Doubts Over Shell’s Reasons for Planned Onshore Exit, Litigations, Environmental Obligations Swell

August 31, 2021

Royal Dutch Shell’s decision to exit Nigeria’s onshore and shallow water may not be unconnected with growing litigations against the oil company and pressure to force it to carry out environmentally friendly operations, a THISDAY review has shown.

After over half a century of pumping oil out of Nigerian swamps, Shell, in May acknowledged that its spill-prone operations there were no longer compatible with its plans to go green.

The Anglo-Dutch company has been gradually selling onshore assets in Nigeria for more than a decade, as it sought to put aside chronic problems such as pollution caused by ruptured pipelines and the resulting legal battles with local communities.

But the company has attempting to turn the tables on its host communities, which have borne the brunt of its operations for about six decades, saying that most of the pollutions were from self-inflicted activities like vandalism.

In May, Shell’s Chief Executive Officer, Ben van Beurden told investors that: “The balance of risks and rewards associated with our onshore portfolio is no longer compatible with our strategic ambitions,” adding that the company “ cannot solve community problems in the Niger Delta.“

With a litany of lost and pending court cases, the company may be looking for an “escape route” to avoid taking responsibility for years of damage to the Niger Delta environment.

Secretary General of the Niger Delta Ethnic Nationalities, Capt. Bassey Henshaw, told THISDAY yesterday that the oil company must clean up the environment it has degraded over the years as well as pay compensation before any talk about leaving its onshore and shallow water operations in the region.

“We do not dispute the fact that they can go green or whatever, but there has to be some closure. You have a business running and there are issues emanating from those businesses. You do not wake up and say you are going green. All the issues have to be fixed and resolved.

“We are totally against it and we will do everything to frustrate them and send a petition to the federal government and the concerned ministry that we vehemently kick against it. We cannot hold then ransom if they want to leave, but they have to have a closure of the previous business they have done, the degradation of the environment, the oil spillages and all,” he said.

According to the Niger Delta youth leader, the clean-up shouldn’t take much time since the company already has a idea of what it will cost to carry out the reversal of the destruction done to the environment.

“You cannot start a new business until that old one is totally settled. If they try that, we will move for the federal government to nationalise them until the issues are resolved. There should be a clean-up of Ogoni and the entire Niger Delta and if they agree, no problem and it should be a full package.

“The closure that I am talking about should include compensation. If they are serious, they have the records already, having consulted with the companies doing the clean-up. Once they pay and bring in the indigenous people to be part of it, then they can exit. They can’t use us this this time, it will backfire,” he noted.

The company already has a number of cases brought against it by locals who have felt short-changed by the activities of the oil company.

For instance, in 2008 four Nigerian farmers filed three separate suits against Shell in The Netherlands, where Royal Dutch Shell (the parent company) is headquartered, with each one addressing the impact of oil spillages in the three villages namely Oruma, Goi and Ikot Ada Udo.

In January 2021, the Dutch Court of Appeal held Shell Nigeria liable for damage caused by the oil spills as the court pronounced that the company owed a duty of care to affected villagers and liable for a failure to prevent future oil spills.

It noted that the Shell Nigeria subsidiary must compensate for oil spills in two Niger Delta villages over 13 years ago and must build warning systems to detect future leaks.

In February, a UK Supreme Court ruled that oil-polluted Nigerian communities in Bille community and the Ogale of Ogoniland could sue Shell in English courts, a decision seen as a victory for the communities after a five-year battle that overturned a Court of Appeal ruling.

Although Royal Dutch Shell did not dispute that pollution had been caused, it argued that it could not be held legally responsible for its Nigerian subsidiary.

Similarly, in 2015, Shell accepted responsibility for two spills and agreed to pay £55 million ($76 Million) to the Bodo community and assist in the clean-up. The company recently consented to pay N45 billion to some Ogoni communities in a legal tussle that has lasted over 31 years.

The United Nations environment programme (UNEP) said in its report sometime ago that it could take 30 years to clean up the pollution caused by oil extraction and recommended an initial fund of $1billion (£800million) for the first five years to be paid by the oil companies.

Penultimate week, the Nigeria National Petroleum Corporation (NNPC), said it had taken over operatorship of the Oil Mining License 11 (OML 11), after Shell Petroleum Development Company (SPDC) lost a case against it.

Meanwhile, Shell is looking to shed most of its current carbon emissions, hitting as much as 70 per cent from its onshore and shallow water operations in the Niger Delta through its planned divestment, THISDAY has learnt.

The company is proposing, pending the conclusion of negotiations with the federal government, to sell off its entire assets in the Shell Petroleum Development Company (SPDC), in a move it said is meant to align with its NetZero plans.

But while Shell is pushing forward with the planned sale of the assets valued at over $2 billion, it is however expected to retain as much as $7billion investments in Nigeria in its offshore operations.

About 19 Oil Mining Leases (OMLs) will be put up for sale by the oil giant in onshore locations and shallow waters in the company’s eastern and western operations in the Niger Delta, which is its 30 per cent equity in the Joint Venture (JV) assets.

According to Wood McKenzie, Shell’s decision not to hold on to its gas assets, may hurt it’s goal to have 55 per cent of gas in the global portfolio by 2030, resulting in a net loss of gas from the portfolio.

With total valuation over $9 billion, McKenzie said that even if Shell eventually leaves its onshore and shallow water operations, it will still have a portfolio worth over $7 billion in Nigeria, mostly driven by the Bonga fields and development of OML 145.

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