Shell Tries to Come Clean on Its Dirty Past in Nigeria

LAGOS (Capital Markets in Africa) – As the company moves away from oil, it can’t shake its years’ operating in the pollution- and graft-ridden nation. Perched in a helicopter sweeping over the mangrove forests of the Niger Delta, a photographer named Casey is looking for trouble. And she finds it, down among a cluster of tree trunks stained with crude. A faint disturbance in a jungle clearing turns out to be a group of men pawing at a pipeline, a tiny slice of a 1,200-mile web that feeds Royal Dutch Shell Plc’s bustling export hub on Bonny Island. Some of the men flee as the chopper closes in, but most redouble their efforts as Casey aims her camera. “I’ve seen things get better,” she said before take-off. “Then they go back to getting worse.”

Casey’s paid by Shell to catch fellow locals in the act of tapping or sabotaging the patchwork of pumps and pipes that have turned Nigeria into both a major oil supplier and a leading polluter. But though she’s under Shell’s umbrella, the photographer isn’t comfortable providing her last name. That’s understandable. The Anglo-Dutch giant’s operations have been the source of conflict since the 1950s, when it drilled the former British colony’s first commercial well. That ushered in an era of spills that have ravaged fishing and farming communities—exacerbating corruption and anger among tribes in the delta, a region the size of Ireland that’s home to some 30 million people.

Now Shell is working to shrink its onshore operations in Nigeria and shed any links to environmental degradation and violence. That will be a major act of extrication. Oil sales made up more than half of federal revenue that flowed to the Nigerian government last year, with Shell accounting for about 7 percent. Ordinary people see the Hague-based corporation as almost as powerful as the government and think it can solve more problems than it can—and that it owes everyone a handout. One Shell employee, who didn’t want to be seen disparaging the country, confided he rejected eight requests for additional, illegal payments in a single trip through the airport on one recent trip. Even antigraft campaigner NGO Global Witness and other Shell critics acknowledge that feuding factions within the government and predatory bureaucrats make it practically impossible to meet every demand.

Faced with such problems and such a legacy, Chief Executive Officer Ben van Beurden wants to change focus. In Nigeria, Shell is shifting its attention to petroleum deposits off the coast in the Gulf of Guinea, far away from the locals who have proven so troublesome for the company. He’s also leading Big Oil’s global pivot toward the cleaner fuels that a growing chorus of shareholders such as Legal & General Group Plc, one of Shell’s largest, is demanding. “We’re more than just a pure exploration and production company,” Van Beurden told reporters in April.

Shell now earns more selling natural gas—which has a smaller carbon footprint than petroleum—and renewable energy around the world than it does from oil. Van Beurden is betting the future on Shell’s ability to eventually complete the transition. Key to that effort is unlocking Nigeria’s vast trove of natural gas, which requires at least some support from the locals Shell has been at odds with for generations. Van Beurden flies in every couple of months to try to move things along, only to be confronted at almost every turn by his company’s checkered past and its partnership with a government feared for its militancy and derided for its graft.

For example, Shell has found a buyer for the last of its onshore exploration rights in the most controversial part of the delta. Shell separately commenced a clean-up effort there to address a pair of pipeline breaches near the village of Bodo in the late 2000s, building up at least some good will with the community. But the investor, a Nigerian, has been denied funding by London banks over due diligence concerns, according to people familiar with the matter. “To do things with corrupt Nigerians—you get sucked in at some point,” says Abel Agbulu, a Catholic priest and intermediary in the Bodo dispute, speaking about the country’s business culture.

The U.S. Department of Justice found in 2010 that Shell paid up to $2 million in bribes to ease shipments through Nigerian customs but declined to prosecute because it believed Shell was bolstering anticorruption safeguards. Italian prosecutors allege that a year after its agreement with the U.S., Shell and Eni SpA, its partner in Nigeria, paid more than $1 billion to win offshore licenses, which mostly went to bribes. The company denies it, and a trial is ongoing. Two middlemen involved in the deal were found guilty in mid-September. Shell stockholders are keeping a close eye on the case in Italy, Eni’s home base. If Shell’s problems keep escalating, investors will face tough choices, according to Iain Pyle of Aberdeen Standard Investments in London. “If you are operating in a manner that involves bribes, then there should be financial penalties and that has an impact on our holdings,” says Pyle. “It’s a risk.”

Shell country chief Osagie Okunbor said in a video chat from Abuja that the company fires an unspecified number of workers a year for unethical behaviour, often the result of tips received from a hotline it promotes. By law, he says, Shell is only allowed to report suspected crimes such as bribes and oil thefts to Nigeria’s industry regulator, which it does. He’s seen only a few prosecutions.

After years of impunity, those dedicated to disrupting Shell’s operations have become more powerful. About 30 percent of oil sent through pipelines in the delta is stolen, according to a 2017 estimate from Wood Mackenzie Ltd. There’s little sympathy for a Western company that’s profited from a region that’s among the world’s poorest.

Trust has eroded so severely that it took nearly 10 years for Shell to gain permission to start the Bodo clean-up, with some accusing it of trying to establish a foothold to restart exploration. Shell has paid the community a court-mandated $80 million, yet boys still drop out of Shell-funded schools to spend their days stealing Shell oil.

A visit to Bodo with a Shell environmental scientist, Ogonnaya Iroakasi, highlights the complexities confronting the company in a country where efforts to right previous wrongs are often stymied by a mix of desperation, vengeance, greed, and indifference. Earlier in the day her crew discovered an illegal refinery within view of a watchtower manned by the army, which is supposed to be leading the fight against poaching. Seized barges laden with stolen fuel bobbed nearby, leaking after weeks of neglect. Iroakasi pointed out recently scrubbed marshes that were again streaked with dark, viscous liquid. She sighs at the sight of a goopy buoy of candy wrappers and Styrofoam cups lapping at the sand. “Re-pollution,” she says.

In 2009, without admitting wrongdoing, Shell agreed to pay $15.5 million to settle claims it collaborated in the 1995 government executions of writer Ken Saro-Wiwa and eight other activists who fought for a greater cut of Nigeria’s oil revenue. In all the time since, about the only thing that Shell seems to have improved is its “rhetoric, professed principles, and posturing,” says Ledum Mitee, who was imprisoned alongside Saro-Wiwa.

Not long after the executions, oil companies started offering so-called sit-at-home payments to pacify legions of unemployed youth, according to Mitee. When the money stopped, the recipients, whose families had grown dependent on the handouts, started to form pressure groups, triggering a crackdown by police. Many of those young men responded by arming themselves and forming patrols of their own, leading to a cycle of violence that ebbs and flows to this day. The animosity runs so deep that attempts to make amends, such as a recent Shell initiative to provide free medical care, are boycotted on principle.

Some things, Mitee says, will never be forgotten—and that means the tensions in the Niger Delta will almost surely continue. It’s a legacy Shell may never be able to clean up.

Source: Bloomberg Business News