive industries tend to

have higher levels of poverty, child morbidity and mortality, civil war,

corruption and totalitarianism than those with more diversified economies.

Does this mean extractive industries can never play a positive role in a

nation's economy? No, it simply means that the only evidence of such a

positive role we could find took place after a country's democratic governance

had developed to such a degree that the poorest could see some of the

benefits. Before the fundamental building blocks of good governance a free

press, a functioning judiciary, respect for human rights, free and fair elections

and so on - are put in place, the development of these industries only

aggravates the situation for the poorest

Dr, Salim, Editorial,

Financial Times

June 16, 2004


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Sources

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1 Sights and Sound of the Curse of the Black Gold. Dir. Ed Kahsi. 2007. Web Video. National Geographic.2 U.S. Energy Information Administration. Country Analysis Brief, Nigeria.http://www.eia.doe.gov/emeu/cabs/Nigeria/Oil.html3 Energy Information Administration, Crude Oil and Total Petroleum Imports Top 15 Countries, June 11, 2007.http://www.eia.doe.gov/pub/oil_gas4 Energy Information Administration, Crude Oil and Total Petroleum Imports Top 15 Countries, February 16,2007. http://www.eia.doe.gov5

Shirbon, Estelle. Dream of free Biafra revives in southeast Nigeria. July 10, 2006. Reuters.http://www.swissinfo.org/eng/swissinfo.html?siteSect=105&sid=68854956 Suassuna, Karen. "Contamination in Paulina by Aldrin, Dieldrin, Endrin and other toxic chemicals producedand disposed of by Shell Chemicals of Brazil. Greenpeace, 2001.7 BBC News. Shell admits fuelling corruption. June 11, 2004. http://news.bbc.co.uk/2/hi/business/3796375.stm8 ONeill, Tom. Curse of the Black Gold: Hope and Betrayal in the Niger Delta. National Geographic.

February 2007.9 Shell Nigeria Website http://www.shell.com/home/content/nigeria/about_shell/dir_about_shell_nigeria.html10 Adenikinju, A.F. (1998)Productivity growth and energy consumption in the Nigerian manufacturing sector:

A panel data analysis. Energy Policy 26 (3), 199-205.11 Lawal, Y. Economic Crimes Panel now try oil theft cases. The Guardian, Monday, 19 July, 2004. Lagos.12 TI Corruption Perceptions Index 2006.

http://www.transparency.org/policy_research/surveys_indices/global/cpi13 Jedrzej George Frynas.Political instability and business: focus on Shell in Nigeria. Third World Quarterly,19:3, 457 478.14 Okoro David Ogbonna. The geographic consequences of petroleum in Nigeria with special reference to theRivers State. Ann Arbor, MI: University Micro lms, 1981, p 254.15 Oil & Gas Forum. www.oiland gas forum.net/oefonline/ gasflaring .htm16 World Bank. Global Gas Flaring Reduction public-private partnership (GGFR).http://www.worldbank.org/ggfr17 EIA Country Analysis Brief: Nigeria,:http://www.eia.doe.gov/emeu/cabs/nigeria.html18 World Bank. Global Gas Flaring Reduction public-private partnership (GGFR).http://www.worldbank.org/ggfr19 Nigeria: Carbon Credit Development for Flare Reduction Projects. ICF Consulting Ltd and Triple E Systems

Associates Ltd. 200620 Ikeme, Jekwu. Assessing The Future Of Nigerias Economy: Ignored Threats From The Global ClimateChange Debacle.Africa Economic Analyis.21 Nigeria: Guidebook for Carbon Credit Development for Flare Reduction Projects. ICF International, 2006.http://siteresources.worldbank.org/EXTGGFR/Resources/NigeriaGGFRGuidebook_ICF.pdf22 Nigeria: Guidebook for Carbon Credit Development for Flare Reduction Projects. ICF International, 2006.http://siteresources.worldbank.org/EXTGGFR/Resources/NigeriaGGFRGuidebook_ICF.pdf23 6. Ellis, Glenn (Director), "The Drilling Fields," 1994, text from film by Catma Films.24 Sights and Sound of the Curse of the Black Gold. Dir. Ed Kahsi. 2007. Web Video. National Geographic.25 Ihekweme, Fabian. State-Making, Nation-Building and the Civil Society; Nigeria, 1960 1999. Hamburg,2000.26 Sorabjee, S.J. Situation of human rights in Nigeria. U.N. Economic and Social Report. February 1998.

27 Der Spiegel, 35, 1996.
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Impact of the Petrochemical Business in Nigeria - Focus on Shell

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