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The Sunday Times (UK): Nigeria looms as wild card in Shell recovery: “Despite the record profits, big trouble is bubbling up with the crude…” (ShellNews.net) 6 Feb 05

 

February 06, 2005

 

Despite the record profits, big trouble is bubbling up with the crude, report Christian Purefoy and Peter Koenig

 

SHELL’s chief executive, Jeroen van der Veer, spent an hour on Thursday in London’s Tower Thistle Hotel giving as good as he got from 50 reporters who were bombarding him with questions at the end of the company’s 2004 annual results press conference.

The 57-year-old Dutchman insisted that Shell’s year-long nightmare, stemming from its exaggerations about its oil reserves, was over. The company had drilled down into those exaggerations and after five downward revisions had finally got its reserves estimate right, he promised. “We intend to move on,” he said.  

 

On Friday the market signalled that it would give Shell space to move on by responding calmly to the news of its fifth reserve cut.

 

After reporting record profits of £9.8 billion for 2004 in spite of its reserves debacle, Van der Veer will now try to prove that the world’s third-largest publicly owned oil company has not lost the knack for finding petroleum, or lost so much ground against rivals Exxon Mobil and BP that it cannot recover. “I am confident about our future,” he said.

 

With the Middle East and Russia in the middle of oil- industry maps, there is reason to be sceptical overall. There is an additional reason for scepticism about Van der Veer’s confidence.

 

Shell depends on Nigeria. The company gets 9% of its oil and gas from the country’s Niger delta, a maze of creeks and mangrove swamps the size of Scotland. Nigeria is one of the most difficult operating environments in the world for oil companies.

 

As Van der Veer and reporters sparred verbally in London, Charles Nwokanma, a 28-year-old machete-toting tribesman, and five others manning a roadblock outside a Shell compound in the delta sparred with the oil company for real.

 

Nwokanma comes from Owaza, a community of 15 villages an hour’s drive from Port Harcourt, capital of Nigeria’s oil-producing region. He and neighbours last week barricaded two flow stations in Abia state, from where crude is pumped to the coast to be loaded on tankers.

 

“The Nigerian government is cheating the community,” Nwokanma said. He and his neighbours shut down the flow stations to press the government into appointing an Owaza villager to the Niger Delta Development Commission, a state-controlled body that distributes Nigerian oil money.

 

The stand-off followed a series of similar clashes in the region last year. Some 20m Nigerians from 40 different ethnic groups speaking 250 dialects across 3,000 communities live in the Niger delta — 70% of them on less than $1 a day.

 

Out of the clashes emerged Alhaji Asari Dokubo, the media-savvy Ijaw who leads a militia called the Niger Delta Volunteer Force. Dokubo, who professes admiration for Osama bin Laden, said he had enough AK-47s and rocket-propelled grenades to equip an army of 2,000 men.

 

Until an informal truce was reached last autumn, Dokubo’s militia came close to a guerilla war with government forces.

 

In December Shell said that local protests would disrupt 10% of its Nigerian crude production throughout February, and gave notice that due to forces beyond its control it might be late in delivering on some crude contracts.

 

Speaking ahead of Shell’s press conference last week, Chris Finlayson, the Lagos-based chief executive of Shell exploration and production in Africa, said that despite violence and community protests Shell had suffered fewer disruptions in Nigeria in 2004 than in either of the previous two years. He characterised the security situation as serious but manageable.

 

“Shell has been operating in the Niger delta for 60 years, through thick and thin,” Finlayson said. “It remains a challenging place to operate, but we are committed to playing our part as a business in contributing to the economic and social development of Nigeria.”

 

http://www.timesonline.co.uk/article/0,,2095-1471650,00.html


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