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Wicked Problem: Royal Dutch Shell and Its Response to the Nigerian Oil Spill
Major oil companies such as Royal Dutch Shell are responsible for hundreds of oil spills every year that cumulatively involve millions of barrels of oil. The harmful effects of such oil spills on the environment is well documented of course, but less well documented are the different types and levels of responses that are used in response to oil spills in developing nations and those used in affluent nations. While oil spills such as British Petroleum's recent rupture of its Macondo well offshore United States are the focus of a massive and expensive coordinated response, far less attention is paid to oil spills that affect emerging nations such as Nigeria. This is not to say, of course, that all major oil companies -- including Royal Dutch Shell -- are completely abrogating their corporate responsibilities for oil spill disasters, but it is to say that there is a growing perception among industry observers that there is a double standard at work that places a higher priority on affluent nations than their developing counterparts. Moreover, some critics maintain the Shell's presence in Nigeria continues to help the dictatorial regime remain in power. To determine the accuracy of these growing perceptions, this essay provides a review of the relevant literature concerning Royal Dutch Shell, including its organizational and historic background as it relates to the company's operation, the extent of its globalisation, and its reputation for ethics and corporate social responsibility. An analysis concerning the different perspectives of the stakeholders involved in the situation is followed by a discussion about the need to construct an understanding of the oil spill event that may be productive for all stakeholders. Finally, an examination of ways in which Royal Dutch Shell's stakeholders can have a personal impact on the situation is followed by a summary of the research and important findings in the conclusion.
Review and Discussion
Organizational and Historical Background of Shell
Today, Royal Dutch Shell (hereinafter alternatively "Shell" or "the company") is comprised of a group of energy and petrochemicals companies that compete on a global basis with about 93,000 employees in more than 90 different countries and territories (Shell at a Glance 2012). The company is headquartered in The Hague, the Netherlands and the Shell group's parent company is Royal Dutch Shell plc, incorporated in England and Wales (Shell at a Glance 2012). The company's operations include three major business activities as follows:
1. Upstream: Generally, these operations explore for and extract crude oil and natural gas. These operations specifically focus on exploring for new oil and gas reserves and developing major projects where the company's technology and know-how adds value to the resource holders.
2. Downstream: These operations generally refine, supply, trade and ship crude worldwide, manufacture and market a range of products, and produce petrochemicals for industrial customers with a specific emphasis on sustained cash generation from existing assets and selective investments in growth markets.
3. Projects and Technology: These operations manage delivery of Shell's major projects and drive the research and innovation to create technology solutions (Shell at a Glance 2012).
A summary of the company's financial performance for 2010 (the latest available figures) is as follows:
1. Revenue: $368.1 billion
2. Income: $20.5 billion
3. Capital investment: $30.6 billion
4. Investment in research and development: $1 billion
At the global level, the company also made the following investments towards sustainable development in 2010:
1. $2.1 billion spent on developing alternative energies, carbon capture and storage, and on carbon dioxide research and development during the past 5-year period.
2. $13 billion spent on goods and services in 2010 from companies in countries with lower incomes.
3. $121 million spent on voluntary social investments in 2010 (Shell at a Glance 2012).
Taken together, these figures indicates that Shell is raking in the money, even during periods of economic downturn, and a significant percentage of these earnings are being generated from the company's exploration and production activities in Nigeria, and these issues are discussed further below.
Shell in Nigeria
The company maintains an extensive presence in Nigeria, and the Shell companies which currently operating in the country are as follows:
1. Shell Petroleum Development Company of Nigeria Limited;
2. Shell Nigeria Exploration and Production Company Limited; and,
3. Shell Nigeria Gas Limited (Oil Spill Data 2012).
According to the consumer rights organization, Essential Action, there is wickedness afoot in Nigeria to be sure, and they acknowledge that the problems are multifaceted, but in the final analysis, these activists maintain that the Shell companies listed above are responsible for the vast majority of it. In this regard, the leaders at Essential Action emphasize that on the one hand, "Shell Nigeria is one of the largest oil producers in the Royal Dutch/Shell Group. Eighty percent of the oil extraction in Nigeria is the Niger Delta, the southeast region of the country" (see political map of Nigeria at Appendix A) (Shell in Nigeria 2012, p. 1). On the other hand, though, Essential Action also makes it clear that: "The Delta is home to many small minority ethnic groups, including the Ogoni, all of which suffer egregious exploitation by multinational oil companies, like Shell. Shell provides over 50% of the income keeping the Nigerian dictatorship in power" (Shell in Nigeria 2012, p. 1). Analysts with the U.S. government confirm that there is massive corruption and criminal activity throughout Nigerian society that extends even to the country's top leaders (Nigeria 2012), but many international observers place the lion's share of the blame on Western enterprises such as Shell for failing to share the wealth and by supporting a regime that targets its foes in particularly aggressive ways. For example, in their call for a boycott of all Shell products, Essential Action reports that, "Since the Nigerian government hanged nine environmental activists in 1995 for speaking out against exploitation by Royal Dutch/Shell and the Nigeria government, outrage has exploded worldwide" (Shell in Nigeria 2012, p. 3).
While there may have been a great deal of attention paid to this incident, far less attention has been given to the effects of the company's operations on the environment of Nigeria or the people they most affect, the Ogoni people. In fact, it would seem there is significant collusion between high-level authorities in the Nigerian government and the top leadership team at Shell in Nigeria in ways that can be regarded as being a manifestation of wickedness in the extreme because it cost people their lives. In this regard, Essential Action emphasizes that, "The tribunal which convicted the men was part of a joint effort by the government and Shell to suppress a growing movement among the Ogoni people: a movement for environmental justice, for recognition of their human rights and for economic justice. Shell has brought extreme, irreparable environmental devastation to Ogoniland" (Shell in Nigeria 2012, p. 1).
These are serious charges, of course, but the mainstream press and nongovernmental organizations, including the United Nations, all agree that there is more involved in the story of Shell's activities in Nigeria than the company would like publicly known. For instance, a recent report from Lawler (2011) filed with Reuters also notes that Royal Dutch Shell's Nigerian oil spill, the largest in the African nation since 1998, highlights the different global responses to oil spills. According to Lawler, "The spill of less than 40,000 barrels from the Shell facility, the biggest leak in Nigeria for more than 13 years . . . is small compared to the much documented rupture of BP's Macondo well off the United States but critics say the fact it happened in Nigeria means little attention has been paid to it" (Lawler, 2011, p. 37). Clearly, then, there are a number of perspectives involved in how Shell's operations in Nigeria are perceived by the different stakeholders who are involved, and these issues are discussed further below.
Different Perspectives of Stakeholders
It is reasonable to suggest that, irrespective of the reality of the situation, the company's top leadership team will portray Shell's operations in Nigeria as being socially and environmentally responsible and will try to place the blame for any wrongdoing squarely on the shoulders of others. By contrast, investors in the company may view Shell's efforts to remediate the most recent oil spill as being important because of its potential effects on earnings and focus on the public relations aspects of the event, while other investors may believe that these efforts are important for the environment without regard for the impact on earnings. The Ogoni people, certainly, would likely assert that Shell's operations are degrading their environment and harming their livelihoods without any recompense from the company whatsoever or any contribution to the development of their economic infrastructure to help overcome these eventualities.
The Nigerian economy overall, for example, has realized a $30 billion-impact from Ogoniland oil, but the Ogoni people themselves have received just a tiny fraction of this money, and the…[continue]
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