CASE STUDY:
Royal Dutch Shell in the Niger Delta (Frederick Bird)
Shell began oil extraction in the Niger Delta in the late 1950s. Between 1950 and 2000, Shell extracted oil for more than 250 billion dollars. During this time, in 2000, the standard of living of the five million people who live in this region has not improved. In many ways it is even lower than it was 40 years ago. Obviously, a significant number of people have found a job. Shell has more than 2000 employees there, almost all whom are from Nigeria. It offers scholarships to hundreds of promising Nigerian students and built dozens of medical clinics, primary schools and community centers.
Since the early 1970s, Shell is forced to conduct its
affairs in Nigeria as a minority shareholder to the Nigerian government, which
holds 55% stake, while Shell owns 30% and two state enterprises share the rest.
It is the former who manages all activities. The Nigerian government claims a
very important part of the wealth generated by oil in the form of royalties,
taxes and profit sharing. The country’s top leaders have used this wealth to
build a new capital, engage in lavish public works which they themselves
privileged, gave themselves high remunerations and benefits, and fund the most
part of government spending. Over the years, Nigeria has witnessed more than
half a dozen strikes against the state. Indeed, various groups, often led by
military, overthrow governments to appropriate the wealth generated by
petrodollars.
The people of the Niger Delta, in particular, resent this
situation. They feel that their environment deteriorates. They protested
against the fact that Shell burns by flares 85% of the natural gas that
accompanies crude oil during its extraction. They feel that these riches, which
in a certain way belongs to them, ends up in the hands of their oppressors.
They complain in particular with the difficulty they have in obtaining fresh
water. Most often, fresh water must be pumped from an underground aquifer. The
most effective way to do this is to use an electric pump that they cannot
afford or do not have the means to repair when broken. Several groups of people
of Delta are already protesting. In some cases, people are attacking Shell
installations, especially pipelines of the region. For Shell, these incidents
stem from ethnic conflicts and are the result of vandalism. The company has
decided to strengthen its staffing in security forces and sometimes asks
military of regional or federal government to come protect facilities. On
several occasions the troops have exercised excessive violence against the
inhabitants of the delta, killing dozens of people.
Questions:
1. What is today the responsibility part of Shell in this
situation?
2. What actions should Shell now reflect on?
3. How could the company have acted more responsibly?
4. Is it possible to imagine behavior that Shell could have
adopted to have a larger portion of the wealth created by the extraction of oil
remain in the Niger Delta rather than in the hands of the Nigerian government?
5. How could Shell have gone about in developing closer
relations with the inhabitants of the Niger Delta? What could Shell have done
to change the practices of the Nigerian government?
6. In general, should companies seek to influence the
policies and practices of a questionable government? If yes, by what means?
