• Friday, March 29, 2024
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BusinessDay

Why Shell struggles to do business in Nigeria

Local firms eye assets as Shell, others exit onshore operations

A combination of regulatory uncertainties, persistent incidents of pipeline sabotage and crude theft in Nigeria’s Niger Delta region are pushing Royal Dutch Shell to reconsider its business operation in Africa’s biggest oil-producing country.

For a company that pioneered Nigeria’s oil industry in the 1950s, Shell accounts for nearly 40 percent of Nigeria’s total oil output and remains central to the economy employing nearly 3,000 people alongside a partnership with more than 11,000 contractors.

However, for Shell doing business in oil- rich Niger Delta region remains as important and problematic as ever in 2021.

“Our onshore oil position, despite all the efforts we put in against theft and sabotage is under challenge,” the supermajor’s chief executive Ben van Beurden said concerning its operation in Nigeria after Shell reported another set of weak 2021 results affected by the coronavirus pandemic.

“But developments, like we are still seeing at the moment, mean that we have to take another hard look at our position in onshore oil in Nigeria,” Shell’s top executive added.

Some industry executives and analysts say the constant security and operational challenges in the Niger Delta have long-held reputational and legal risks for Shell.

“Shell is reconsidering assets with legal uncertainties or assets that are subject to host communities’ disruption which has slowed production over a certain period of time,”seye Fadaunsi, former executive director of Pillar Oil, an indigenous oil firm said.

He noted that moving production to offshore fields will minimise the incidence of pipeline vandalism which will reduce the loss of crude oil in the process of transportation, thereby maximising its revenue.

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Concerning the impact of Shell’s decision on Nigeria’s economy, an energy and finance consultant expert who doesn’t want to be quoted, said divesting or selling assets to incompetent firms would increase Nigeria’s idle fields which will have a negative effect on the country’s total output.

Eddy Wikina, a former managing director of Treasure Energy Resources said he was more concerned about the level of transparency that would be involved in getting new owners for Shell assets.

“We need to avoid the kind of situation we are currently witnessing in Nigeria’s marginal bid rounds which is filled with a lot of secrecy and mystery,” sad, Wikina, who is also a former external relations manager of Shell Nigeria Exploration and Production Company, (SNEPCO) .

Some experts say the effect of the COVID-19 pandemic and the renewed interest in renewable energy is forcing most oil majors to activate portfolio rationalization.

As of 2020, Shell joint venture assets in Nigeria include, 340 producing oil wells; 56 producing gas wells; a network of approximately 4,000 kilometers of oil and gas pipelines and flowlines; 10 gas plants; two major oil export terminals; one power plant, and one shallow-water Floating Production Storage and Offloading (FPSO).

Shell has been flagging for years problems with crude oil theft on its pipeline network onshore Nigeria.

Education professionals have criticised the Federal Government ’ s long indebtedness to university workers, saying this has worsened the woes of public university system and encourage unwholesome practices in the education sector.

Report indicates that the Federal Government is owing university workers under the National Association of Academic Technologists (NAAT), the Senior Staff Association of Nigerian Universities (SSANU) and the Non-academic Union of Universities and Associated Institutions (NASU), over N150 billion earned allowances.

The money spans over nine years of unpaid allowances. The government has been unable to pay since 2011 as jointly agreed in the 2009 agreement signed by the Federal Government with the respective unions.

While the NAAT members are said to be owed N71 billion since 2011, SSANU and NASU on their part said members under the Joint Action Committee of the two unions are being owed over N81 billion since 2011.

The three unions have demanded for the payment of the earned allowances, and coupled with other contentious issues such as IPPIS and general poor state of the university system, two of the unions, SSANU and NASU have declared industrial action.

Reacting to the ongoing strike by SSANU and NASU, educationists and university professors who shared their views with Businessday, said the action was inimical to the development of tertiary education and should be stopped to deter further deterioration of this pivotal sector.

Maurice Onyiriuka, an educationist condemned how successive governments continue to pay lip service to the welfare of university workers. He said this was not the right approach to getting the best out of a pivotal sector like tertiary education.

NAAT has demanded for additional release of fund from the government to add to the N10 billion given to the three unions from the initial N40 billion released recently. The Academic Staff Union of Universities (ASUU) was given N30 billion from the total N40 billion for the payment allowance recently, while NAAT, SSANU and NASU were given N10 billion.

Ibeji Nwokoma, president of NAAT said the government owed his members N71 billion, and demanded immediate payment of half of the total sum.

Specifically, NAAT demanded for immediate release of N30 billion to pay its members, to avert strike.

“We have written to the government that NAAT as a body ought to have been given a specified percentage of the N40 billion. You must define it; you can’t just say ASUU 75 per cent and others 25 percent. Let us know the specific percentage you are giving to NAAT as a union.

“In the MOU we entered with the government on November 18, in item number 2B, we demanded that in sharing the N40 billion released, that government should clearly define what is going to be allocated to each union and government agreed to the genuineness of our demands and said NUC (National Universities Commission) and Federal Ministry of Education will work it out in conjunction With the union and what they have done negated completely the spirit of that MOU.”

“In most universities, our members are being owed from 2011. So, we have also demanded that 50 percent of what is being owed our members should be paid to us, which translate to N30 billion.”

Abdulssobur Salaam, vice president (West) of SSANU said that the specific figures may be difficult to determine, saying “this is the reason the union is demanding the outcome of the Forensic Audit report since 2017.

‘ Greenhouse gas emissions from the conventional energy sources used for transportation are known to be the main reason for the global warming, which started changing the climates and posing great threat to the planet

Nigeria’s transportation sector is the gateway to the nation’s economy. It is the backbone of trade and very strategic in the facilitation and sustenance of movement of people, goods and services. Climate change is one of its major threats globally and it is imperative Nigeria develops better strategies to manage its impact as well as create more awareness about it. Additionally, it is important for the sector to double its adaptation strategies to avoid situations like that of Nauru, Boston, Virginia Beach, Charleston, Atlantic city, Miami, New Orleans and New York City etc.

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The threats and adverse effects of climate change are the reasons why transportation systems are structured to withstand all types of weather. It is also the reason why transportation engineers refer to historical records of climate and extreme weather conditions when designing infrastructure for transport such as ports, airports, railway tracks, bridges, roads etc.

The effectiveness of environmental sustainability policies in the sector as well as its potentials of supporting adaptation and mitigation are yet to be fully realized because most of the policies remain very broad and cannot provide the required focus to respond to climate change concerns. While climate change is mentioned in some key government policies, there are yet to be specific policies or strategies for climate change adaptation and mitigation especially in relation to the sector. Also, the policy framework for aligning human development and climate change management remains largely undeveloped.

Nevertheless, the government has recognized the need to adapt existing national policies, strategies and plans to address climate change and to ensure its adaptation and mitigation concerns are properly integrated into current national development plans, known as Vision 20:2020.

Nigeria’s total Greenhouse gas emissions (GHG) in 2014 were 492.44 million metric tons of carbon dioxide equivalent (MTCO2E), totalling 1.01 percent of global GHG emissions. 38.2 percent of GHG emissions came from the land-use change and forestry sector, followed by the energy, waste, agriculture and the industrial processes sector, which contributed 32.6 percent, 14.0, 13.0 percent and 2.1 percent respectively to GHG emissions.

According to CAIT data, a suite of online data and visualizations tools that support the many dimensions of climate policy making and provides free, open, user -friendly access to world-class climate data from a desktop, tablet or mobile device, enabling analysis whenever it’s needed, Nigeria’s GHG emissions increased by 25% (98.22 MTCO2E) from 1990 to 2014. The average annual change in total emissions was 1%. In its Intended Nationally Determined Contribution (INDC), Nigeria pledged to unconditionally reduce GHG emissions by 20% by 2030, compared to business as usual (BAU) emission levels. It aims to achieve this goal by improving energy efficiency by 20%, providing 13 GW of renewable electricity to rural communities that are currently not connected to the electric power grid, and by ending the flaring of gas.

Greenhouse gas emissions from the conventional energy sources used for transportation are known to be the main reason for the global warming, which started changing the climates and posing great threat to the planet. It has now become very crucial to find new ways of integrating sustainable energy in the strategic implementation of the automotive infrastructure development plans in order to minimize the emission of these gases into the atmosphere to boost sustainable environment.

It is interesting to note that countries belonging to the Organization for Economic Cooperation and Development (OECD) have already decoupled their economic growth from emissions. From 2004 to 2014, OECD countries grew their economies by 16% all together, while cutting fossil fuel consumption by 6% and reducing greenhouse gas emissions by 6.4%. Results of international energy association study shows that global emissions remained flat in 2014, while GDP rose marking a historical milestone.

It is also important to point out that extreme weather conditions and events such as hurricanes/ cyclones and floods have the potentials of disrupting routes in inland and coastal transport systems. Although there are other climate factors that may affect transportation such as climate change-driven changes in temperature, humidity and precipitation, coastal transportation infrastructure. Seaports are also impacted by sea-level rise, which exacerbate coastal flooding during extreme storm events. Therefore, it is important to identify viable adaptation measures to promote better implementation strategies as well as obtain accurate climate projection data for broad range of climate indicators that would help increase awareness and solve climate change challenges.

The importance of undertaking projects that promote better understanding of climate change, extreme weather conditions and best practices would also add more value especially as demand for the sector grows daily in line with global economy, trade and world population. Transportation has been traditionally looked upon as a challenge in terms of reducing greenhouse gas emissions, and a lot of effort has been directed at solving this issue such as providing guidance on the use of indicators for sustainable and liveable transportation planning.