The Managing Director and Country Chair, Shell Petroleum Development Company of Nigeria Limited, Mr. Mutiu Sunmonu, says the implementation of projects is dependent on sound fiscal policies, security, infrastructure and respect for the sanctity of contracts,
I have been asked this question several times and I have always said that Nigeria is blessed with abundant material and human resources. So Nigeria offers many opportunities and doing business here enables you to take up these openings. However, for these opportunities to deliver the desired benefits for the country and the investor, you must provide an enabling environment in terms of security, sound fiscals, stable policies and provision of infrastructure and amenities.
Shell has been operating here for the past 50 years, and I can say this has been an exciting time when you look at how the oil and gas industry, for example, has evolved over these years, but it has also been challenging when you examine the peculiar terrain we’ve had to work in.
Do you think these challenges are being tackled appropriately?
I am sure you are aware that the Federal Government has expressed seriousness about tackling these issues. Take corruption, government has strengthened the relevant institutions in the fight against this monster as it is doing in security. Clearly, the intentions are there; we just have to make sure the desired outcomes are achieved.
Why is Shell divesting from some of its assets in Nigeria?
As you can imagine, Shell is a global company that regularly examines opportunities to rationalise its portfolio where the actions attract business value and reinforce the long-term health of our business. The divestment of our equity in some assets also agrees with the Federal Government policy of encouraging more indigenous players in the industry. I hope you are not going to ask me whether the divestment means Shell is leaving Nigeria. This is not Shell leaving Nigeria, but rather a refocusing aimed at strengthening our long-term position in the country. Part of this is investment, and part of it is asset sales.
Shell has been in Nigeria for more than 50 years and remains committed to doing business here. These transactions should rather be seen in the context of Shell’s active portfolio management of its assets and interests around the world.
Does Shell believe in the Nigerian market?
Why have we been here for the past 50 years if we don’t believe in Nigeria? The country’s first commercial export in 1958 was from Shell’s Oloibiri field, making Shell Nigeria’s oldest energy company, demonstrating a long-term and continuing commitment to the country, its people and the economy. Today, Shell companies in Nigeria are producing oil and gas from land and swamps in the Niger Delta, from shallow and deep water reserves some 120 km off the coast, as well as participating in Nigeria’s largest liquefied natural gas plant, which exports all over the world. So we believe in Nigeria, not just in her market, and can contribute to the building of a prosperous future for her people though the efficient conduct of our business.What major projects are we likely to see from Shell, say in four years’ time?
We have a strategy to invest in projects which strengthen our long term portfolio position in the country – for example, the one billion cubic feet per day-Gbaran-Ubie integrated oil and gas project which started up in July 2010. Some $4bn has also been committed on the Forcados Yokri and Southern Swamp oil and gas projects that will cut our routine gas flaring and help supply more domestic gas. I am not able to give you details of projects planned in the next four years, but I can say that we remain committed to the future of Nigeria and will implement projects as opportunities and conditions allow.
What are these conditions?
I’ve already touched on them, sound fiscals, stable policies, security, amenities, infrastructure, respect for sanctity of contracts, etc.
To what extent has crude theft affected the company?
I rather see this as a national tragedy. In 2009, the United Nations estimated that 150,000 barrels of oil and condensate were stolen from facilities daily; last year, the Nigerian government estimated 400,000 barrels. Also last year, there were 86 reported incidents of crude oil theft from SPDC facilities that involved vandalism, spills, fire or arrests. The authorities arrested 51 suspects and seized among others 21 tankers, 14 vehicles, 25 barges, and 162 locally made boats.
These almost certainly represent a small fraction of the true scale of the problem. Illegal refining in the Niger Delta is part of a wider problem of a highly organised crime worth billions of US dollars a year.
What is the company doing about this?
As a responsible operator, we work to improve our processes and systems so we can reduce operational spills to the barest minimum. But no matter how well we do this, and regardless of how well we maintain pipelines and other facilities, these will have only a limited impact on oil spills until the widespread oil theft, sabotage and vandalism activities are stopped. And we believe this can be achieved with enforcement of law and order and prosecution of offenders. We have also called for provision of employment opportunities so idle youths are not lured into easy-money making avenues which are fatal to themselves, the people and the environment.
Just last week, a Dutch court entered judgment in a case on four oil spills; the court agreed that the spills were caused by sabotage but blamed SPDC for not performing its duty of care. What is your reaction?
Our reaction is already out there in the public domain. As you rightly pointed out, the District Court in The Hague ruled that the four oil spills at Oruma, Goi and Ikot Ada Udo between 2004 and 2007 were caused by sabotage, and that Royal Dutch Shell Plc is not liable and dismissed all claims of Friends of the Earth (Milieudefensie).
Only in the case of Ikot Ada Udo the court ruled that SPDC could have prevented the sabotage by plugging the well at an earlier stage. In this particular case saboteurs opened the valve (above surface) with a wrench. In 2010, SPDC took the necessary measures to contain the well. This was also acknowledged by the court. For Ikot Ada Udo, the proceedings will continue between SPDC and Mr. Akpan to establish damages, if any.
You will also recall that Friends of the Earth also argued that SPDC did not clean up the spill sites properly. This allegation was also dismissed by the court. We welcome the court’s ruling that all spill cases were caused by criminal activity.
We have said all along that oil pollution is a problem in Nigeria, affecting the daily lives of people in the Niger Delta. However, the vast majority of oil pollution is caused by oil thieves and illegal refiners. This causes major environmental and economic damage, and is the real tragedy of Nigeria and the Niger Delta.
How would Shell describe the Nigerian gas market?
The Nigerian gas market is developing and requires the right steps to fulfil its potentials; a good starting point is the National Gas Master plan.What is the future of the market?
Bright, if the right conditions exist.
Is Shell committed to the quick passage of the Petroleum Industry Bill?
We were invited to comment on the bill along with the rest of the industry, and we did. Like the rest of the industry, we are waiting to see what finally emerges. Our interest is for a balanced bill that is capable of stimulating growth and reform of the industryWhat does the economy stand to benefit if the current PIB before the National Assembly is passed into law; any reservations?
We support the overall objectives to reform the industry — it is vital for Nigeria’s oil and gas industry that it is competitive with other provinces. It is important for Nigeria for a PIB to be passed with terms and conditions that are competitive with other hydrocarbon provinces, which will encourage future investment in the oil and gas industry, thereby creating additional government income, enabling other sectors, creating jobs and developing additional local capacity. These are also in line with the President’s priorities — job creation and electricity.
What do you have to say about the Nigerian Content Act for the oil and gas industry?
This is good for the country and good for our business. At Shell, we take Nigerian content very seriously and have taken serious steps to build the capacity of Nigerian vendors and award contracts to them.