SPDC gives insights into divestment options amid oil theft, deaths, harm to investments
Every year at about August, the international oil corporations (IOCs), especially Shell Nigeria, give a financial overview of the nation’s oil industry. The highlight for 2022, as always in recent years, is the deepening implications of oil theft which goes with loss of revenue, vandalism, scourging levels of fire disaster and mass deaths at illegal refining sites across the oil region.
This comes on the heels of revelations by the Nigerian Upstream Petroleum Commission (NUPRC) which just announced through its chairman, Gbenga Komolafe, that Nigeria lost $1Bn in the first quarter of 2022.
This amounted to nine million barrels of crude oil within the period under review, showing that out of 141 million barrels pumped into the pipelines, nine million barrels did not get to destination (export terminals). By current production levels, this amounts to almost loss of eight days output.
Shell is one of the hardest hit IOCs because of their large footprint in the volatile oil region, and the fact that they have pipelines that help most other IOCs and local oil producers to transport crude to export terminals.
Last week, Shell Petroleum Development Company (SPDC) went round key locations in the oil region to explain the facts behind the ugly figures. In Port Harcourt, the team was led by Igo Weli, the General Manager, External Relations who was backed by relevant unit heads and subject experts who made presentations to energy correspondents in the oil region.
The trending issue in the oil industry is the divestment blues by IOCs in the face of global move away from fossil fuel and deteriorating revenue loss in Nigeria’s oil zone as well as environmental devastation by third party oil spills and oil theft, vandalism, illegal refining locally called kpofire, and frequent deaths through fire disasters. These alone give bad name to the region where most oil sites are rated black or red in security classification.
The issue is whether the IOCs were serious with divestment activities that hover in the air, or whether a company as big as Shell could quit in Nigeria.
Divestment is happening – Igo Weli
Starting from this vexed issue, the Port Harcourt boy told his people to better get it into their psyche that divestment is happening. What is important, he insisted, is to look at why it is so.
He said divestment has a cause, and that it is not ordinary. “We must begin to ask ourselves, why do companies divest? SPDC is in 170 countries, and they are not divesting in those countries. We must ask ourselves, why is SPDC divesting in Nigeria? There are things happening here that are not happening in other countries.”
Industry sources have pointed to what they call a new trend, strange litigations whereby judgments seem to come easily in many billions of naira from judges to claimants. Most citizens see this merely as a positive turn that looks like fetching billions of naira from naira wells as in oil wells.
Experts said this is new in the industry in Nigeria and there is high suspicion on some of the litigants. They said some spills cannot be traced. Some persons even help to spread a spill to their communities to qualify for benefits that come from evil happenstance.
This led to some persons wondering aloud if there have emerged some willing judges for quick judgments. They said it looks like a new racket, but judgment is judgment. So, media men were challenged to find out if this could be one of the reasons IOCs are fleeing, divesting. They were asked to pay attention to this new trend which they said is very recent and is a new danger.
Back to the presentations by SPDC officials, the diversity of the tragedies in the oil fields were listed as illegal refineries and crude oil theft which leave behind a trail of impacts such as loss of revenue, crash of value of Naira to other currencies, soot, criminality, not meeting OPEC allocated production/market quota, spending on clean up, mass deaths, etc.
Ugly face of oil region
Whereas view of oil fields in other countries present a beautiful sight of mesh of pipes and glitter of coloured lights, that of Nigeria is said to be an ugly face from the air. SPDC officials said if you do overfly, you shed tears at what you will see; the face of the oil region from the sky.
The oil thieves have devised new methods to convey their products along the routes. For instance, sometimes, a lady will be ahead and gives money to officers at checkpoints and describes the coming vehicle. When that vehicle gets there, it is motioned to go ahead.
Weli particularly made it clear that those that frequently perish in fire blowouts are not the real owners. They recruit them around the country now, and tell them they were going to work in oilfields. When they come here and die, they join the growing list of missing persons in Nigeria.
Task before the press
The officials want the media to act to stop the thinking behind the disasters. Help stop this evil, the officials demanded. Money spent by Shell is for all Nigerians because it’s a joint venture and the FG has larger share. So, it is the peoples’ money. This thread of though may be far-fetched for the oil thieves who walk about like heroes winning back community assets even if it is by stealing them.
This could be why Weli noted that the matter is becoming worse. It’s now impacting the ground water level. Note that the entire populace is guilty. But, do the oil thieves not tell newsmen that something must kill a man. The foot soldiers that cash out about N50,000 per operational day refuse to touch other jobs or SME offerings. They live big while their masters live large.
There are over 150 sites per year. Weli warned that this is re-impacting in everything. If you want to visit a site to assess it, you must procure a truckload of soldiers. Often, for the sake of compensation, community people in the next village help the spill to spread to their own areas. This, he said, is because during clean up jobs will be given only to communities that were impacted.
So, beyond litigation approach, the IOCs think the press is an arbiter. They said they want the press to tell the story. For now, most citizens act with a lot of impunity and still turn round to litigate. The IOCs say it is painful to pay such people. Shell in particular is not pro-litigation. This is a Nigerian problem and it cripples Nigeria’s funds, and retards operational progress such that some of the IOCs may want to relocate. This is because nowhere else is this happening in the world.
This is raising another question. Who, between Shell and Nigeria with her communities, is burning and losing more? Weli warned that It is not a Shell problem alone. Being in 170 countries, Shell has more options than Nigeria has.
It is the opinion of industry officers that Nigerians and Niger Deltan must realize that IOCs are investors. Will it be okay for them to invest to discover, drill and pump oil, only for a group of criminals under whatever guise to just take it? It seems difficult to find any other answer than not okay.
Yet, the evil practice seems to be on the rise, and to the IOCs, nobody seems to care. The solution, according to Weli, is to go back to the causes of the spill and solve it from there. But, he warned, if care is not taken, more than 50 per cent of national budget may be required to clean up the oil region. Demand by oil region dwellers may explode and the masses will support them. It will now be mandatory to clean up the entire Niger Delta. If this is to be done, half of the national budget may be needed to do it. Will other parts of Nigeria easily approve this kind of spending? This seems to be another difficult question.
What is more glaring is that oil theft is huge and is increasing, to between 250,000 bpd to 400,000 bpd. Now, the trans-National pipeline (TNP) has been under constant breach in recent years. It went down in March 2022. It had to go down in a situation where SPDC puts in something like 100 barrels of crude oil and at the other end, they get only five barrels. This must be an extreme illustration, going by the NUPRC figures of 132 million barrels lost out of every 141 million barrels. This must be an industry average while the other example is only for the TNP.
Encroachment Managers say the industry is a value chain, and the IOCs are significant contributors to the economy. There is high level encroachment on the Right of Way (ROW, pipelines).
Every business tries to reduce exposure to costs, they argued, and Shell had to sell off some 150 projects, roads, school amenities, etc in Oyigbo zone. Shell says it can’t carry gun, either, just to do business. They are not the government that has such right. So, what is the option left to an investor boxed into this kind of corner, other than divestment? “We can only divest and move”, an official said.
Weli’s parting words
The man regarded as a bright son of the oil region that always slams the people with inside truth to the face said the government is trying but did not act early.
On remarks that oil pipelines and wellheads can only be tampered with by experts who must be insiders and oil workers, Weli made it clear that SPDC does not shield staff. He added that what Shell does to protect assets is not done anywhere else. These things count or have meaning where investment decisions are made.
Shell supplies information to security agencies. It is up to them to what they do with it, he added.
The loss is huge and it impacts on the naira value and exchange rate.
Weli said drones may be joining the fight. He said in answer to a question the oil region is gaining heavily but that it seems IOCs are doing nothing. SPDC, he said gave $2bn to the NDDC from year 2000 to 2017. The company had to make it public so the people will know that destroying oil assets is destroying their own property.
The GM, buck-passing is too much
Over 90 percent of spill is caused by 3rd party agents, but the people of the region keep a blind eye to this fact and make it look like the trouble is with operational spills only. This may need huge resources to clean when the people get round to that point.
Warning tone: The choices we are making will kill us. The mess is here, it’s not by Shell. Shell is not going; we are only restructuring our portfolio (to offshore). The bigger question is the impact on Nigeria.
Many call for modular refineries as the magic solution, but Weli asks, why it is easier to do illegal refineries? They do it crudely, they do not buy the crude, they kill as many hundreds of peoples as they wish without sanctions; so illegal refinery will look like good business. But the moment the model is reconfigured and fatalities now seem normal. Shell can’t do it that way. That is why the company lasted. It is a strong brand with global standards of operation. So, supporting modular refineries for the crude thieves means incentivising criminality. It can only attract more people to it.