Nigeria: Shell’s onshore roots still run deep
Royal Dutch Shell wants to reweight its footprint in Nigeria to focus on oil and gas fields far offshore, away from the theft, spills, corruption and unrest that have plagued the West African country’s onshore industry for decades.
But for the company that pioneered Nigeria’s oil industry in the 1950s, the Niger Delta remains as important — and problematic — as ever.
While Shell has cut onshore oil production and sold some onshore assets, it continues to invest in others. In fact, onshore production has risen in recent years as a share of Shell’s output in Nigeria, an analysis of company data over the past decade shows.
Much of the increase comes from less polluting gas, used mainly in power generation, which Shell thinks will be key to the transition to lower carbon energy. Gas made up 70 percent of onshore production in 2017, up from 47 percent in 2008.
Graphic: Nigeria onshore production - tmsnrt.rs/2CLPxEU
The company still controls thousands of kilometers of pipelines connecting inland fields to coastal terminals through its subsidiary, Shell Petroleum Development Co of Nigeria (SPDC), however.
So while SPDC has cut oil production in the Delta by 70 percent since 2011, when it first started reporting data on spills, the incidence of spills and theft from pipelines has fallen at a much lower rate and has picked up again recently, the data shows.
Shell’s Nigeria Country Chair Osagie Okunbor hinted it was a sensitive balancing act.
“We are too big just to see ourselves as ‘there is a problem and we have to run’. That is not what we are thinking of doing,” he told reporters on a media trip to the country in July. “But at the same time we don’t want to spread our footprint.”
Two pipeline spills in 2008 in the small community of Bodo in Ogoniland are emblematic of the problems in the Delta, a vast maze of creeks and mangrove swamps criss-crossed by pipelines and blighted by poverty and oil-fueled violence.
On a speedboat trip to the site of a clean-up operation launched by Shell last year, a makeshift oil refinery stood idle on a charred landing. The ground was soaked with oil, the air heavy with petrol fumes and slicks glistened in the water nearby. There were few signs of birds or fish.
So far this year, 85 crude spills have been recorded, already higher than the previous two years. In 2016, militant attacks pushed the volume of spills to more than 30,000 barrels, a high since 2011.
Oil theft from SPDC rose to around 9,000 barrels per day (bpd) in 2017 - a loss of nearly $180 million for the year - from 6,000 bpd the year before.
Despite all the problems and costs, however, Nigerian onshore operations generate billions of dollars annually.
Shell does not break down profits by country, but a report on payments to governments that the company publishes annually showed it paid around $1.1 billion in royalties, taxes and fees to the Nigerian government in 2017.
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