Critical analysis of the Shell oil spill in Nigeria

¶ … 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 company employs just a handful of Ogoni workers (Shell in Nigeria 2012). As one critic puts it, from the perspective of the Ogoni people, "Oil is a curse which means only poverty, hunger, disease and exploitation" (quoted in Shell in Nigeria 2012, at p. 4). While Shell proudly proclaims its commitment to sustainable development in Nigeria, the stakeholders who are most immediately affected by the company's operations are being systematically denied any meaningful share in the proceeds.

Of course, it is axiomatic that every story has at least two sides, and in the case of Shell's operations in Nigeria, there are a number of such perspectives involved. From the perspective of many Nigerians and international observers alike, it would seem, the company's activities in Nigeria have been carefully coordinated with nefarious partners in the high places in the Nigerian government to specifically target grassroots movements that bring unwanted attention to the problem. For instance, Essential Action adds that, "The first highly visible action organized by the Movement for Survival of the Ogoni People (MOSOP) occurred on January 4, 1993 with 300,000 Ogoni (3/5 of the population) participating in the peaceful 'Ogoni Day' demonstration" (Shell in Nigeria 2012, p. 3).

This event marked a groundswell of support from the Ogoni people and clearly evinced their views, and the MOSOP represents more than half of the Ogoni population but remains relatively powerless in Nigeria today (Shell in Nigeria 2012). Despite this clear demonstration of popular will, the Nigerian government and Shell appear to have collaborated in their response to these actions by the Ogonis and their sympathizers that may threaten Shell's operations. In this regard, Essential Action reports that, "Since MOSOP became highly visible, other groups in oil producing regions have begun modeling their actions on MOSOP's tactics of intense yet peaceful demonstrations, pan-ethnic-group organizations, and charters based on the Ogoni Bill of Rights" (Shell in Nigeria 2012, p. 3). The Ogoni Bill of Rights, created in 1990 by the MOSOP, clearly states the perspective of the Ogoni people with respect to Shell's operations, with its major points being as follows:

1. Clean up of oil spills;

2. Reduction of gas flaring;

3. Fair compensation for lost land, income, resources, life;

4. A fair share of profits gained from oil drilled at their expense; and,

5. Self-determination (Shell in Nigeria 2012, p. 4).

These major points would appear to be reasonable to most modern observers, but the company appears to be unable or unwilling to accommodate these goals. In this regard, Essential Action reports that, "The military and Shell have been careful to prevent any movements from gaining MOSOP's momentum" (Shell in Nigeria 2012, p. 3). Likewise, according to Obi (2001), the "Ogoni Bill of Rights (OBR) of 1990 (and the 1992 addendum to the OBR) making specific demands for local autonomy, compensation for pollution, and reparations for unpaid royalties to the people, on the Nigerian government and Shell went unacknowledged, and tensions continued to mount" (pp. 60-61). Given this background, it is not surprising that there are in fact several perspectives involves depending on who is doing the asking and who is doing the answering concerning the effects of Shell's operations in Nigeria, making the need for an informed holistic perspective all the more important today and these issues are discussed further below.

Ways of Constructing an Understanding of the Oil Spill Event that may be Productive for the Different Stakeholders

Identifying the reasons and the effects of any manmade disaster can be a complicated enterprise that involves recognizing that the spin that is placed on the event will differ from source to source. For example, as noted above, investors may consider the event from the perspective of its potential impact on their pocketbook and its adverse public relations effect on the company. This perspective can be seen from a report from an oil analyst at a bank that characterized Shell's latest Nigerian spill as "unlikely to have much of an impact on the company. They are cleaning it up and the authorities seem very supportive of what's happening. This is not the worst incident. Shell's pipelines in Nigeria's onshore Niger Delta spill often, and the company usually blames this on sabotage attacks and oil theft, though it did not in this case" (Lawler 2011, p. 3). Likewise, the company can be reasonably expected to minimize the environmental damage that resulted from the spill while simultaneously emphasizing its long-term commitment to environmentally responsible practices. This perspective can be discerned from the company's report on its Web site that noted nearly 30,000 barrels spilled from the company's operations in Nigeria during 2010 from more than 150 separate spills. The company reported that "less than 40,000 barrels of oil" were leaked during the latest spill, making it the largest such incident in Nigeria since 1998 when about 40,000 barrels was leaked offshore from a ruptured pipeline operated by Mobil (Lawler 2011).

For Shell, the incident could not have occurred at a worse time from a public relations perspective since it took place just 4 months following the publication of a report from the United Nations (UN) that criticized the company as well as the Nigerian government for contributing to five decades' worth of pollution in the Niger Delta (Lawler 2011). The net impact of these activities, the UN report emphasized, will require at least $1 billion to initiate remediation efforts that will require fully three decades to complete if they are successful, which remains questionable (Lawler 2011). The public relations "spin" placed on the oil spill by the company's Nigerian chairman, Mutiu Sunmonu, is indicative of the perspective being advanced by the company. Describing the incident as "regrettable," the chairman emphasized that Shell had "made substantial progress in mitigating the consequences" (quoted in Lawler 2011at p. 3). In support of this assertion, the company features numerous photographs of its efforts in the region on its corporate Website, including descriptions of its use of dispersants and the five vessels used to deploy it, as well as periodic updates concerning the progress that has been made with this, as well as all of its other, oil spill remediation efforts in Nigeria. A review of the progress report for the latest incident on the company's Web site indicated that the most recent update was a few months ago and no further progress had been reported at that time; however, in February 2012, Royal Dutch Shell reported the oil spill offshore Nigeria had been contained in a press release. According to Cocks (2012), the press release indicated that, "The oil spill has now been dispersed and contained. We had five ships working to disperse it. It was dispersed over the weekend and that was completed before it hit the shore. It did not wash up on the shore [and] chemical dispersants had combined with natural dispersion to clear the spill" (quoted in Cocks, 2012 at p. 2).

Not everyone was impressed with this report, though, and despite this positive spin, environmental groups Environmental Rights Action (ERA) and Friends of the Earth Nigeria (FoEN) responded that "local communities in Odioama in the Bayelsa State in the Niger delta region had spotted suspected slicks from the Bonga spill near the coast" (Cocks 2012, p. 3). The two groups reported that local fisherman had witnessed oil spreading near the Odioama and St. Nicholas coastlines (Cocks 2012). To date, the company has not responded to these charges nor has it made any update to its status report concerning this incident in several months. Nevertheless, the company has responded by highlighting its ongoing corporate social responsibility efforts. For instance, Shell Petroleum Development Company of Nigeria Limited's Web site claims the company "is committed to minimizing oil spills to the environment and to cleaning up all spills in the Niger Delta when they occur, as fast as possible, no matter what their cause. We work hard to reduce the number and volume of operational spills, which are under our control i.e. spills due to corrosion, human error and equipment failure" (Oil Spill Data 2012, p. 3). The company maintains that during the past 5-year period, less than 30% of spills from its facilities have been operational in nature, and that the majority of oil spills in the region have been the result of sabotage or theft (see Figure 1 below) (Oil Spill Data, 2012).

Figure 1. Number of oil spills per year offshore Nigeria: 2006-2011

Source: Oil Spill Data 2012

According to the company's performance data, since 2006, Shell in Nigeria has experienced an average of 169 oil spills per year, a modest decline from the 175 average for preceding 5-year period. The company reports that in 2010 (the latest figures available) there were 144 spills in excess of 100kg (the Royal Dutch Shell Group reporting standard reports only spills greater than 100kg) as shown in Figure 2 below.

Figure 2. Volume of spills (barrels)/year: 2006-2011

Source: Oil Spill Data

Among the salient excerpts from the company's corporate literature concerning its efforts to respond to oil spills in Nigeria are the following:

1. At the beginning of 2010, there were 144 sites still to be cleaned up. By the end of 2010 only 41 sites were outstanding. After clean-up, the majority of sites were found to require remediation based on recommendations from inspections carried out with government regulators.

2. A total of 282 sites were remediated in 2010, of which 270 were certified. The remediation of the five remaining pre-2005 spill sites was hampered by community issues and a security concerns.

3. Remediation contracts have been awarded at all sites, and work has begun.

4. Of the 27,580 barrels of oil spilled in 2010, 18,763 barrels (68%) were recovered.

5. In some areas, the clean-up effort was frustrated by frequent new spills on the same site caused by repeated oil theft and illegal refiners.

6. Shell Petroleum Development Company's (SPDC) operators continuously monitor for leaks and respond to anomalies. In addition, any reports, either by community surveillance teams under contract to SPDC or by the public, are responded to immediately. SPDC first shuts down the flow of oil to the leak before steps are taken to verify other details about the incident in preparation for the response, which starts with containment. By immediately shutting down pipelines or flowlines that are damaged and containing the spills, we minimize the damage to the environment.

7. To provide transparency with respect to the cause and consequence of the spill, a team including relevant government agencies and SPDC is accompanied by representatives of impacted communities when they visit the site, as quickly as possible after the leak occurs. This Joint Inspection Visit, or JIV for short, determines the spread, the volume and the cause of the spill (Oil Spill Data 2012, p. 5).

This corporate spin would suggest that the company is a stellar corporate citizen committed to the health and welfare of all of its stakeholders, but the actual picture is much different and Essential Action reports that the company's operations have adversely affected the health and welfare of the Ogoni people in particular for the past 50 years. It is equally clear that the company is trying to redirect attention from its actions in Nigeria to its competitors in hopes that they will look good by comparison. For instance, according to a report from Duncan and Duke (2011), "The boss of Royal Dutch Shell launched a blistering attack on beleaguered rival BP over the devastating Gulf of Mexico oil spill" (p. 1). The company's CEO said Shell would "never have made the mistakes that led to the death of 11 workers on the Deepwater Horizon rig and the biggest environmental disaster in U.S. history. Shell clearly would have drilled this well in a different way and would have had more options to prevent the accident from happening" (p. 1). The report by Duncan and Duke, though, also cites the fact that, "Shell's own record is far from spotless and industry sources pointed towards ongoing criticism of its operations in Nigeria" (2011, p. 2).Taken together, these different outcomes can be reinforced or conflict with each other from these various sense-making perspectives, but it is possible for the company to have a personal impact on the situation and these issues are discussed further below.

How Royal Dutch Shell's Stakeholders can Have a Personal Impact on the Situation or Problem

As noted above, there are a number of perspectives involved in Shell's operations in Nigeria that the company would not have far to go to do more than it has already for the Ogoni people because to date, they have not done anything noteworthy. For example, Essential Action notes that, "Shell has done next to nothing to help Ogoni: by 1996, Shell employed only 88 Ogoni (0.0002% of the Ogoni population, and only 2% of Shell's employees in Nigeria)" (Shell in Nigeria 2012, p. 4). Indeed, the need is clear and from the perspective of the Ogonis, Shell could do much more to share the wealth simply by helping them respond to the changes that are taking place in their environment that are the direct result of the company's operations. In this regard, Essential Action concludes that, "Ogoni villages have no clean water, little electricity, few telephones, abysmal health care, and no jobs for displaced farmers and fisher persons, and adding insult to injury, face the effects of unrestrained environmental molestation by Shell everyday" (Shell in Nigeria 2012, p. 4). For the Ogoni people, then, the needs are apparent but the wickedness that surrounds them prevents them from having the same level of access to scarce resources that are enjoyed by people in democratic countries where corruption does not erode any social progress that is made and barriers to such progress are not systematically placed in the way. These constraints are further exacerbated by the unique conditions that exist in Ogoniland where the company's operations are most prominently felt.

Notwithstanding the criticisms leveled at the company to the contrary, Shell argues that it has taken great pains and expense to not only mitigate the effects of its operations in Ogoniland, but actually welcomes the criticisms leveled at it by the UN report because they provide the opportunity to respond with the company's perspective on the events. As can be seen from Shell's response to the UN report's recommendations, the company not only maintains that it is a good corporate citizen, the vast majority of the blame for the wickedness in this region is attributable to thieves and saboteurs that adversely affect the company's operations in Ogoniland. In this regard, the company emphasizes in its response to the UN report that, "The UNEP report highlights the unique challenges and complexities of Ogoniland which is not representative of conditions in the rest of the Niger Delta" (SPDC action on matters addressed in the UNEP report 2012, p. 1). In fact, Shell reports that in 1993, operations in the region were stopped following a series of attacks of its personnel and the company has not been able to regain complete access to the region since that time (SPDC action on matters addressed in the UNEP report 2012, p. 1).

The company's specific response to the UNEP report's recommendations for its operations in Ogoniland is provided in Table 1 below.

Table 1

Shell Petroleum Development Company's Response to UNEP Recommendations

Recommendation

SPDC Response

1. To fully review and overhaul procedures for oil spill clean-up and remediation as well as improve on contracting and supervision.

A. SPDC has carried out a preliminary review of its procedures. RENA remains a proven and internationally recognized method to remediate spill sites which is widely used in many countries. The report noted that in a few specific cases in Ogoniland we did not go deep enough in our pre-clean up assessments and this may have impacted the overall effectiveness of remediation in those areas. A review by SPDC has confirmed this finding in relation to a few specific sites. Based on this finding, SPDC will revisit the sites in Ogoniland investigated by UNEP to determine whether clean up and remediation have been adequate, and take action as required. SPDC will also review a sample of other remediated sites more widely across the Delta to check that adequate remediation has indeed been carried out.

B. SPDC will continue its ongoing efforts to ensure effective supervision of contractors and their full compliance with regulatory and contractual requirements.

C. SPDC has been in negotiations with a reputable international organization for some time, to launch a joint project to review and if necessary, further improve SPDC's remediation techniques in the Delta, drawing upon independent expert scientific knowledge. Also, SPDC issued contract tenders at the beginning of 2011 inviting internationally respected organisations such as the British Standards Institute (BSI) and Det Norske Veritas (DNV) to provide independent review and assurance of SPDC's oil spill response and management practices.

2. To conduct a comprehensive review of SPDC assets in Ogoniland and develop a decommissioning program and Integrity Management Plan for the assets.

A. SPDC remains committed to developing an asset integrity management plan for Ogoniland but effective implementation will require support from communities and from the government, given the unique challenges regarding access since 1993. Decommissioning of the facilities that are not in service in Ogoniland had not been possible due to the limited access SPDC has had in the past.

B. As an illustration of what can be achieved when access is granted, between 2009 and 2010, SPDC secured more than 100 non-producing wells in the area to make them more difficult to tamper with. This was achieved with the cooperation of both local, state and federal governments and the Ogoni communities. SPDC has set up a team to review and develop a comprehensive decommissioning program and asset integrity plan and looks forward to discussing these plans with the relevant Ogoni communities.

3. SPDC to work with Nigerian regulators to clarify the legislation governing remedial intervention and target values.

A. SPDC will continue to engage with the relevant government regulators on the Environmental Guidelines and Standards for Petroleum Industry in Nigeria (EGASPIN). SPDC confirms however that it currently manages its remediation process on a risk based approach consistent with international best practice.