Shell Nigeria's
Sustainability Report 2002:
A Critical Review
By Bankole Arowobusoye
Introduction
Shell Petroleum Development Company
(SPDC)
is a leading multi-national oil and gas company operating in 140
countries of the world. Given the global nature and sheer enormity of
the scale of operations of SPDC, it is apt that the implications such
operations have on the sustainability of resources, communities and the
environment be reported upon from a global perspective. For this reason
the sustainability report of this company in Nigeria, a West Africa
State, is reported upon
Obfuscation per excellent
It would be correct to affirm that through its 2002 sustainability report on its Nigerian operations, entitled
"'People and the Environment Annual Report",
SPDC has found perfection in prevarication. This 56 page document in
the opinion of this reviewer is mainly an exercise artfully targeted at
inundating the reader with large volumes of superficial, self seeking,
'Trust us" information, designed to give the appearance of substance
but which leaves the discerning reader in a spurious state of confusion
SPDC
proves that information overload, especially when designed to carpet
bomb the reader into oblivion, as a form of obsufication is every bit
as effective as outright non disclosure or falsification of information
Deficiencies
A more meaningful sustainability report by SDPC should have, (but sadly lacked) some of the following;
-
Target Audience: Well-defined boundary based upon targeted audience and well defined relative economic indicators.
Although
it is quite understood that SDPC is an international corporation and
although there are indeed references here and there to the Nigerian
environment in which the company operates, one would expect that a
sustainability report on Nigerian operations would have been written
with due consideration of the local audience in mind. It is by no means
clear that this is the case.
SDPC has not really defined the
audience for whom this report is targeted, however, it would appear
that SDPC is much more focused on an external audience, as right from
the opening paragraphs of this report, through to the last, a barricade
mentality leaps out from the pages assailing the local reviewer.
From
the language, contextual use of information and presentation of data in
the report, there is little or no clarity for the local audience,
unless of course the report is not directed towards local review. To
illustrate this point, a quotation is taken from the tone setting
opening sentences of the chairman's remarks as follows:
"The
EA field, which formed part of the $8 billion integrated oil and gas
development investment program announced three years ago, came on
stream at the end of 2002." -Opening paragraph SDPC Sustainability report, Message from the Chairman.
The reader is given little or no background information on the
prevailing local socio-economic context and the relative value of $8
Billion in local currency or what exactly EA (Extraterrestrial Animal?)
is. The implications of all these for the local economy is thus left to
the imagination.
With the tone of the report thus firmly set
with the use of foreign currency and technical jargon, a reviewer may
be pardoned for thinking that the intended audience of this report is a
cross between a North America trained Harvard economics professor and a
Texan Millionaire Oil mogul .
-
Economic Indicators: In
terms of the usage of economic indicators, SDPC succeeded in bandying
about absolute dollar values when convenient and percentage figures
when convenient, without actually relating what the dollar amount of
these percentage figure translate to in the overall finances of SDPC.
Through selective presentation of its economic indicators, SDPC
therefore manages the appearance of luminescence, safe and secure in
the knowledge that economic indicators like all indicators are only
useful when fully presented in relative and absolute terms with respect
to say the company's bottom line. This is illustrated below in two
points;
a. On pg 10 (Sec 3:Generating Wealth) of its report, SPDC
specifies that:
"Out of the 4,000 contracts awarded by SPDC annually, about 80 per cent
(3,200 contracts) go to indigenous contractors, most of them from our host states in the Niger Delta"
This
on the surface looks like a good thing. However SDPC manages to avoid
stating the actual dollar value of contracts awarded to external
(foreign) contractors thus negating any association with capital flight
from the region. It would appear that SDPC is indeed living up to its
sub-title: Generating Wealth of this section of the report. The only
question is –for whom?
b. In a reversal of this (providing dollar amounts without relating
these amount to an overall percentage ), SPDC proudly graphically
announces on pg 37 (Sec 8:Community development) that it had spent
about $65 Million on community development projects. SPDC is however
silent on how much this amount translates to in percentage terms of its
Net or Gross profits or how much of these are tax deductible/ business
expenses
-
Heath Safety and Environmental (HSE):
SPDC states on pg 38 (sec 9:Protecting the Environment) of its report
that it is in compliance with 154 out of 157 regulations of the DPR .On
pg 50 a summary of its HSE performance is presented. It would at first
glace appear that SPDC has done a good job of complying with HSE
standards, but this is misleading in the following respects;
Protection of the environment hinges on hazardous wastes management
(HWM). SPDC fails to address such important issues as HWM , Land use
and stewardship impacts but instead talks a lot about Environmental
Impact Assessment (EIA) and EIA certificates it has received. However,
without HWM and Land use stewardship compliance, EIA is meaningless. If
a company fails to comply with regulations in this one single respect,
its whole HSE policy is a failure no matter how bold a face it might
put on .
By its own assertion, SPDC has failed to comply with
regulations in the area of HWM . This however is not even the most
damning revelation, it should be of interest and worrying concern to
the international community that SPDC appears to have no intention of
complying in future with HWM regulations in Nigeria and has audaciously
stated this upfront.
'We
have applied to the regulators for exemption from the three outstanding
items, which are: oily wastewater limits, hazardous waste management
and environmental sensitivity index (ESI) mapping." pg 38 sec 9 : Sustainability report
Overlooking
the shortcoming of SPDC's HSE performance highlighted above and
examining the rest of the HSE reportage, how the company sets its
targets, monitor/obtains feedbacks, gathers data and interprets results
does not generate confidence. SDPC admits that there are high degrees
of uncertainty in the methodology used in arriving at its HSE results.
This is an affirmation borne out by the report of the third party
consultant KPMG, retained by SPDC to independently verify its report.
It is interesting to note that some of the conclusions of KPMG about SDPC HSE performance included the following:
'
Improvements were made by SPDC during the year, however, limitations
still exist in the completeness and quality of gas metering at the flow
stations and these could affect the accuracy of the reported data for
gas flaring. In addition, these limitations materially impact the
accuracy of the CO2, SO2, NOx and CH4 data."
"Due to
incompletenesses of the data on waste and oil in effluent to surface
environment, we are not able to assess whether these data reflect the
performance of SPDC." - p 53 Sec10: Sustainability Report
If
even a consultant hired by SDPC and given every access/assistance to
SPDC facilities cannot fully give credence to the SPDC HSE report how
possible would it be for a reviewer to find this report credible?
-
Community under-involvement
SPDC
is under involved in the community. The company claims to work with
stakeholders in direct social investments programs, manpower resource
development and empowering of the local populace. Indeed many such
projects are listed in sec 7 and 8 of the report.
The questions
that need to be asked is how much of an impact do all these so called
community development projects actually make in a society of mind
bogging poverty and how much in monetary terms do these investments
translate to, as a percentage of SPDC's gross or net bottom line?
Although
in the sustainability report and on the SPDC website for that matter,
it was difficult to directly obtain actual amounts of profits and
earnings derived by SDPC from their Nigerian operations, an idea of
this can be gleamed from the scale of and investments it has made into
its own business to further enhance future profitability, and from the
amount of production volume and commodities price.
The following highlights taken from the report speaks volumes about SDPC's scandalous involvement with the community
"Amount
invested by SPDC and its strategic partners in past 3 years to increase
its reserves base and production capacity and to improve asset
integrity - $8 billion"
-Amount of crude oil produced per day :-719,000 bpd, at an average price of $25/barrel this works out to about -$6.5B/Annum
Amount of gas sales averaging 812 million standard cubic feet per day (scf/d) at an undisclosed price b
These sharply contrast with the paltry amount of $67M invested by SDPC into the community
SDPC
does not disclose the dollar amount of contracts it awards outside of
the local community but it has already been pointed out that SPDC does
not award sizeable contracts to the indigenous community and
contributing to capital flight from the local economy.
"Every
time a dollar changes hands, it becomes a new dollar for someone to
spend. In this way, dollars that circulate multiply. As long as money
circulates within a self-contained system, it generates wealth within
that system, but when money leaves the system, the multiplier effect
stops. In a healthy economy, a dollar gets spent six to eight times
before it leaves the community; in an unhealthy economy, money falls
out of circulation almost immediately" -J.T.Pierce and A Dale1
Sustainable
development does not occur in a community subject to this kind of
treatment. If SDPC were mindful of the above, there would be little
need to spend $67 M in community development.. In its rationalization
for propagating this non sizeable contract award policy, SDPC claims
that high value contracts cannot be let to the indigenous contractors
because few of them have the technological or financial capacity to
undertake the larger, higher technology contracts in the industry
But in the same breadth, hypocritically states that:
'Opportunities
exist for some local contractors to grow into international players in
their area of expertise, making Nigeria a service hub of the West
Africa region."
"Increased
local content in the upstream sector will boost technology transfer and
the economic development of Nigeria and the Niger Delta in particular."
-pg10 Sec2: Susutainability report
Yet
when SDPC avoids giving contracts to local companies because of its
above rationalization, how can they grow to be international players?
"We
also support technological growth the wider Nigerian society, including
sponsorship of five professorial chairs in Nigerian universities, and
sabbatical placements of Nigerian academics in our company." pg 12, sec 4: Sustainability Report
-
In a country which in 2002 had about 47 Universities 2 and about 12,400
University Lecturers 3 SDPC gives five chairs to Nigerian universities,
this does nothing to enhance local technology or manpower capacity.
The
local populace aware of the outstripping of wealth from their
community. In the past this had resulted into expressions of
violence.According to SDPC's own statistics there was
'15 per cent increase in community incidents, from 245 in 2001, to 282 in 2002." - pg7, sec2:Sustainability report
This
escalating trend of violence is all but sure to continue and makes one
wonder, would it not be cheaper for SDPC and better for all concerned
if SDPC simply truly gave back more wealth to the local community from
which it derives so much?
Conclusions
SDPC's
sustainability report clearly reveals that for SDPC to truly claim to
be a leader in sustainability development, at least in its Nigerian
sphere of operation, the company needs to and should clearly do more in
the following areas:
Economic and Social
It
is recognized that the sustainability report is not a financial
statement, nevertheless a high level of integration is expected between
this document and the economic rather than financial performance of the
company. This means that the public would be pleased to know exactly
how much SPDC realized in earnings from their activities in the
locality and how much of this was reinvested into the local economy.
Positive engagement of local industry
SDPC
does not disclose the dollar amount of contracts awarded to local
contractor but it is very clear that SDPC can better engage the local
community and should do far more than simply spending $67M on publicity
stunts. One way in which to actually enrich, and improve the quality of
life of the local community without fanfare, would be by as a matter of
policy simply increase the amount of hive value subcontracts awarded to
indigenous contractors thereby stopping capital flight from the
community .
Positive engagement in Academics
'All over the world investment in university education is a critical
component of national development effort. Nations today depend
increasingly on knowledge, ideas and skills which are produced in
universities (World Bank, 1997; OECD, 1996). As a nation's knowledge
industry, universities increase the productive capacity of the labour
force" - B. Oni 4
If SDPC rationalizes its inability to engage
the local community in the area of industry, one can only wonder what
excuses underlie its inability to do the same in academics especially
considering the cross fertilization potential of positive engagement in
this area will have on industry. There are more than enough local
Universities available for SDPC to drastically increase the level of
support given to local universities and institutes of technologies in
Nigeria.
Environmental
Units of measurements are important. Considering the fact that the
danger hazardous contaminants posed to life and their toxicological
profiles are measurable only in well known terms such as of Rfds and
Rfcs which are derived from NOAEL values, it is curious that the HSE
summaries of SPDC contains only meaningless bulk figures from which the
risks posed by the wastes cannot be assessed.
Environmental
standards are generally lower in developing parts of the world,
arguably as a necessary price to be paid for industrialization. Bearing
this in mind, SDPC environmental performance is not impressive as even
one oil spill incident is one too many especially as compensation/
remediation mechanisms being used locally are far from being state of
the art techniques.
There is therefore no justification for
SDPC to seek exemption from complying with outstanding environmental
regulations. SDPC should be aware that in more developed parts of the
world, the standards would in all probability be much higher and it
would have to be in full compliance. It is not unreasonable for the
local community to expect the same type of corporate responsible that
would be extended to the more developed parts of the world
Footnotes
a.
In a recent press conference, the President of the Federal republic of
Nigeria stated the obvious. The Oil companies are corrupt, aid and abet
corruption in Nigeria http://odili.net/news/source/2004/feb/20/60.html.
b
This review recognizes the fact that SDPC is not the Government of
Nigeria, already pays taxes, and has a profit sharing arrangement with
the Federal Republic Of Nigeria.
Glossary:
NOAEL is the No Adverse Effects Levels of concentration of a chemical substance
Rfd dose is the NOAEL divided by a factor considering ingestion and dermal pathways of exposure
Rfc dose is the NOAEL divided by a factor considering inhalation of exposure
References:
1.Communitie, development and sustainability across Canada, UBC Press 1999
2. National Universities commission Nigeria
3. (Federal Office of Statistics (FOS), 1996)
4.
Capacity building effort and brain drain in Nigerian universities, Dr
B. Oni ,Nigerian Institute of Social and Economic Research 1999
Link to of SDPC 's report titled " People and environment report 2002"
http://www.shell.com/static/nigeria/downloads/pdfs/2002%20report_final.pdf
Mr Bankole Arowobusoye can be reached at bankarow@shaw.ca
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