An open letter from Mutiu
Sunmonu, Chairman of Shell
Companies in Nigeria
In 2011, Shell Petroleum Development Company (SPDC) continued our efforts to rebuild operations and provide more transparency around our activities.
A government amnesty for militants that began in 2010 has allowed SPDC engineers to reactivate dozens of wells and hundreds of kilometres of pipeline. These had been shut down under threat of violence or actual attacks during the upsurge in militancy in the years 2006 to 2009. There’s more still to do, but we’re getting there – repairing our infrastructure, and the morale of our employees.
SPDC production rose for the second year running, providing more revenue to the government – the majority owner – and our other joint-venture partners. Stable funding and better security paved the way for progress on important projects. In 2011, we installed new equipment to capture gas produced with oil that would otherwise be burned off, and we repaired or improved existing facilities to capture gas. This helped reduce the amount of flaring at SPDC facilities in 2011, even though we produced more oil than in 2010.
Our increased focus on the maintenance of pipelines and other equipment, thanks to better access to sites, led to the volume of onshore operational spills from SPDC facilities also falling in 2011. That is welcome as operational spills are caused by equipment failure or accidents. We experienced an increased number of operational spills, however, as we put more pipelines back into service. No spill is acceptable and we must continue to work to improve our performance.
Despite an end to militant attacks, urgent action is still needed to tackle the oil theft and illegal refining by criminal gangs which continue to cause the majority of spills. Although mostly occurring in a few areas, the environmental impact of these activities is severe. In one case, in the Imo River area, we chose to shut down our operations in 2011 because of the environmental and social damage these oil thieves were causing.
Regrettably, the Shell Nigeria Exploration & Production Company (SNEPCo) experienced an oil leak during loading operations at the Bonga field 120 km offshore. I’m sorry that this leak occurred, but pleased that the swift response efforts of SNEPCo staff in co-operation with the Nigerian government meant that most of the resulting spill evaporated or was rapidly dispersed at sea.
The UNEP report on oil contamination in the Niger Delta’s Ogoniland region, released in August 2011, showed the complexity of some of the challenges we face. The findings were sobering, with some important lessons for us. SPDC welcomed the report, accepting its recommendations for the company. We’re also . It is not often that opportunities for real change arise in the Delta. I earnestly hope that this report proves to be a catalyst for co-operation among government, the industry and civil society.
SPDC has been making changes already. We’re making it easier in a number of ways for others to check and follow our progress. In January 2011, we launched a new website which allows users to track how SPDC deals with each confirmed spill from its facilities. In December 2011, SPDC agreed with the International Union for Conservation of Nature to launch an independent scientific advisory panel to review SPDC practices in the clean-up and remediation of spill sites, and to recommend improvements. In early 2012, we contracted Bureau Veritas, an international verification organisation, to independently audit SPDC oil spill management practices.
Recent years have been challenging in Nigeria, but I am hopeful for the future. We want to continue to invest and produce oil and gas here, sharing the benefits of doing so responsibly and profitably with the Nigerian people.
SHELL’S ECONOMIC CONTRIBUTION
The Shell Petroleum Development Company of Nigeria Ltd (SPDC) is the operator of a joint venture between the government-owned Nigerian National Petroleum Corporation (NNPC, 55%), Shell (30%), Total (10%), and Agip (5%). Partners fund the joint venture based on their ownership share. Since the government-owned NNPC owns 55%, the joint venture’s activities depend on the government providing this share.
Shell Nigeria Exploration & Production Company (SNEPCo, 100% Shell-owned) operates and has a 55% interest in the offshore Bonga field, Nigeria’s first deep-water project. Shell also has a 26% interest in Nigeria Liquefied Natural Gas (NLNG), which exports LNG around the world.
- $38 billion: revenues from SPDC to Nigerian government from 2007 to 2011.
- $6 billion: Shell share of royalties and taxes paid to the Nigerian government in 2011 (SPDC $4 billion, SNEPCo $2 billion).
- 95%: share of revenue after costs that goes to the Nigerian Government from each barrel of oil SPDC produces.
- $1.4 billion: value of SPDC and SNEPCo contracts awarded to Nigerian companies in 2011.
- 6,000/35,000: estimated direct/indirect jobs created by SPDC and SNEPCo in Nigeria.
- 90%: proportion of employees who are Nigerian.
- $164.1 million: SPDC and SNEPCo funds to the Niger Delta Development Commission in 2011 (Shell share $59.9 million).
- $76.3million: 2011 contribution from SPDC and SNEPCo to community development projects (Shell share $23.6 million).