Nigeria lags as peers enjoy Shell’s bumper payouts

Nigeria, Africa’s top oil producer, dropped further to the third-biggest recipient of payments from Shell last year, lagging far behind its peers such as Norway that cashed in on higher oil prices.

Although the amount paid to Nigeria last year was higher compared to 2021, the increase pales in comparison with those of Norway, Malaysia, Oman and Brazil, data compiled from Shell’s reports on payments show.

Nigeria was the biggest recipient of payments from Shell until 2021, when Norway received the largest amount of about $4.52 billion compared to the $4.48 billion paid to the West African country.

The energy giant’s payment to the Nigerian government had hit a high of $6.39 billion in 2018 but fell to $5.63 billion in 2019 and $3.24 billion in 2020.

International oil companies (IOCs), including Shell and Chevron, posted bumper profits for 2022 on the back of the steep rise in prices following Russia’s invasion of Ukraine.

Shell’s payments to countries where it has operations jumped 64.79 percent year-on-year to about $34.37 billion as its annual profit more than doubled to $39.9 billion, the highest in its 115-year history. ExxonMobil and Chevron also reported their highest-ever profits of $56 billion and $35.5 billion respectively.

Nigeria saw a 0.92 percent increase in payment from Shell last year to $4.52 billion, compared to Norway’s 70.85 percent surge to about $7.72 billion. The slight increase in payment to the Nigerian government signals the dwindling fortunes of the country’s oil and gas sector, which is the lifeblood of the economy.

Payments to Oman and Qatar more than doubled to about $4.56 billion and $3.68 billion. Brazil’s revenue from Shell jumped 87.40 percent to $4.34 billion while that of Malaysia increased by 39.46 percent to $4.47 billion.

Shell said in its latest report that payments made to governments arose “from activities involving the exploration, prospection, discovery, development and extraction of minerals, oil and natural gas deposits or other materials (extractive activities)”.

Read also: We paid Nigerian government $4.5bn in production entitlements, royalties, taxes – Shell

Its subsidiaries in Nigeria paid $3.03 billion to the Nigerian National Petroleum Company (NNPC) last year as production entitlement, while $711.85 million was paid in taxes to the Federal Inland Revenue Service.

The regulator, the defunct Department of Petroleum Resources (now Nigerian Upstream Petroleum Regulatory Commission (NUPRC)), was paid about $691.65 million and $1.79 million for royalties and fees respectively, while $79.84 million was remitted to the Niger Delta Development Commission.

“Nigeria has not benefitted substantially from the global energy price boom because of the costly petrol subsidy, and record low oil production,” the World Bank said in its latest Nigeria Development Update report. “Oil price booms have historically supported the Nigerian economy but this has not been the case in 2021–22.”

Crude oil production in Nigeria plunged below 1 million barrels per day (bpd) last year to the lowest in several decades owing to rising theft, pipeline vandalism and underinvestment. It has risen in recent months to 1.31 million bpd in February, according to data from the NUPRC.

“Oil production remains below the average production level of the last decade due to high costs, high security risks, the inability of the Federation to pay fully and on time for its share of costs in joint-venture operations, and in the past, uncertainties about the future fiscal terms, now set out in the Petroleum Industry Act (PIA). Despite the passage of the PIA, confusion remains regarding the management and governance of the oil sector,” the World Bank said.

Shell said earlier this month that its crude oil production in Nigeria fell by a quarter last year as it continued to battle security issues and theft.

The company said its share of production, onshore and offshore, in the country was 131,000 barrels of oil equivalent per day (boe/d) in 2022, compared to 175,000boe/d in 2021.

“Security issues, sabotage and crude oil theft in the Niger Delta continued and remained significant challenges to our onshore operations in 2022, leading to a significant reduction of crude available for export from the Bonny terminal for several months,” it said in its annual report.

Two weeks ago, Shell Petroleum Development Company of Nigeria lifted the force majeure it declared on the Bonny export programme almost a year ago.

Shell had announced in 2021 its intention to reduce its involvement in onshore oil production in Nigeria. It suspended plans to sell its assets last year, in compliance with a Supreme Court ruling that said it had to wait for the outcome of an appeal over a 2019 oil spill.

IOCs operating in the country have had to sell many of their onshore assets since 2010, when divestment saw Seplat Energy Plc and other local operators snapping up oil blocks.

ExxonMobil announced in February last year that it had agreed to sell its equity interest in Mobil Producing Nigeria Unlimited, which holds a 40 percent stake in four oil mining licences, including more than 90 shallow-water and onshore platforms and 300 producing wells. But the transaction has been blocked by the regulator and the NNPC.