Global oil giant, Shell, has identified insecurity, legislative issues and poor infrastructure as some of the problems confronting its operations in Nigeria.
In its 2019 report, the Royal Dutch Shell, said: “In our Nigerian operations, we face various risks and adverse conditions. These include security issues surrounding the safety of our people, host communities and operations; sabotage and theft and our ability to enforce existing contractual rights.
“Others are litigation; limited infrastructure; potential legislation that could increase our taxes or costs of operations; the effect of lower oil and gas prices on the government budget; and regional instability created by militant activities. These risks or adverse conditions could have a material adverse effect on our earnings, cash flows and financial condition.”
However, the company explained how these risks are managed. It said: “We test the economic and operational resilience of our Nigerian projects against a wide range of assumptions and scenarios. We seek to proportionally share risks and funding commitments with joint-venture partners. We monitor the security situation, and liaise with host communities, governmental and non-governmental organisations to help promote peaceful and safe operations.”
On the controversial $1.1 billion Malabu oil block located in oil prospecting licence (OPL) 245 in which nine executives from Eni and Shell, as well as Nigerian officials were indicted, the report said Shell takes violation of anti-bribery laws seriously. But in the case of Malabu oil field, it was a legal transaction.
It said: “Violations of anti-bribery, tax-evasion and anti-money laundering laws carry fines and expose us and/or our employees to criminal sanctions, civil suits and ancillary consequences, such as debarment and the revocation of licences. Anti-bribery, tax-evasion and anti-money laundering laws apply to Shell, its joint ventures and associates in all countries where we do business. Shell and its joint ventures and associates have in the past settled with the US Securities and Exchange Commission regarding violations of the US Foreign Corrupt Practices Act.
“Any violation of anti-bribery, tax-evasion or anti-money laundering laws, including those potential violations associated with Shell Nigeria Exploration and Production Company Limited’s investment in Nigerian oil block OPL 245 and the 2011 settlement of litigation pertaining to that block, could have a material adverse effect on our earnings, cash flows and financial condition.
“We maintain an anti-bribery and anti-money laundering (ABC/AML) programme with adequate resources, a comprehensive governance structure and established reporting lines in place. Clear guidance is provided to staff, which includes requirements in Shell’s Ethics & Compliance manual, an ABC/AML specific website, training modules where completion is monitored and regular messages from Shell leaders on the importance of management of ABC/AML risks. As to OPL 245, the 2011 settlement was a fully legal transaction with Eni and the Federal Government of Nigeria, represented by the most senior officials of the relevant ministries. We maintain our view that there is no basis to convict Shell, or any of our former employees who are also on trial, in Milan.”
On the impact of Coronavirus, Shell said: “Since the start of 2020, there has been a developing outbreak of the COVID-19 (coronavirus). To date, we have not seen a material impact on our operations. As a result of COVID-19, we have seen macro-economic uncertainty with regards to prices and demand for oil, gas and products.
‘’Furthermore, recent global developments and uncertainty in oil supply in March have caused further volatility in commodity markets. The scale and duration of these developments remain uncertain but could impact our earnings, cash flow and financial condition.”
It also reiterated its release of Invitation to Tender (ITT) to contractors for the development of the Bonga South West Aparo (BSWA) oil field to buttress its commitment to investing in Nigeria, if the challenges were addressed by the government.
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