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Defiant Shell unwilling to quit crime-hit Niger Delta

Screen Shot 2013-09-29 at 23.38.41Oil giant Shell has denied running away from its problems in Nigeria. Shell employs 600 contractor companies, who Janzen says “in principle” survey the lines around the clock;  Campaigners suggest some contractors may be implicated in theft, arguably putting Shell indirectly in the frame.

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30 September 2013

The tanker sailed into the Niger Delta, right under the eyes of Nigeria’s armed forces. Crewed by men working for an international criminal gang, it headed inland, hooked up to “bunkering” points illegally installed on Shell’s Trans-Niger pipeline, and began to steal oil.

“Something went dramatically wrong,” says Jurgen Janzen, Shell’s pipeline asset manager. A year ago today, in the early hours of the morning, Shell discovered both the tanker and the pipeline ablaze, a raging inferno billowing black smoke hundreds of feet above the Delta.

“We know that a number of the people got killed,” says Janzen. “We had to go in and extinguish the fire.” Ultimately, the tanker sank – another addition to the dismal list of human suffering and environmental devastation that is the by-product of the oil industry in Nigeria. Theft on such an audacious scale is not rare. Shell chief Peter Voser says the problem is “endemic”.

Most of the time, the criminals succeed. More than 50,000 barrels of oil a day are stolen from the joint venture Shell operates in the Delta. About 10,000 barrels have spilled from Shell pipelines damaged by thieves so far this year, which the company takes responsibility for cleaning up. But much of the oil haul is taken by local gangs to rudimentary refineries, where the crude they cannot process is simply discarded. No one monitors these volumes or cleans them up. Janzen estimates it could be 5,000 barrels each day. “It’s huge,” he says.

From a helicopter, the refining sites are obvious: ugly scars pock-marking the verdant mangroves. Rusting tin huts and refining equipment are dotted among blackened, dead trees, the sheen of oil shimmering on the waterways.

Shell is willing publicly to reveal this devastation because it wants to pressure Nigeria and the international community into doing more to stop it. Janzen says theft has increased significantly since last year because “people saw they were able to get away with it”.

“As a company, it is hurting us badly,” he admits. Theft and other disruption saw Shell’s share of onshore Nigerian production in the second quarter slump to just 158,000 barrels of oil and gas a day, from 252,000 a year before. Shell took a $250m hit as a result. It has already sold some Delta oil fields in recent years and is now conducting a strategic review that could see it sell assets producing as much as 100,000 barrels per day more than half the latest output. Could Shell finally be admitting defeat in the Delta?

“Surrender is not an option for us,” insists Mutiu Sunmonu, chairman of Shell’s Nigerian operations. “We are not running away from the problem onshore.”

He says there is now a “concerted effort” by government and wider industry to tackle the theft. Shell argues it is the Nigerian government that is losing the most as much as $12bn a year in lost revenues. “This is not a Shell issue; this is a national issue,” Sunmonu says.

Sunmonu admits that theft is one reason for the strategic review, but insists it is not the main one. Rather, it is more profitable to focus elsewhere in Nigeria. “It doesn’t make sense for Shell to be rubbing shoulders with small independents,” he says. An onshore project might cost $250m, but tax is high, so Shell makes as little as $2 a barrel net profit.

It wants to focus on more expensive projects, such as offshore Nigeria, where it already produces 105,000 barrels per day. A deepwater project might cost $15bn, but profit margins are much higher. “There is no indigenous company that can venture into that,” Sunmonu says. But there are other reasons Shell, despite its denials, might now like to run from the Delta, where it first struck oil in 1956.

Operations here have long blighted its reputation. In 1995, activists campaigning for the rights of people in the Ogoniland oil field were executed by the Nigerian government; Shell was accused of collaborating in human rights abuses. In 2009, it agreed a $15.5m out-of-court settlement, while admitting no liability.

In 2011, a damning report by the UN Environment Programme criticised both Shell and the Nigerian government for contributing to 50 years of pollution in Ogoniland through inadequate maintenance and spill clean-ups.

“It is more economical to abuse the environment than protect it,” says Nigerian senator Bukola Saraki, who wants companies to be fined for every barrel spilled. UNEP estimated that the clean-up of Ogoniland alone would take 30 years and has called on the oil industry and government to set up a $1bn fund to cover the first five years. This is yet to be implemented. Meanwhile, spills caused by corrosion continue; Shell admits responsibility for 41 leaks last year, compared with 154 caused by thieves.

Even where theft is the cause, critics say Shell cannot absolve itself of all responsibility. Shell employs 600 contractor companies, who Janzen says “in principle” survey the lines around the clock. In reality, many of their unarmed workers don’t turn up at night, when armed thieves operate. Shell shows journalists a spill clean-up site near Port Harcourt, where thieves with trucks came, apparently unnoticed, to tap the pipeline. Even in broad daylight, the surveillance outposts here are unmanned.

Campaigners suggest some contractors may be implicated in theft, arguably putting Shell indirectly in the frame. Sunmonu rejects this. “It’s a crime,” he says. “What’s the difference, if somebody works for me during the day and then he comes back at night to steal?” He says Shell is putting in place safeguards but, given the number of contractors, has to “depend on the government security agency to fish out whoever is doing this”.

The people of the Delta have seen little of the oil revenues enjoyed by the government, much of which has been siphoned off through entrenched corruption. Jemimah Mbaya, a Nigerian pastor, says local theft must be seen in the context of the widespread poverty. “To Shell they are stealing, but to them they are taking what is theirs,” she says.

What is indisputable is that thefts continue, and the devastation caused will need to be cleaned up. Sunmonu won’t dwell on this prospect. “The first thing is to stop crude-oil theft,” he says. “If you don’t stop crude-oil theft, we shouldn’t even start to discuss how to clean up, because it’s going to be a wasted effort.”


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