For a century, Shell has explored the Earth to make our lives more comfortable. But in its wake, says Andrew Rowell, lies corruption, despoliation and death
The Queen and the Duke of Edinburgh went to the Shell Centre on the Thames riverside near Waterloo last Tuesday, to crown the company’s centenary celebrations. Critics claim the timing of the Queen’s visit was slightly unfortunate: it came just one day after the second anniversary of Ken Saro-Wiwa’s death in Nigeria: he was campaigning against Shell’s oil exploitation in the region.
The Shell Transport and Trading Company (STTC) has risen from its humble roots in a cramped office in the East End to become one of the most successful corporations of the century. What we collectively know as “Shell” is in fact more than 2,000 companies. Last year, the Shell Group’s profit was a record pounds 5.7 billion, the proceeds from sales of pounds 110 billion. “Were our founder, Marcus Samuel, to reappear today, I do not think he would be displeased with what has grown from his efforts,” says Mark Moody-Stuart, STTC’s chairman.
As part of the centenary celebrations, the cream of the City were invited to a reception at the Guildhall. There is also to be a commemorative book. Whilst it may mention the Shell Better Britain Campaign, and even the controversy over Brent Spar, not everyone will agree with the authorised biography’s version of Shell’s history. Here is a less authorised approach.
After it merged in 1907 with its rival Royal Dutch, the Royal Dutch Shell company was formed; its first chairman was the Dutchman Henri Deterding. By the 1930s, Deterding had become infatuated with Adolf Hitler, and began secret negotiations with the German military to provide a year’s supply of oil on credit. In 1936, he was forced to resign over his Nazi sympathies.
During the early 1940s, as the world waged war, Peru and Ecuador had their own armed border-dispute – over oil. Legend in Latin America says that it was really a power struggle between Shell, based in Ecuador, and Standard Oil in Peru. The company left a lasting reminder of its presence in the country: a town called Shell. Activists in Ecuador are seeking to get the town renamed Saro-Wiwa.
In the post-war years, Shell manufactured pesticides and herbicides on a site previously used by the US military to make nerve gas at Rocky Mountain near Denver. By 1960 a game warden from the Colorado Department of Fish and Game had documented abnormal behaviour in the local wildlife, and took his concerns to Shell, who replied: “That’s just the cost of doing business if we are killing a few birds out there. As far as we are concerned, this situation is all right.”
But the truth was different. “By 1956 Shell knew it had a major problem on its hands,” recalled Adam Raphael in the Observer in 1993. “It was the company’s policy to collect all duck and animal carcasses in order to hide them before scheduled visits by inspectors from the Colorado Department of Fish and Game.” After operations ceased in 1982, the site was among the most contaminated places on the planet, although Shell is now trying to make it into a nature reserve.
At Rocky Mountain, Shell produced three highly toxic and persistent pesticides called the “drins”: aldrin, dieldrin and endrin. Despite four decades of warning over their use, starting in the 1950s, Shell only stopped production of endrin in 1982, of dieldrin in 1987 and aldrin in 1990, and only ceased sales of the three in 1991. Even after production was stopped, stocks of drins were shipped to the Third World.
Another chemical Shell began manufacturing in the 1950s was DBCP, or 1,2 -Dibromo-3-Chloropropane, which was used to spray bananas. This was banned by the US Environmental Protection Agency in 1977 for causing sterility in workers. In 1990, Costa Rican workers who had become sterile from working with the chemical sued Shell and two other companies in the Texan Courts. Shell denied that it ever exported the chemical to Costa Rica and denied that it exported it to any other country after the ban in 1977. The case was settled out of court.
Just as people had begun to question Shell’s products, so they began to challenge its practices. In the 1970s and 1980s, Shell was accused of breaking the UN oil boycott of Rhodesia (now Zimbabwe) by using its South African subsidiary and other companies in which it had interests. Shell, singled out by anti-apartheid campaigners for providing fuel to the notoriously brutal South African army and police, responded by hiring a PR firm to run an anti-boycott campaign.
By the 1980s criticism of Shell’s operations was spreading. From Inuit in Canada and Alaska, to Aborigines in Australia and Indians in Brazil, indigenous communities were affected by Shell’s operations.
In the Peruvian rainforest, where Shell conducted exploration activities, an estimated 100 hitherto uncontacted Nahua Indians died after catching diseases to which they had no immunity. Shell denies responsibility, and says that it was loggers who contacted the Nahua. By the end of the decade, the company’s image was suffering in the US and UK, too.
In April 1988, 440,000 gallons of oil was discharged into San Francisco Bay from the company’s Martinez refinery, killing hundreds of birds. The following year, Shell spilt 150 tons of thick crude into the River Mersey, and was fined a record pounds 1 million.
But by now, the company was responding to growing international environmental awareness. “The biggest challenge facing the energy industry is the global environment and global warming,” said Sir John Collins, head of Shell UK, in 1990. “The possible consequences of man-made global warming are so worrying that concerted international action is clearly called for.”
Shell joined the Global Climate Coalition, which has spent tens of millions of dollars trying to influence the UN climate negotiations that culminate in Kyoto next month. “There is no clear scientific consensus that man-induced climate change is happening now,” the lobbyists maintain, two years after the world’s leading scientists agreed that there was.
At the same time, the company has taken its own preventive action on climate change and possible sea-level rise by increasing the height of its Troll platform in the North Sea by one metre. By 1993, as Shell’s spin-doctors were teaching budding executives that “ignorance gets corporations into trouble, arrogance keeps them there”, 300,000 Ogoni peacefully protested against Shell’s operations in Nigeria. Since then 2,000 have been butchered, and countless others raped and tortured by the Nigerian military.
In the summer of 1995 there was the outcry over the planned deep-sea sinking of the redundant oil platform Brent Spar, and in November Ogoni leader Ken Saro-Wiwa was executed, having been framed by the Nigerian authorities. At the time Shell denied any financial relationship with the Nigerian military, but has since admitted paying them “field allowances” on occasion. This year in Nigeria, the three-million-strong Ijaw community started campaigning against Shell, leading to another military crackdown.
“The military governor says it is for the purpose of protecting the oil companies. The authorities can no longer afford to sit by and have the communities mobilise against the companies. It is Ogoni revisited,” says Uche Onyeagucha, representing the opposition Democratic Alternative. In Peru, Shell has returned to the rainforest. It acknowledges “the need to consider environmental sustainability and responsibility to the people involved”, but the move is still criticised by more than 60 international and local environmental, human-rights and indigenous groups.
“Shell has not learnt from its tragic mistakes,” says Shannon Wright from the Rainforest Action Network, which believes there should be no new fossil-fuel exploration in the rainforest: “They continue to go into areas where there are indigenous people who are susceptible to outside diseases.” Meanwhile, Shell publicly talks of engaging “stakeholders”.
It hopes that we, as consumers, will continue to give it a licence to operate. However, for each barrel produced, the ecological and cultural price increases exponentially. Everyone knows we need to reduce our consumption of oil: but Shell’s very existence depends on selling more of it. Senior executives are said to be “girding our loins for our second century” because “the importance of oil and gas is likely to increase rather than diminish as we enter the 21st century”. Can we let that happen?
guardian.co.uk,June 2013 17.19 BST
Oil company Shell will resume talks next week in London with lawyers representing 15,000 of the poorest people in the world who are claiming millions of pounds’ compensation for oil spills on the Niger delta. But Martyn Day, of Leigh Day law firm which is acting for the communities, said the case could still go to a full high court trial in London in 2014.
Jun 19th, 2013 by John Donovan.
…an independent investigation into how the Organisation for Economic Co-operation and Development’s guidelines are enforced found ‘discrepancies’ between Shell’s story and other accounts of the size and cause of spills… urged Shell to publish all investigations carried out prior to 2011, potentially exposing the company to multi-million pound lawsuits…
Royal Dutch Shell’s claims to be reducing the amount of oil it spills in Nigeria have been undermined by a report into how it publishes data on environmental disasters.
The Anglo-Dutch firm has been at pains to show that most spills in the Niger Delta are the result of thieves hacking into pipelines, a crime known as ‘bunkering’.
But an independent investigation into how the Organisation for Economic Co-operation and Development’s guidelines are enforced found ‘discrepancies’ between Shell’s story and other accounts of the size and cause of spills.
Holland’s National Contact Point for the OECD told the oil giant to ‘be prudent’ when publishing spill investigation data.
It also called on Shell to publish figures from before January 2011, when the company began putting information about leaks on its website.
And it repeated UN concerns that investigators are ‘at the mercy of the oil companies’ when assessing the size and severity of spills. The report follows a complaint by Friends of the Earth and
Amnesty International, which submitted evidence of spill investigations it said were heavily influenced by the company.
‘Shell has repeatedly stated operational spills are going down and sabotage is going up. This is all based on a process where the investigator is being investigated,’ said Audrey Gaughran, of Amnesty.
She called for more independent assessment to offset weakness in local regulation.
Shell has pointed to improvements in the way it reports spill information since 2011.
But Gaughran urged Shell to publish all investigations carried out prior to 2011, potentially exposing the company to multi-million pound lawsuits.
Safe sex in Nigeria By John Donovan
Tom Mayne of Global Witness, an NGO, has followed the case closely; he believes things were structured this way so that Shell and ENI could obscure their deal with Malabu by inserting a layer between them. Mr Agaev, Malabu’s former fixer, lends weight to this interpretation. It was, he says, structured to be a “safe-sex transaction”, with the government acting as a “condom” between the buyers and seller.
Court documents shed light on the manoeuvrings of Shell and ENI to win a huge Nigerian oil block and on the dilemmas of their industry
DEALS for oilfields can be as opaque as the stuff that is pumped from them. But when partners fall out and go to court, light is sometimes shed on the bargaining process—and what it exposes is not always pretty. That is certainly true in the tangled case of OPL245, a massive Nigerian offshore block with as much as 9 billion barrels of oil—enough to keep all of Africa supplied for seven years.
After years of legal tussles, in 2011 Shell, in partnership with ENI of Italy, paid a total of $1.3 billion for the block. The Nigerian government acted as a conduit for directing most of that money to the block’s original owner, a shadowy local company called Malabu Oil and Gas. Two middlemen hired by Malabu, one Nigerian, one Azerbaijani, then sued the firm separately in London—in the High Court and in an arbitration tribunal, respectively—claiming unpaid fees for brokering the deal.
The resulting testimony and filings make fascinating reading for anyone interested in the uses and abuses of anonymous shell companies, the dilemmas that oil firms face when operating in ill-governed countries and the tactics they feel compelled to employ to obfuscate their dealings with corrupt bigwigs. They also demonstrate the importance of the efforts the G8 countries will pledge to make, at their summit next week, to put a stop to hidden company ownership and to make energy and mining companies disclose more about the payments they make to win concessions. On June 12th the European Parliament voted to make EU-based resources companies disclose all payments of at least €100,000 ($130,000) on any project.
The saga of block OPL245 began in 1998 when Nigeria’s then petroleum minister, Dan Etete, awarded it to Malabu, which had been established just days before and had no employees or assets. The price was a “signature bonus” of $20m (of which Malabu only ever paid $2m).
The firm intended to bring in Shell as a 40% partner, but in 1999 a new government took power and two years later it cried foul and cancelled the deal. The block was put out to bid and Shell won the right to operate it, in a production-sharing contract with the national petroleum company, subject to payment of an enlarged signature bonus of $210m. Shell did not immediately pay this, for reasons it declines to explain, but began spending heavily on exploration in the block.
Malabu then sued the government. After much legal wrangling, they reached a deal in 2006 that reinstated the firm as the block’s owner. This caught Shell unawares, even though it had conducted extensive due diligence and had a keen understanding of the Nigerian operating climate thanks to its long and often bumpy history in the country. It responded by launching various legal actions, including taking the government to the World Bank’s International Centre for the Settlement of Investment Disputes.
Malabu ploughed on, hiring Ednan Agaev, a former Soviet diplomat, to find other investors. Rosneft of Russia and Total of France, among others, showed interest but were put off by Malabu’s disputes with Shell and the government. Things moved forward again when Emeka Obi, a Nigerian subcontracted by Mr Agaev, brought in ENI (which already owned a nearby oil block). After further toing and froing—and no end of meetings in swanky European hotels—ENI and Shell agreed in 2011 to pay $1.3 billion for the block. Malabu gave up its rights to OPL245 and Shell dropped its legal actions (see timeline).
The deal was apparently split into two transactions. Shell and ENI paid $1.3 billion to the Nigerian government. Then, once Malabu had signed away its rights to the block, the government clipped off its $210m unpaid signature bonus and transferred just under $1.1 billion to Malabu.
Tom Mayne of Global Witness, an NGO, has followed the case closely; he believes things were structured this way so that Shell and ENI could obscure their deal with Malabu by inserting a layer between them. Mr Agaev, Malabu’s former fixer, lends weight to this interpretation. It was, he says, structured to be a “safe-sex transaction”, with the government acting as a “condom” between the buyers and seller.
It is not hard to see why the oil giants would want to avoid being seen to be dealing directly with Malabu, a shell company with tainted provenance. Its ultimate beneficial owner is widely believed to be Mr Etete, the very minister who had awarded it the block while serving under Sani Abacha, the late, staggeringly corrupt dictator.
In 2007 Mr Etete was found guilty of money-laundering by a French court. His conviction was upheld in 2009. The trial centred on bribes he had allegedly demanded from foreign investors while in government. He used these to buy, among other things, a French mansion and about €1m-worth of Art Deco furniture, according to French court documents.
Then in 2011 Mr Obi, one of the middlemen in the final deal with Shell and ENI, took his claim for unpaid fees to the High Court in London, calling on Mr Etete to give testimony. For unclear reasons, he agreed to do so—but the hearings had to be moved briefly to Paris so that Mr Etete could give evidence, because he had been barred from Britain for failing to disclose his French conviction on entering the country.
Mr Etete claims he has never been more than a consultant to Malabu. If so, he is unusually hands-on. He was the company’s main negotiator and its representative in the High Court, where he admitted to being the sole signatory on its bank accounts. Indeed, there is no evidence of anyone else making decisions for Malabu.
When asked in court about others purportedly linked to the company and its record-keeping, Malabu’s company secretary, Rasky Gbinigie (who describes Mr Etete as a “family friend”), insisted that he had lost the firm’s copy of the register of shareholders and all minutes of meetings, that there was no written correspondence between him, the directors and the shareholders, and that he had no documents to verify who put up the company’s original share capital.
A not-so-secret alias
Last year Nigeria’s Economic and Financial Crimes Commission (EFCC) looked into Malabu after Mohammed Abacha, a son of the former dictator, complained that he had been a founding shareholder but had been illegally cut out. In an interim report later in the year, the commission said that one Kweku Amafegha “stood in” as a nominee director for Mr Etete. In the High Court’s hearing in Paris Mr Etete admitted that he had himself used the surname Amafegha to open accounts in the past. It was, he said, an alias that “I have always used when I go out for secret missions internationally.”
In the same hearing Mr Etete said of OPL245: “I put my blood, I put my life into this oil block”—quite a commitment for a mere consultant. Yet, when asked directly if he was its owner through Malabu, he denied it. When presented with transcripts of a recording in which he supposedly claimed that “It is my block”, he dismissed the transcripts as inaccurate.
Shell and ENI did not respond to The Economist’s questions about whom they believed to be the beneficial owner of Malabu. Whether or not they suspected it to be Mr Etete, their dealings with him were extensive. He met ENI executives repeatedly. High Court testimony indicated that Shell officials had met him as recently as December 2009, after his money-laundering conviction was upheld. In an e-mail that came out in court, a Shell man talked of having had lunch and “lots of iced champagne” with Mr Etete, who had requested figures from Shell on what it was willing to pay Malabu for the block.
ENI says it considered cutting a deal with Malabu directly, until it emerged that the firm might not have full ownership of the oil block because of “existing disputes”, including with Mr Abacha. Mr Obi testified that Shell broke off direct talks with Mr Etete for the same reason, and because he was “an impossible person to deal with”.
But the oil giants were clearly reluctant to throw in the towel. Shell was loth to walk away from a block in which it had already invested tens if not hundreds of millions of dollars. (The company will not say how much.) ENI was attracted by the size of the block, the prospect of accompanying tax holidays and a waiver of the usual requirement that production revenues be shared with the national oil company.
Shell and ENI reject the suggestion that their joint purchase was a thinly disguised transaction with a dodgy brass-plate company. Shell says it made payments to the Nigerian government only and that it has acted at all times in accordance with Nigerian law. It previously said it had “not acted in any way that is outside normal global industry practice”. ENI says its payments to the government “were made in a transparent manner through an escrow arrangement with a major international bank”. That bank was JPMorgan Chase. A Lebanese bank had earlier declined to handle the payments, it emerged in court.
The companies’ claim that they bought the block from the state, not Malabu, is disingenuous, says Mr Mayne of Global Witness. It is also contradicted by Nigeria’s attorney-general, Mohammed Bello Adoke, who told a parliamentary committee last July that the companies “agreed to pay Malabu”, with the government acting as an “obligor” and “facilitator.”
The attorney-general was unusually active in helping the deal along. He held meetings with Shell, ENI and Malabu, helped to structure the final agreement and even advised on payments to middlemen, according to Mr Obi. In Nigeria it is highly unusual for an attorney-general to be so involved in a big oil deal. The lead is typically taken by the petroleum ministry, which in this case was said to be livid at being sidelined—particularly when Mr Adoke requested that it extend the deadline it had given Malabu to pay its long-owed signature bonus. Mr Adoke, it was suggested in the High Court, had been lawyer to none other than Mr Etete before serving in government. (Mr Adoke could not be reached for comment.)
Where did the money go?
The attorney-general has rejected as “without basis” claims in the Nigerian press that much of the money the government paid to Malabu in the 2011 deal was “round-tripped” back to bank accounts controlled by public officials. But where that money did end up is shrouded in mystery. Of the $1.1 billion, $800m was paid in two tranches into Malabu accounts. This was then transferred to five Nigerian companies that appear to be shells. One of these, Rocky Top Resources, received $336.5m, some of which seems to have been passed on to unknown “various persons”, according to the EFCC’s report. Some $60m went to an account controlled by Mr Etete, who has said that he received $250m in total for his role in the deal. He said in court that “Malabu shareholders decided to spend their money the way they deemed fit” and that he is investing on their behalf.
Among the listed owners of three of the recipient companies is Abubakar Aliyu, who is reported to have close business ties to a senior politician, Diepreiye Alamiesegha, the former governor of Bayelsa state. Mr Alamiesegha’s skills in escapology would impress Houdini. Detained in Britain on money-laundering charges in 2005, he jumped bail. After returning to Nigeria, he was sentenced in 2007 to two years for each of six corruption-related charges, though he served only a few hours in prison. In March 2013 he received a controversial pardon from Goodluck Jonathan, Nigeria’s president. Local press reports have made unsubstantiated allegations linking both the president and Mr Alamiesegha to the Malabu deal.
The EFCC’s report states: “Investigations conducted so far reveal a cloudy scene associated with fraudulent dealings. A prima facie case of conspiracy, breach of trust, theft anmd [sic] money laundering can be established against some real and artificial persons.” Officially, the EFCC’s investigation is still open, but a source familiar with it says that its sleuths have been discouraged by higher-ups from moving forward. However, other countries’ fraudbusters have taken an interest. At least one of the parties involved in the oil-block sale has been contacted by America’s Department of Justice.
As for the legal actions brought in London against Malabu by the middlemen, the High Court is expected to rule soon on Mr Obi’s claim for $200m. Mr Agaev’s separate arbitration case, in which he sought payment of a $65.5m “success fee”, was recently settled behind closed doors.
Shell and ENI now each own half of an attractive oil block. To get it, however, they have had to strike a deal that brings with it reputational and legal risks. They might conceivably face action under their home countries’ anti-corruption laws, if enforcers reject their claim to have dealt only with the Nigerian government, not Malabu. Shell “would obviously have preferred to secure OPL245 without going within a million miles of Malabu and Etete,” says someone who was involved in the negotiations.
The saga is a striking example of an ethical dilemma that is growing more acute for international oil companies. They are desperate to replace their shrinking reserves with new finds, but many of the most attractive fields are in unstable or poorly governed places. Worse, the industry has to contend with increased resource nationalism in oil-producing countries, making it harder for outsiders to secure reserves, and with greater competition from state-owned firms in Asia, Latin America and the Middle East, which may not have to operate to the same ethical standards.
As a result, firms that refuse to touch any deal with the slightest whiff of impropriety risk eventually going out of business, says Peter Hughes, an energy consultant and former BP executive. They may feel that the best they can do, short of walking away, is to put as much distance as possible between them and the source of the bad smell, as Shell and ENI apparently tried to do with their two-part transaction.
How arm’s-length is arm’s-length enough? That depends on the company’s “threshold of ambiguity”, says Cory Harvey of Control Risks, which helps companies to manage political and reputational risk. This will vary from company to company and will be perceived differently by management, regulators and NGOs. Ms Harvey has seen oil-industry clients walk away from deals because of concerns about the reputation of, or lack of reliable information on, a seller or local partner. But energy transactions in difficult places can be “spectacularly complex”, she says, making it hard to gauge the acceptable level of risk. Nigeria is “arguably the most complex environment of all”.
Mr Hughes argues that when foreign companies turn a blind eye to questionable aspects of a deal, it can sometimes benefit developing countries with natural resources. The publicly traded oil majors are, on balance, a force for good, raising overall standards of behaviour by trying to operate as cleanly as possible in most circumstances, he says; better that than leaving the field to less scrupulous operators. Ethically speaking, the industry “has to be viewed in relative, not absolutist, terms,” he argues. Mr Hughes points out that Shell periodically talks of scaling back its Nigerian operations, which he believes to be “part of a political-risk management strategy” to exert pressure on the government to act more cleanly and predictably.
Global Witness prefers to see the OPL245 affair as “a lesson in corruption” that demonstrates how important it is for rich-world governments to press on with transparency initiatives, on two fronts. The first front concerns payments to governments. In the past year America and the EU have begun to require resources firms listed there, and large unlisted firms in the EU, to report, project-by-project, their payments to governments. Had this been in force at the time, it would have picked up the $1.3 billion transaction with Nigeria. This would have prompted public scrutiny of the deal and the subsequent money flows through Malabu, which in the end came to light only because the two middlemen decided to sue.
Shell says it favours greater transparency, if applied globally. It opposes the existing project-by-project initiatives because they omit companies not listed in America or Europe, thereby handing them a competitive advantage.
The second front for improving transparency concerns the use of murky corporate vehicles. Hopes are growing that the G8, which meets next week with Britain’s David Cameron in the chair, will take steps towards ending the use of anonymous shell companies. Had corporate registries been collecting, and making publicly available, information on beneficial owners back in 1998, the identity of Malabu’s owners might have been clear from the start. And it would have been much more difficult to move the proceeds of the sale to Shell and ENI into the corporate equivalent of a black hole, seemingly out of the reach even of Nigeria’s anti-corruption commission.
As he left the conference hall following his address, some delegates chanted: “no more cuts.”
One delegate, Bolatito Aderemi from the Dublin South West branch, started to sing: “All we are saying is enough is enough.
As he passed her Dr Reilly said she should “stick to her day job”.
A number of delegates objected to the Minister’s comments and said the union should seek an apology.
Dr Reilly later met with Ms Aderami privately and apologised.
He said he had made a quip as he left the hall. He said he had been informed that someone had taken offence. He said he had not intended to offend anyone.
Ms Aderemi, who is originally from Nigeria, said the Minister had shaken her hand, tried to give her a hug and said he was sorry and did not mean to embarrass her. She said she accepted his apology.
Dr Reilly had been greeted in silence as he arrived at the conference. However he received applause following an anouncement that nurses would hold senior leadership positions inthe proposed new hospital groups and in the Department of Health.
He said each of the proposed new hospital groups, to be announced formally next week, will have to have a director of nursing as a full executive on the management team.
“I will (also) establish a new chief nursing officer role within the Department of Health, that this role will be at assistant secretary level and a full member of the management advisory committee and will have executive authority to lead the nursing profession in Ireland and represent its perspective both to Government and internationally.”
Dr Reilly told delegates that pay savings of €150 million had to achieved in the HSE this yearin addition to the many reforms and efficiencies designed to improve servies and to live within its budget.
“Frankly, we are between a rock and a hard place.”
The Minister said that management and unions were meeting at the Labour Relations Comission to explore all the avenues open to try to reach a resolution to reducing the paybill.
“If we can find such anagreement it would be so much better than an imposed solution.
However he said the country was borrowing €1 billion per month and that this could not continue.
Shell exploration manager Roland Spuij – deluded or ignorant?
Printed below is a deluded article written by a Shell exploration manager – Roland Spuij (person on the right) – who apparently is totally ignorant of Shell’s track record of giving a higher priority to production and profits than to the safety of its offshore workers. Either that, or he is trying to deliberate mislead New Zealanders? Same applies to his comments about Shell’s conduct in Nigeria. Has he forgotten that in 2009 Shell paid $15.5 million (£9.7m) as an out-of-court settlement in a case accusing it of complicity in human rights abuses in Nigeria. 17 pages of correspondence between Shell and the Nigerian Police – authentic exhibits from the litigation – prove Shell supplied arms and ammunition to the Nigerian police force (part of a corrupt murderous regime)
Otago Daily Times
Shell proud of its safety record
It’s good to see Rosemary Penwarden outlining her concerns and for Shell to have the right to respond, something we were unable to do in our recent meeting in Dunedin brought to a halt by other protesters.
Shell welcomes any discussion, including on climate change, so long as it has a chance to present its views. Whether there is oil or natural gas present in any basin is not determined by us or any opponents, but by nature. We have strong scientific evidence, including information from wells previously drilled in the Great South Basin, that we can expect to find gas there, with some associated liquid gas ”condensate”; the chance of finding oil is very low. The first step is to prove the presence of hydrocarbons as part of the exploration phase. It is too early to talk about options for future development concepts, assuming the presence of hydrocarbons is proven.
Shell did not leave anything off the table with our Environmental, Social and Health Impact Assessment.
At the earliest opportunity we were presenting some of the preliminary findings in order to get feedback. Rafting birds were indeed identified as potentially being affected in the very unlikely case of an uncontrolled release of gas and condensate. Much research was included on the feeding and migratory patterns of rafting birds, including albatross and shearwaters.
Shell operates under detailed processes, using the latest equipment and technology to minimise any credible risk a drilling spill could have on birds and marine life, particularly whales and dolphins. If we proceed to drilling, we will have a complete range of responses to deal with the consequences of any spill, however unlikely.
The video footage acquired by Niwa’s research vessel Tangaroa under contract to Shell does indeed indicate there is little marine life apparent on the surface seabed at the potential drilling site. Shell received the video footage only a few days before the meeting and chose to share it. Our preliminary conclusion is that drilling a single exploratory well over a month would have very limited impacts. We are open to further input.
Shell does not take lightly its often stated commitment to environmental and personal safety. We are a major player worldwide and publish our performance on environmental metrics on an annual basis. The number and volume of operational spills has steadily reduced over recent years but we continue to learn from all our incidents to improve our performance further in the future.
For the record, we were not involved in the 2010 Horizon disaster in the Gulf of Mexico, or the Elgin platform gas leak in the North Sea. We agree that the health and safety record for New Zealand is poor across all industries compared with Britain and other countries. The head of Shell New Zealand, Rob Jager, is at present chairing the Government’s Independent Taskforce on Workplace Health and Safety.
As for Nigeria, as recently as last week, the US Supreme Court refused to hear a case attempting to link Shell with claims of human rights abuses in the Niger Delta – claims that Shell has always strongly denied. Shell remains firmly committed to supporting fundamental human rights, including those of peaceful protest. Shell acknowledges improvements can be made to our operations there and has made significant progress in reducing spills and gas flaring in recent years. It is important to note that the vast majority of spilt oil in Nigeria is caused by rampant criminality – oil theft and illegal refining. This leads to widespread environmental damage and is the real tragedy of the Niger Delta.
Shell shares concerns about climate change and we see gas as a clean and affordable energy source. Wind, solar and bio fuels are some 1% of the energy mix today and they will have an important role to play beyond 2030. Over the past five years, we have spent US$2.2 billion on developing alternative energies, carbon capture and storage, and other CO2-related R&D.
But industry will need to see more technology development to make renewables cost-competitive with hydrocarbons and less reliant on subsidy; we are working on that for the long term. We do not have coal reserves. Our 2012 total production was split almost equally between oil and gas. Given that natural gas has around half the carbon emissions of coal and about a third that of diesel, this should provide some common ground for discussions on how we address climate change in a world with ever-increasing energy demands. We remain committed to debating all these issues and urge anyone with an interest in New Zealand’s energy future to engage constructively with us.
– Roland Spuij, Shell’s New Zealand exploration manager.
“OSSL management seems to be so disgusted by Shell management that they appear set on a self-destruct mission. The two main possibilities appear to be that they are either responsible for manufacturing forged documents as part of an attempt to put pressure on Shell, or have been drawn by Shell into a corruption conspiracy/scheme operated in Ireland on an industrial scale.”
JOHN DONOVAN EMAIL TO PRIVATE SECRETARY OF IRISH JUSTICE MINISTER, MR ALAN SHATTER
From: John Donovan <firstname.lastname@example.org>
Subject: Re: Alleged Corruption of Irish Police Force
Date: 6 April 2013 16:38:12 GMT+01:00
To: INFO <email@example.com>
Dear Mr Brennan
I do apologise for sending this further email but OSSL contacted me again this morning. As a result I have supplied three additional items of purported evidence that I have not seen before, that should be brought to the attention of Mr. Alan Shatter, the Minister for Justice and Equality.
1. A copy of a purported testimonial letter about OSSL dated 8 August 2012 purportedly from Mr. Michiel Crothers, Managing Director of Shell E&P Ireland Limited.
2. A copy of a purported letter marked “Strictly Private & Confidential” dated 28 February 2011 from The OSSL Company to Garda Superintendent Mr. John Gilligan. The author was purportedly Mr. Desmond Kane. The letter, if authentic, discussed the purchase and delivery of festive gifts to the Garda and claims that the gifts were purchased by OSSL on behalf of Shell E&P Ireland. According to the purported letter: “At Shell’s insistence these gifts came with a high degree of confidentiality, which we have adhered to until this very day.”
3. A purported letter dated 5 May 2011 to Mr. Kane at The OSSL Company from Superintendent John Gilligan, which may be in response to the above OSSL letter.
I pointed out yesterday that although the allegations appear to be outlandish (and may be unfounded), Shell has a track record of giving improper gifts, including alcohol, to federal employees. I supplied the relevant official investigation report by The Office of The inspector General of the US Department of the Interior.
I now recall other corruption scandals involving Royal Dutch Shell.
The first is, in one respect, even closer in nature to the current allegations, in so far as Shell using a sub-contractor to bribe government officials of a host country – in this example, Nigeria.
Shell to pay $48m Nigerian bribe fine: Daily Telegraph 4 November 2010
These companies, including Shell, admitted they “approved of or condoned the payment of bribes on their behalf in Nigeria and falsely recorded the bribe payments made on their behalf as legitimate business expenses in their corporate books, records and accounts”.
SHELL IN BRIBERY FINE: Daily Express 6 November 2010
Shell must pay a $30million “criminal penalty” over charges it paid $2million to a sub-contractor “with the knowledge that some or all of the money” would be used to bribe Nigerian officials to allow equipment into the country without paying duty. Shell, which has not admitted guilt, must pay a further $18million to repay profits and interests.
U.S. Securities & Exchange Commission Cease and Desist Order: Shell Corruption in Nigeria
Royal Dutch Shell fulfilled a money-laundering role in the Al-Yamamah “oil for arm” corruption scandal that was being investigated by the UK Serious Fraud Office until Prime Minister Tony Blair stepped in and terminated the investigation on spurious grounds of national security.
Executive Intelligence Review: Scandal of the Century Rocks British Crown and the City: June 22, 2007
The al-Yamamah deal: The Guardian: 7 June 2007
BAE lands arms deal for a new generation: The Telegraph: 19 August 2006
BAE rejects calls for fresh Saudi investigation: The Telegraph 3 February 2013
Shell’s involvement in the cited corruption scandals obviously does not mean that it is guilty of the allegations made by OSSL.
It does however mean that Shell has prior form.
The new alleged evidence can be viewed here (See Below)
OSSL management seems to be so disgusted by Shell management that they appear set on a self-destruct mission. The two main possibilities appear to be that they are either responsible for manufacturing forged documents as part of an attempt to put pressure on Shell, or have been drawn by Shell into a corruption conspiracy/scheme operated in Ireland on an industrial scale.
Shell’s partners in the Corrib Gas Project must be concerned that the lead partner, Shell, has allowed this matter to drag on.
Meanwhile Shell attempts to weaken laws that will reveal such payments
Proceedings in a recent UK High Court case have revealed that Royal Dutch Shell plc was aware that a US$1.1 billion payment made by Shell and Italian firm Eni S.p.A. would end up in an account controlled by Dan Etete, a former Petroleum Minister of Nigeria, who was convicted of money laundering in France in 2007. Furthermore, testimony heard during the trial indicates that an official from Shell previously negotiated directly with Etete over “iced champagne”. An email cited in the trial also mentions that the Shell official would consult with someone in The Hague called ‘Peter’ over the terms of a potential deal. Global Witness has written to Shell’s CEO, Peter Voser, to ask whether he is the ‘Peter’ mentioned in the email, but has not received a response to the question.
Meanwhile, Shell continues to lobby against new legislation currently being discussed in the EU that would bring much-needed transparency to payments between oil companies and governments. Shell is also part of a US lawsuit aimed at striking-out existing law that requires payment disclosure by US-listed extractive companies . “This scandal demonstrates precisely why we need the new transparency laws being finalized in Europe that require companies to disclose their payments right down to the project level – with no exemption for any country,” said Simon Taylor, director of Global Witness. “In light of Shell’s behavior in Nigeria, it is difficult not to conclude that it wishes to keep its deals in the dark.”
The High Court case, Energy Venture Partners v Malabu Oil & Gas, has been brought by a Nigerian consultant who alleges that he was not paid by Malabu for his work in helping to arrange the US$1.1 billion deal for oil block OPL245 in 2011. OPL245 has been the subject of controversy ever since it was awarded to Malabu in 1998, not least because Etete awarded the block to Malabu while Petroleum Minister of Nigeria. Etete is widely believed to control Malabu, although he has denied being Malabu’s owner, maintaining in court that he was employed by the company as a consultant only after he left office.
Etete is also controversial because he was found guilty in France in 2007 of money laundering, a conviction that was upheld in 2009. During the recent High Court case, testimony was heard that Etete had accepted bribes and used aliases to hide his ownership of money which he then used to buy expensive properties in France. Despite the fact that Etete’s conviction was upheld, the court heard that an official from Shell had lunch with Etete around December 2009. In an email describing this meeting, the official said that the two men were getting along very well personally, enjoying “lunch and lots of iced champagne.”
The email also says that Etete had requested some initial figures from Shell on what it was willing to pay Malabu for OPL245, and that “Peter has to talk to The Hague and we will come back with a figure.” Global Witness has asked Shell whether the reference to ‘Peter’ may be a reference to its CEO, Peter Voser. Shell’s 2010 annual report appears to list no other senior executive called Peter who might be in a position to make decisions about negotiations of the size being discussed. If the ‘Peter’ named is in fact Peter Voser, this would indicate that the company’s most senior figure was aware that Shell was in negotiation with convicted felon Etete. Global Witness put this and other points to Shell in a letter addressed to Mr Voser: Shell did not provide a direct response to these questions.
During the court proceedings, it was alleged that Shell eventually broke off direct negotiations with Etete when it found out that the son of General Sani Abacha, the dictator of Nigeria until his death in 1998, had claimed that he was the rightful owner of a percentage of Malabu, which was set up as a limited Nigerian company during his father’s rule.
Following more negotiations, in April 2011 Shell and Eni agreed to pay US$1.1 billion to the Government of Nigeria, which itself had an agreement to pay exactly the same amount to Malabu. Global Witness believes that this was structured primarily as a way of allowing Shell and Eni to claim that it had not struck a deal with Etete. The High Court proceedings and other evidence seen by Global Witness reveal that, in reality, Shell and its partner in this deal, Eni, were aware and in agreement that the deal was for the benefit of Malabu, and had met with Etete face-to-face on several occasions.
Shell chose not to reply to Global Witness’ specific questions on alleged meetings with Etete and the knowledge of its senior management of those meetings. Instead, it responded by saying that Shell reached a settlement with the Government of Nigeria. In Global Witness’ opinion this is disingenuous, because the deal to acquire OPL245 resulted in a huge payment that Shell knew was ultimately going to Etete’s company. Shell added in relation to the allegations made in the High Court case: “we can confirm that neither [Shell’s Nigerian subsidiary] SNEPCo nor any other Shell company is party to those proceedings and, as a consequence, we cannot comment on any statements or allegations made in the course of those proceedings.”
Simon Taylor of Global Witness commented: “Shell and Eni’s claim that they did not do a deal with Malabu fails to address the question of their knowledge of where the payment was ultimately going. They also fail to explain their apparent extensive direct dealings with Etete. Both companies appeared to enjoy rather lavish meals with Etete, and ended up taking part in an arrangement that, in the absence of a better explanation, looks like an attempt to conceal their US$1.1 billion deal with Abacha’s money laundering convicted oil minister. Both companies should be laughed out of the building if they attempt to challenge the new EU Directive on transparency or the existing US transparency laws.”
Contact: Simon Taylor: mobile: +44 (0)7957 142 121; or Thomas Mayne: landline: +44 (0)20 7492 5864, or mobile: +44 (0)7939 460357; or Brendan O’Donnell: landline +44(0)207492 5898, or mobile: +44(0)7912 517 128
 In addition to Shell’s opposition to EU efforts to require project-by-project reporting as part of the proposed Transparency Directive, as a member of the American Petroleum Institute (API), the company is supporting a lawsuit filed by the API that seeks to completely strike out Provision 1504 of the Dodd-Frank Act that was signed into law by President Obama in July 2010.
Global Witness investigates and campaigns to prevent natural resource-related conflict and corruption and associated environmental and human rights abuses
Galway S2S and Rossport Solidarity Camp members challenged the head of SEPIL, Michael Crothers, to answer for the crimes Shell has commited.
The Managing Director of Shell E&P Ireland, Michael Crothers, came to the NUI Galway Energy Night on the evening of Feb 28th. He was part of a PR delegation that promoted Shell’s progress in attempting to bring the Corrib Gas Project on-stream. A group of local Galway Shelltosea activists and Rossport Solidarity Camp members with ethical objections to the Gas Project staged a peaceful protest to express their concerns. Shell has been allowed to remove 125,000 tonnes of peat bog from an area directly including, and surrounded by, EU Special Areas of Conservation. The Irish government has failed in its legal duty to protect the natural habitats upon which Shell are currently working. In relation to the negative environmental consequences of the CGP, Crother’s response was to praise Shell’s environmental record as “exemplary”.
Protesters raised their banners in solidarity with all of the global communities that have been, and still are, subject to Shell’s immoral and illegal activities, be they environmental, social or economic. Shell and partners have been subjecting the community of Erris, North County Mayo, to the building of an experimental & highly dangerous gas pipeline for the past 13 year experimental.
During a Q&A session, one person asked Crother’s about Shell’s activities in Nigeria. It has been well documented that in the mid 1990’s Shell colluded with the Nigerian Military in the murder of environmental activist Ken Saro-Wiwa and eight other activists? Crothers was asked to comment on a 2009 court settlement in New York; relating to the murder of the Saro-Wiwa, in which Shell agreed to pay $15.5m in compensation to the relatives of Ken Saro-Wiwa. To many objective observers, this was a clear admission by the Shell corporation that it is guilty of murder and human right violations? Crothers claimed to be unaware of what has happened to Saro-Wiwa in Nigeria and wouldn’t, even though the case made international headlines at the time. The protest was successful because it prevented SEPIL from presenting an inaccurate and in many cases, totally untrue, account of Shell’s activities in Ireland and in other parts of the world.
Shell is a name already infamous with many campaigners. Be they concerned with climate change, human rights abuses or health and safety, the Royal Dutch Shell group has a sullied reputation and not only among environmentalists: In September 1993 the TGWU (transport and general workers union) launched a nationwide boycott of Shell petrol stations due to union derecognition at their Shell haven refinery in Essex.
Shell now paints itself as a caring company wishing to dissociate itself from past ‘mistakes’ in Nigeria and ‘accidents’ in the North Sea.
Some of the examples here are historical, but they give an insight into Shell’s culture and despite liberal greenwash, things haven’t really changed so there are more recent examples as well.
When it withdrew from the Global Climate Coalition in 1998 (see Influence/Lobbying section) Shell wished to be seen as one of the pioneer corporations, taking climate change seriously. Even before it withdrew from the GCC, Shell had been attempting to cultivate this image. In May 1997, the day after John Browne gave his speech at Stanford university stating that BP had reached a point where it must consider “the policy dimensions of climate change” (see BP profile), Heinz Rothermund, Managing director of Shell UK Exploration and Production, asked in a lecture he gave at Strathclyde University, “How far is it sensible to explore for and develop new hydrocarbon reserves, given that the atmosphere may not be able to cope with the greenhouse gases that will emanate from the utilisation of the hydrocarbon reserves discovered already? Undoubtedly it is a dilemma”.
Shell, however has not translated this concern into action, it has not ceased or scaled back its exploration and production activities. Quite the opposite, Shell has ambitious plans to increase extraction by 5 per-cent year on year. So far the company is on target: “Compared to the third quarter last year, total hydrocarbon production increased by 5 per-cent”. However, a question mark hangs over the potential for sustained growth at this rate: Phil Watts, delivering the group’s 2nd quarter results for 2001 said that plans to grow output by 5 per-cent between 2000 and 2005 now looked “Very challenging” amid the slowing world economy. Analysts predicted that Shell could scale back its growth target to 3 per-cent, but Mr. Watts refused to be drawn on a figure for longer- term production growth.
Scaling back production does not suit a company like Shell whose worth, despite some investments in renewables, is measured in production volumes and proven reserves. In June 1990, the then chairman and Chief Executive Designate of Shell UK, Sir John Collins, suggested that we “see this great challenge [climate change] as a spur to ingenuity, the free market and sustainable economic development.” So Shell has opted for a techno-fix: In 2000, Shell, together with Siemens began developing a pilot gas-fired power station in Norway, which will capture its Carbon Dioxide (CO2) emissions and pump the gas underground. There are both technical and ethical questions over the use of this unproven technology in combating climate change. Most bizarrely of all, CO2 injection will be used for what is known as ‘enhanced oil recovery’ gas will be injected to increase the pressure of declining fields. What is sold to the public as a solution to climate change will actually be used to extract more oil.
In accepting the reality of climate change, Shell announced in 1989 that the company was going to increase the height of its giant ‘Troll’ platform by 1 meter, to counter predicted rise in sea-level. The platform can be raised further if it becomes necessary over the proposed 70 year lifespan of the rig
Dear People of Bellanboy
Did you ever wonder what happens when a gas plant explodes.? Well just take a look at this Video.
Can you really trust Shell to do the job right?
“Royal Dutch Shell is a company with sham business principles and no scruples. It plotted to exploit the 9/11 attack for commercial purposes, adopted a Touch F*** All approach to the safety of offshore operations costing the lives of Shell offshore workers, and even defrauded its own investors. Is the U.S. government really going to allow this thoroughly discredited blundering company to continue with its jinxed Arctic folly? And I have not mentioned its horrendous track record in Nigeria, including the embedding of spies throughout the host government.”
The above from http://www.royaldutchshellplc.com/
The Guardian -31st Jan 2013
Shell continues spilling oil in North Sea despite efforts to improve
Anglo-Dutch group has been responsible for over 20 pollution accidents in British waters over a six month period
The Grounding of the Kulluk in Alaska
There is no mention of making any insurance claim, because Shell was apparently unable to obtain contingency cover.
The venture was to risky.
The ill fated voyage of the Kulluk, which ended on the rocks, was prompted, as Shell has admitted, by a tax dodging motive.
Do you the people of Co. Mayo trust Shell?
Royal Dutch Shell (NYSE: RDS-A) is the respondent in a landmark case currently before the U.S. Supreme Court. The outcome of Kiobel v. Royal Dutch Petroleum will have significant implications for the oil and gas sector, and potentially for other extractive companies operating in sensitive regions.
This, among other factors, could signal a new era of costly corporate liability for human rights and environmental violations around the world. The days of corporate impunity are drawing to a close, and companies that hope for sustained access to critical resources must deal better with the communities where they operate. Investors would do well to pay attention.
What’s this all about, precisely?
Here are the two questions at the heart of Kiobel v. Royal Dutch Petroleum, according to the official Supreme Court docket:
Whether the issue of corporate civil tort liability under the Alien Tort Statute (“ATS”), 28 U.S.C. § 1350, is a merits question, as it has been treated by all courts prior to the decision below, or an issue of subject matter jurisdiction, as the court of appeals held for the first time.
Whether corporations are immune from tort liability for violations of the law of nations such as torture, extrajudicial executions or genocide, as the court of appeals decisions provides [sic], or if corporations may be sued in the same manner as any other private party defendant under the ATS for such egregious violations, as the Eleventh Circuit has explicitly held.
In plain English, the court is considering whether it has jurisdiction to hear lawsuits regarding international law violations on foreign soil, and whether corporations can be sued for those violations in the same way that individuals can be.
The curse of the black gold
Like many oil companies, Shell has operations in the ecologically and politically sensitive Niger River Delta. The Niger River Delta exists in a complicated landscape of political instability, ethnic conflict, extreme poverty, and rich biodiversity. Ed Kashi, a photojournalist and National Geographic contributor, says the discovery and exploitation of oil in the region has only exacerbated its problems. A common refrain is that the Niger River Delta has suffered “the curse of the black gold.” Mr. Kashi actually wrote a book with co-author Michael Watts entitled, “Curse of the Black Gold, 50 years of Oil in the Niger Delta.”
When Shell entered the region more than half a century ago, the company did little to obtain the support of the local communities. To be fair, no other companies considered local communities’ needs in their extractive projects in those days either. This is changing. In modern times, we have a concept called “social license to operate,” and it is at the heart of why Shell is now the defendant in a landmark human rights case.
Generally speaking, a company has a social license to operate when the communities its project affects accept its presence; feel that their needs and concerns have been understood and addressed; perceive that they benefit from the company’s operations in some way; and welcome the company’s continuing operations. Let’s be honest: While this is essential, it’s also incredibly difficult to achieve. Imagine trying to earn community consent when the stakes are high, and the affected parties come with widely varied concerns and agendas.
What we are seeing now, though, is that the cost of failure to obtain community consent is higher than previously understood, and may be growing considerably. This theme is turning up repeatedly around the world across various extractive sectors, from oil to mining to – most recently – agribusiness. Companies’ ability to manage this issue will increasingly affect their bottom line.
Oil spills and murdered activists
Oil has leaked from Shell’s pipelines into the ground and water of Ogoniland, the Niger River Delta region at the forefront of the Supreme Court case. Experts reviewing aerial footage of Ogoniland estimate that the spilled oil volume rivals that of the notorious Exxon Valdez spill of 1989, when 10 million gallons of oil gushed along the Alaskan coastline. Until 2011, Shell had estimated the impact at less than 40,000 gallons. While Shell now discloses spill volume in Nigeria, the company makes no public estimates of cleanup costs.
We’re talking here about numerous small spills in Ogoniland, not one massive spill as in ExxonMobil‘s (NYSE: XOM ) Valdez case. The causes vary. Shell has long asserted that the majority of spills are caused by theft and sabotage, even as it acknowledges that some are the result of operational failures, accidents, or corrosion. This strikes me as a distinction without a difference. If sabotage is at play, then it necessarily implies Shell’s failure to maintain good relations with local communities, and reveals the cost of that failure. Ultimately, the company is responsible for securing its supply chain.
The environmental devastation these spills have caused is hard to overstate. Local fisheries have been destroyed, groundwater has become unsafe to drink, communities have collapsed, and people have sunk even further into poverty. They are aware that someone is profiting handsomely from the oil on their land, but it’s not them. They are angry, and they have been for a while.
Some have turned that anger to activism. Nigeria’s first mass protest against the oil industry originated in Ogoniland with writer Ken Saro-Wiwa and his Movement for the Survival of Ogoni People. Nearly half the Ogoni population rallied in 1993 to support Saro-Wiwa’s movement. The backlash was so significant that Shell pulled out of Ogoniland in 1993, leaving behind only pipelines moving oil from other areas. That is what it looks like to lose social license to operate. It’s not good for people, and it’s not good for business.
The Nigerian government was so alarmed by Saro-Wiwa and others’ activities – and the threat they posed to oil revenues – that it arrested Saro-Wiwa and some of his colleagues and subjected them to a trial that was widely viewed as a sham. The trial concluded with the public hanging of Saro-Wiwa and eight others in 1995. The world reacted with horror, and the name Ken Saro-Wiwa has come to be synonymous with gross injustice.
Many believe that Shell was complicit in the proceedings. Shell denies this. It’s up to courts of law to settle the matter, but public perception that Shell had a hand in the activists’ murder has stubbornly endured.
Bringing us back to the present, you may have noted earlier that Ken Saro-Wiwa was among nine people executed in 1995. One of the others was named Dr. Barinem Kiobel, and his wife brought the current case against Shell all the way to the Supreme Court. The outcome is likely to be significant not just for Shell, but for all other extractive companies.
The Center for Constitutional Rights summarizes the lawsuit as seeking “… relief for crimes against humanity, including torture and extrajudicial executions, and other international law violations committed with defendants’ assistance and complicity between 1992 and 1995 against the Ogoni people.”
The Supreme Court is currently deliberating as to whether it has jurisdiction in this case, and a decision is not expected until next year.
Then there is the environmental side of things. In 2011, the United Nations Environment Programme (UNEP) released a blistering report on the damage that oil companies have done in Ogoniland, and what they must do to rectify the situation. UNEP estimates that the cleanup will take 25-30 years, and recommends that it begin with a $1 billion cleanup reserve for Ogoniland, to be funded by the government and oil companies. Shell said at the time that it would comply fully with the recommendations, but a Reuters investigation one year later found little evidence of progress.
Activists have sought legal relief in various jurisdictions. Beyond Kiobel v. Royal Dutch Petroleum in the U.S. Supreme Court, Shell has been sued in the Netherlands, the United Kingdom, and Nigeria. In October 2012, four Nigerian farmers and the Dutch arm of environmental group Friends of the Earth filed suit against Shell in a Dutch court in mid-October. The plaintiffs in that case seek compensation for damage from oil spills, as well as a thorough cleanup. It is the first time that a Dutch firm has been sued in a Dutch court over damage that took place abroad. Radio Netherlands says that a verdict in this case is expected at the end of January 2013.
Meanwhile, the British law firm of Leigh Day & Co. filed papers in March 2012 against Shell on behalf of 11,000 Nigerians of the Bodo community for compensation for oil spill damages. As in the Dutch case, Leigh Day says that this is the first time any oil company has faced a claim on U.K. soil for damage done abroad.
The Sustainable Investments Institute (Si2) conducted a recent study (link opens a PDF) attempting, among other things, to calculate a dollar amount for which corporations could be liable if they were held to account for the damage they’ve done in the broader Niger River Delta region. In the assessment, Shell would not be the only company at risk. Total (NYSE: TOT ) , Chevron (NYSE: CVX ) , and ConocoPhillips (NYSE: COP ) all have significant interests in the region. Si2 concluded that “… total liabilities, excluding punitive damages, could range anywhere from $16 to $51 billion. With punitive damages, the costs could be far higher. For several of the companies analyzed, the potential costs of addressing oil spill damage in the Niger Delta could wipe out a significant portion of annual earnings—more than 40 percent of 2011 net income in some cases.”
Those are sobering numbers. Of course, the question is whether Si2′s estimates are likely to come to fruition. I asked Peter DeSimone, Si2′s co-founder and deputy director, to offer his thoughts:
In the short term, it’s very likely that some of these potential liabilities will be realized, especially those in connection with UNEP’s proposed $1 billion cleanup and remediation fund for Ogoniland. Beyond this time horizon, it’s difficult to tell. Continued violence, community organizing, government sentiment, spill activity, and the outcomes of pending lawsuits will all be variables in determining whether potential liabilities end up on companies’ books. … The upper end of our estimates uses the UNEP Ogoniland study as a proxy for the entire region, but investors and other key stakeholders will not know the true extent of the damage until a scientific assessment is made public. One element of certainty is that international attention to this issue is growing, as is anger over the spills in Nigeria. At the same time, all of the present operators have big plans to continue to develop assets in Nigeria. If they are going to maintain their licenses to operate there, I would put my money on many of these companies increasing cleanup and remediation activities and realizing these liabilities sooner rather than later.
Chickens coming home to roost
Global momentum for greater accountability is building. No matter what you think of BP (NYSE: BP ) , the company’s proactive response to the Macondo spill drew attention to the comparatively dismal efforts of oil companies in other regions of the world. There are significant court cases playing out right now against various oil majors for poor management of their effects on the communities in which they operate. In a future article, I will cover the astonishing story of a case against Chevron for its actions in Ecuador.
Regardless of any single court decision, though, companies ignore their social licenses to operate at their own peril. You’ll note from Shell’s story that the company’s claim that much of the oil spilled in the Niger Delta was the result of sabotage. The community’s rejection of Shell is costing the company its primary resource. Consider the cost, too, of the necessary increase in security for company facilities and staff. Finally, severely eroded community relationships contribute to a real risk of resource nationalization, which can effectively sink the company’s entire investment.
Simon Billenness, president of the CSR Strategy Group and co-chair of the Business and Human Rights Group of Amnesty International USA, summed this situation up perfectly in a recent interview:
The result of Kiobel v. Royal Dutch Petroleum will have a major impact on Shell and other companies in extractive industries. Irrespective of the outcome of that one case, however, it is clear that the days of corporate impunity in remote regions of the world are coming to an end. Companies that wish to have ongoing access to critical resources will have to deal openly and fairly with the communities affected by their operations. Companies that fail to do so risk becoming shut out of opportunities to expand their reserves and increase their shareholder value.