February 11, 2024
From Internationalist 360

Geoff Iyatse

Today, the oil companies whose operations damaged the environment and their collaborators (the government), which failed to act, are on the same table negotiating a divestment deal that does not factor in remediation clauses.

Shell Petroleum Development Company (SPDC, or simply Shell), like its leading competitors, has been on a prolonged asset disposal campaign in Nigeria, which dates back to over a decade. In the latest move to end its near-century operations in Nigeria’s oil-rich Niger Delta, SPDC is offering its onshore assets to a consortium of local companies for $2.4 billion.

Of course, doing business in Nigeria has been a tough task in recent years – one reason GSK, Unilever, P&G and many other multinational companies left the country or cut their operations last year. But for more complex reasons, such as escalating insecurity and increasing oil theft, the major international oil companies (IOCs) operating in Nigeria, led by Shell, have been divesting from the Nigerian hydrocarbon business well over a decade ago.

For instance, between 2010 and 2015 alone, Shell offloaded its interests in close to 10 oil-mining licences (OMLs) – OML 4, 38, 41, 26, 42, 40, 34 and 30, with Seplat Energy PLC, a Nigerian company which after a protracted boardroom politicking has been hijacked by foreign partners (mostly from the United Kingdom), emerging a major beneficiary of the divestments.

Unrelenting oil thieves and the government’s unconvincing policies 

Facilitated by a ring of criminals, oil theft is a major drain on the country’s resources. Two years ago, Nigerian economist Tony Elumelu took to Twitter (now X) to lament how operators were losing “over 95 per cent of oil production to thieves.” The outburst might have been dismissed as an exaggerated estimate of the challenge, but it gave a clue into the frustration of investors, both local and foreign. Prior to Elumelu’s outburst, the IOCs had variously complained of the danger posed by oil theft. For instance, from January to September 2013, 189 crude theft points were repaired, according to a statement by Shell, which described the trend as a “dangerous development.” The crisis has worsened in the past decade, with a total loss by the IOCs estimated at 65.7 million barrels from March 2022 to March 2023.

Government officials have, indeed, confirmed that oil theft could cripple the industry and scare investors away. Last December, the Nigeria National Petroleum Corporation (NNPC) Limited said it recorded 112 incidents of theft in the oil-producing Niger Delta region within a week. The desperation of oil majors to sell off their onshore assets in Nigeria is a telling reflection of the severity of the challenge and their frustration in getting the government, whose officials have been severally accused of aiding the economic sabotage, to act decisively on the issue.

During Nigeria’s 2023 general elections, oil theft was a top issue. Then, Bola Ahmed Tinubu said he would deploy technology to tackle the challenge of oil theft if elected. In his first engagement with the service chiefs as the President, Tinubu instructed that the security experts should end the crisis in the oil sector, emphasising that he would not tolerate oil theft and other criminal activities. He also pledged to remove obstacles faced by producers, including ending pipeline vandalism. But over eight months into his tenure, nothing has changed remarkably, at least not enough to deter IOCs from going ahead with the resolve to end their decades of operations in the country’s onshore crude operations.

Shell, ExxonMobil, and Agip, who have been on a prolonged asset disposal campaign, are offering about $4.5 billion onshore assets for sale in their latest move. Already, Shell said it had reached a $2.4 billion agreement with Renaissance, a local consortium of five companies, to divest its onshore business and end its 88-year operation in Nigeria’s onshore oil industry.

The cost of premature exit  

Whereas the companies buying out SPDC are not entirely new in the industry, some of them have left a bad taste in the host communities. The deal has been rejected by the Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN), alleging that “one of the companies that made up the assemblage has a history of subjugating workers and subjecting them to untold hardship as exemplified in the current management of OML 34.”

Previously, the Nigerian government opted for conditional disposal of the planned IOCs’ assets. The Guardian quoted the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) as saying that the processes and parties in the deals would be subjected to thorough scrutiny before necessary approvals would be granted. But a few days after, the Minister of State for Petroleum (Oil), Heineken Lokpobiri, said the government would not delay the sale if necessary clearances are done – whatever that implies.

If the IOCs wind down their operations in Nigeria today, there is a litany of unresolved issues – ranging from litigations related to oil spills and even unexecuted court judgments – a reason some stakeholders have called for a more transparent transaction. So far, details of the Shell-Renaissance deals are only known to the parties and, perhaps, the government. A more open deal is required to help deprived oil-producing communities know how their lands would be restored to their original state.

Sadly, the IOCs have, in close-to-a-century operations, left behind swathes of polluted lands and untold pains. There are unexecuted court rulings or ongoing litigations that border on negative externalities resulting from Shell operations. While environmentalists insist that about $100 billion is required to clean up the entire Niger Delta, even the one-billion-dollar clean-up and restoration programme launched by the Nigerian government eight years ago has stalled.

Over the decades, the oil majors opted for cheap exploration that pumps tonnes of gas into the atmosphere as opposed to environmentally friendlier processes, while the government continued to dilly-dally on ending gas flaring. The enormity of the environmental degradation in the Nigeria Delta has put the region on a prominent spot on the global map. For instance, a study conducted by scholars from the University of St Gallen in Switzerland shows that infants in the Niger Delta are twice as likely to die in their first month of life if their mothers live near an oil spill. The study also suggests that the Niger Delta suffers about 11,000 premature deaths yearly. This means the IOCs did not only destroy farmlands in the decades they have operated in the volatile Niger Delta but have also terminated human lives.

Today, the oil companies whose operations damaged the environment and their collaborators (the government), which failed to act, are on the same table negotiating a divestment deal that does not factor in remediation clauses. The government will do more disservice to the affected communities if it signs the premature oil majors’ exit and fails to hold them to full account for the damage they caused before they remove their drilling machines from Niger Delta oilfields.