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23 Jun 2017

Shell retreats from Nigerian oil business: Firm to focus on gas after battles with bandits plundering its pipes


Shell is retreating from its key oil business in Nigeria amid long-running battles with thieves and racketeers. The blue chip giant lost around 5,660 barrels of oil per day last year – and far more in previous years – as criminals hacked into its vast network of pipes and sold the oil on local and international black markets.
Oil leaks caused by sabotage, as well as through its own operational problems such as cracked pipes and equipment breakdowns, have devastated local livelihoods and wildlife, triggering conflict and resentment.
Shell entered Nigeria in 1936 and the country's oil has helped the Anglo-Dutch firm become the £170billion mega-business it is today.
Hostile environment: A farmer tends to crops beside oil pipes in the Niger Delta
But bosses are now focusing on Nigeria's vast gas reserves instead, seeing it as a cleaner, more efficient resource.
The move could help finally reverse Nigeria's damning paradox of being awash with resources while at the same time struggling to supply power its 182m residents' homes.
Shell has sold around 13 of its 33 oil wells in the country to Nigerian companies since 2010, with more sales possible. 
Over the past few years, Nigeria's small independent oil producers have spent billions buying assets from the big international players.
As Shell steps up its focus on gas, Osagie Okunbor, the boss of its operations in Nigeria, this week said it was about to make a final investment decision on a 300m cubic feet gas project in the south of the country. It would supply gas to a vast petrochemicals and fertiliser company.
That would add to Shell's vast gas assets in the country including a distribution company and share of a liquified natural gas plant.
Okunbor said: 'We have been revising our strategy in terms of our presence in Nigeria. We have essentially streamlined our footprint such that we pay a lot more emphasis on gas and reduce the oil part of our footprint.
'Even with this divestment we are probably the biggest international oil company operating onshore.
'So it's not like we have fled – what we have done is to focus on gas, which as energy we felt is a more efficient energy source.
'Also, frankly gas compared to oil is easier to manage in terms of some of the issues we face.'
This week, Shell took reporters on a helicopter ride over the Niger Delta to ram home the problem of illegal 'bunkering' where thieves siphon off oil.
 Yet also visible is the Bodo Creek area which was devastated by a spill of Shell's corroded pipes in 2008 and 2009, destroying waterways and fishing supplies.
Work has yet to start on cleaning up the area – two years after Shell was ordered to pay £55million compensation – with recrimination thick on all sides. Shell says local communities have been obstructing clean-up efforts in the hope of getting more compensation.
Inemo Samiama, who leads the clean-up's independent mediation programme, said: 'People got used to sharing money and they wanted the money for the clean-up to be shared as well.'
Many local residents say they have been angered by delays to the clean up and the way it has been handled including the choice of contractors. They have brought a case in London's High Court to keep alive their right to sue Shell if the clean-up is inadequate.
Even after the Bodo spills, around 200 tons of oil spilt last year from Shell's pipelines was unconnected to sabotage. It says 90pc of its leakages were due to theft.
But gas looks like the future –Nigeria is thought to have the ninth-largest reserves in the world. Okunbor added: 'We have very big ambitions to grow a domestic gas base. 
'There's no point building a business on gas that we don't get paid for or don't get the right price for it – so will be part of that debate in the wider Nigerian economy to ensure that the whole value chain for gas works.'

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Item Reviewed: Shell retreats from Nigerian oil business: Firm to focus on gas after battles with bandits plundering its pipes Rating: 5 Reviewed By: LinkNaija