allAfrica.com: Nigeria: ‘Shell Has Great Roles in Country’s Development’

Daily Champion (Lagos)
20 February 2008
Lagos

New Managing Director of Shell Petroleum Development Company (SPDC) Nigeria Limited, Mr. Mutiu Sunmonu recently spoke with journalists in Lagos on the company’s challenges in the country.

SOPURUCHI ONWUKA recorded the chat.

Excerpts:

THE journey to the top:
 
One thing I wouldn’t do is tell you how old I am. I will leave you to figure it out on your own.

I started my career in Shell in August 1978, here in Lagos and in Freeman House, after graduating from Unilag in 1977. I had a first class honours in mathematics. So I joined the computing section of the company. And really had quite a good time in Lagos. I was in Lagos till 1987 when I moved to Port Harcourt, spent two half years before going abroad in January 1990. I came back to Port Harcourt again in 1993 and headed the information technology (IT) services. In 1995, I became the IT Manager for the company.

At that time I was really getting worried about my career. Just at the age of 40, as an IT person, I had already gotten to the peak of the position in Shell, and I was really getting worried what was going to become of me.

One thing I was sure I was not going to do was to go into Human Resources (HR). That was very clear in my mind. Because it was very typical in those days for technical people to go into HR.

So in 1977, I had my first baptism of the real business when I became the production manager, and that was really my first experience into the core business. And I have remained in that core business, went abroad in 2001 as regional business adviser for China, covering also Thailand.

I returned in 2003 as General manager in charge of production for the Eastern division. In 2005, I became Executive Director in charge of Corporate Affairs, and a year after I went back to production as Executive Director. I remained in that role until January 10, this year when I became the Managing Director of the company.

For me, it really has been a very exciting journey. And the way I look at it is that the journey has just begun, not just for me as a person, but when I look at the prospect of oil and gas in Nigeria, I look back at the contribution of Shell in that sector and it holds a very promising future for the company.

It is my desire that Shell will continue to play a leading role in that sector. And on my own part, I would also love to be associated with that future. So, I can tell you that regardless of all the difficulties we have faced as a company, from the crisis in the Niger Delta to problem of funding, Shell is here to stay.

We still believe in the future of Nigeria. We believe in the energy future of this country, and we like to be a track player in Nigeria. We hope that some of the difficulties we are facing will be a thing of the past.

Finding continues to be a major challenge for us. The problem is still there, it has not gone away. But I am confident that given the level of discussion that we have with government we would find a solution to the who issue of funding.

On security situation, we will continue to work with government, we will continue to do our best within the areas of our operation to make sure that we can indeed continue to have a harmonious relationship with our stakeholders within the communities, at the state level, and also at local government level.

So when I just look at some of the difficulties we face I see them as challenges. And in my own opinion, that is what will really determine how resilient we are as a company. How we are able to overcome these challenges will actually show our strength as an organisation. And we will continue, in my own opinion, to develop the human capital in Nigeria.

I have a feeling that a lot of things that Shell has done were probably not publicised enough. People still believe that expatriates still hold a lot of positions in SPDC.

But we really have to look at the data. If you look at the top echelon of SPDC today, 11 out of the 14 senior management positions are held by Nigerians. A lot of people really don’t appreciate this. We really have less than five per cent of expatriates in SPDC. And five per cent is less than 300.

In the same token how many Nigerians are abroad? They are between 270 and 280. So people must not see only one side of the equation without looking at the other side. We have almost the same number of expatriates as the number of Nigerians outside. So, I do believe we are doing our best in terms of human capital development.

The Shell intensive training programme is something I will continue to support and promote. This was the programme we started about 10 years ago to help bridge the gap in the educational development of non graduates. We bring them out of Nigerian Universities and put them into a Shell school affiliated to Robert Gordon University in Abardeen and we train them for about one year after which we absorb some of them. And those we cannot absorb are free to pick employment elsewhere.

And as I look at the performance in the last 10 years, we have trained almost 1200 fresh Nigerian graduates, coming through this programme fully funded by Shell, pay them allowance, and apart from the fact that we can take some of them into our operation, some of them also find employment with other companies in the country.

I though it was important for me to put on the table some of those things we are doing and also to give all the assurance that whatever our achievement have been in the past, it is my desire and my determination to surpass it as we move forward.

There is a lot that we can still do as a company in terms of creating wealth for the nation, in terms of human capacity development, and I am determined that I make sure that I take Shell to the next level.

Please confirm that your production losses in the Niger Delta is affecting gas delivery to plants that produce LPG for internal consumption?

It is true that since March 2006, our production has been severely curtailed because of the crisis in the Delta. For almost 1½ years we did not produce from the Western division.

I can say that we are slowly getting back into production in the Western division. So we are not yet at full capacity in that area but we have made very good progress within a very short time that we have been able to move in safely. So I will expect that our production will come back depending on how the Niger Delta is stabilised.

With respect to gas production to NLNG, I can tell you that in 2007, we actually exceeded the plan for NLNG supply. You need to be aware that it is not only Shell that supplies gas to NLNG. We actually had to make up for the shortfall of some of the partner companies. So, the shortfall in gas supply to NLNG is not due to our failure but that of other suppliers. We will continue to make strong supply equation for NLNG.

How much of your output was shut in 2006 and how much is still shut in now. What is the status of your restructuring exercise. And what are you doing to expand your domestic gas pipeline network?

Three questions in one. As I said in 2006, our entire production in the Western division was completely shut down. And that was in the order of 400,000 barrels per day. So as I speak we have been able to put back about half of that. So, we still have between 150,000 to 200,000 barrels per day still locked in.

We will continue to work on how to unlock the remaining barrels. But of course that will depend on how much funding we get to support our operation. So the remaining will come back as funding improves.

On domestic gas, even with all the difficulty we have in the Delta, we are still able to produce more domestic gas than the demand level.

It still do not have enough industrial capacity and power generating capacity to take up our full domestic production. However, we are committed to government’s efforts in terms of the growth in the domestic market, especially as regards power generation.

As you know, government in 2008 has provided specific terms for every operator on domestic gas and also IPP. We are committed to that. we have a number of domestic gas projects which we are working on, and we will deliver on those projects, again, suject to funding. So, we are committed to supporting government’s aspiration for the growth of the domestic gas supply.

Restructuring is still on hold, but I am very confident that we will reach amicable solution with our joint venture partners very soon. We have had some very useful discussion. The understanding on both sides have improved significantly and that gives me a lot of confidence that we will reach a resolution of the impasse within the shortest time.

With the restructuring in Shell now as it is, are you really in charge. What is the status of the funding arrangement in the joint venture. And in case the restructuring continues are you still going to disengage 3000 Nigerians?

There are number of Shell companies in Nigeria. SPDC which I head is one. There is SNEPCO which is the offshore arm of our upstream company. You have SNOP. We have quite a number of Shell companies in Nigeria.

So I am heading one, and Ann Pickard is the overall head of Shell’s E&P companies in Africa. We have operations in Gabon, Cameroon, Libya. So that is the distinction between Ann and me.

On funding, we have serious problems. What government said is that we have over performed. That means more work than government was able to fund. That is the simple explanation. If you look at 2007, we had a work programme of $8.6 billion. And at a stage government said it could only fund $2.7 billion, and our original plan was $6.6 billion. Even though we tried to cut back to be able to get down to the level of $2.7 billion that government was confortable with time difference made it impossible. We ended up executing jobs of $4.0 billion.

So, that is the over performance that government is talking about. It is not as if we spent more money doing the same work, but we spent more money doing more work.

On job cuts, let me make this clarification. In terms of streamlining our staff strength, it is going to affect both Nigerians and expatriates. I think that is the subtle point that people miss. And as I always said in all my presentations, the percentage of expatriates will not increase as a result of the rationalisation. So when we rationalise staff it will affect both expatriates and Nigerians.

And I think it is very important to say again that I don’t recognise the figure of 3000 at all. Again whatever figure I give you here will be speculative because if we had continued with the exercise we would have finished our design and determined how many jobs that are going to be redundant. But because we have stopped the design job mid way we have not been able to get down to definite figures. As of now, nobody has been laid off. Not a single soul yet.

What is the position of Shell in the OKLNG joint venture, and what is the company’s reaction to oil bench mark adjustment in the 2008 budget?

I think the new benchmark price for oil is good news. that will make more money available for appropriation. And it is our own belief that if more money is available the entire oil and gas industry will benefit. i can tell you that we are still committed to OKLNG.

Shell said earlier it might not meet the gas flare out deadline by end of this year, what is the position now that DPR has threatened penalties? Also what is the company doing on downstream integration?

My position is that gas flaring is not just an issue for Shell, it is an issue for the entire industry, and as you are aware, the entire industry under the auspices of OPTS is working with representatives of government and World Bank consultants in terms of really getting a better handle on realistic timing for achieving flare out.

That discussion is on going because it is very clear to all parties both in the industry and in government that 2008 is not realistic. So we are working with government in terms of agreeing on much more realistic time table.

Having said that I would like to make it bold that Shell as a company will comply with the law. Whatever the law said with respect to gas flare, we will comply 100 per cent. That is our position.

Again downstream integration is a business ieeue. We have to look at opportunities on case by case basis. I am here as an upstream person. I am not a downstream person. I am not a downstream person. So if you really think about how you bring downstream into the equation, the economics of that will have to be looked at seperately.

With the level of hostility you experience in the Niger Delta how do you intend to play your role in leading the industry?

We hope that militancy in the Niger Delta will come under control. It is really not our desire to move our headquarters away from Niger Delta. So our hope is that the various arms of government will do what it takes to get stability in the Niger Delta. And we will be willing to work with government, contribute our quota, towards achieving stability in the area.

But, of course, we will continue to be watchful and monitor the situation such that we will not put our people at harm in the course of their duties. I did have a discussion with the Rivers State government of recent of which we again, expressed our faith in Nigeria, in Niger Delta, and it is our desire that Shell remains in the region.

May we know the volume of gas Shell is providing for domestic utilisation, especially your programme on the Afam power plant. Secondly, what is Shell’s response to allegation by PETAN that Shell owes it $5 million for serives delivered. Then what becomes of SNOP after the rationalisation?
 
Well, I said I am an upstream man. I wouldn’t want to speak for downstream. On PETAN, we owe the group some money but we have not discrimated against them in any way. Because of our funding situation we have not been able to meet our obligation to our contractors. And PETAN happens to be one of those groups. What I can assure you is that as our funding situation improves so also will our payment to contractors improve.

On Afam, it is a mixed story. It is a project we went into full heartedly. We should be commissioning Afam this year before June. But that in itself might be impacted by lack of funding. Funding and security situation have impacted the progress of Afam. So I think if we have both, we should be in a position to deliver Fam by June this year.

On the gas supply to local utility, I think it is important to say that Shell produces over 75 per cent of domestic gas to this country. And if you really look at that in terms of electricity generation, gas form Shell accounts for 56 per cent of the power generated in this country. So, we are doing very well in terms of the ratio between domestic and export gas.

The GMON with host communities is not yielding the desired results. Are you thinking about a new approach to community relations?

We actually went back to the drawing board some few years ago. And last year we started rolling out a new pholosophy which we call the Global MOU concept. And what it does is rather than Shell undertaking projects for communities, we form communities into trusts and put money into an account for them for which the board approvs the communities wanto undertake with the money.

And there is very strict control on how you utilise the money. Our is that as communities start to build concensus to agree on projects that they believe are beneficial to them, we would be able to get other donors to put more money into the same account. Donors in the list include the NDDC, State government and even international development agencies, so that whatever money we put into the account will become a catalyst. And we believe that by so doing, the communities will become a lot more independent.

Another aspect of this GMOU is that we are encouraging the NDDC to be involved such that whatever project the communities want to undertake would be part of the overal blueprint for development in the Niger Delta.

However it is still at very early stage. We have not been able to roll it out across the Delta. And in some areas it has been a significant progress. In areas like Afam, the GMOU is working very well. The communities are agreeing on projects. They are utilising their money prudently.

But if you go to some other communities, the story is different. There are some communities where we have put money in their account, and for upward of six months they have still not agreed on what project to do. But we are helping such communities by getting NGOs to work with them and really train them on how to develop concensus, because this is a new way of thinking for them.

So that is what we are doing now and we want to give this concept time and see how it comes out.

http://allafrica.com/stories/200802200317.html