02:24 GMT 31st August 2011
You took over the management of SPDC at a time of immense corporate challenges. Increased militancy, production shut ins and even fears of Shell leaving Nigeria. How did you manage to pull through?
I was appointed Managing Director of SPDC on I January 2008, and Country Chair, Shell Companies in Nigeria, exactly two years later. The challenges you mention had started before I took over. With increased security problems, we were forced to shut in some western productions, including EA, our shallow offshore field.
I have worked and lived in the Niger Delta for more than 30 years and have friends and associates who have been badly affected by the crisis. Sadly, some of my colleagues in SPDC and other oil company staff, including contractors lost their lives. We must all be relieved that the situation is better now, and it is to the credit of the government and other stakeholders that we have restored some lost production.
So how did we pull through? We did a lot of things - but mainly we monitored the situation and took precautionary measures. Above all, we were determined to pull through. We are not just fair-weather friends.
What is the security situation in the Niger Delta now? We understand some fields in the western production area are still shut in.
The situation has improved considerably. During the first quarter of2009, we began restoring some of the oil and gas production that was shut in, including EA. We've also restarted and repaired assets that were damaged during the crisis and cleaned up oil spills from destroyed facilities. However, criminality is still a challenge with activities like kidnapping, crude oil theft, illegal refmeries and vandalisation of infrastructure. From an operations point of view, we continue to take all necessary measures in the interest of the safety and security of our staff, contractors and facilities.
How would you appraise the success of the government's amnesty to Niger Delta militants?
Without any doubt, the amnesty programme has been a success and we owe the general improvement in the security situation to the initiative. As a key stakeholder, we support the Federal Government's efforts to achieve lasting peace and development in the Niger Delta.
The militancy was the outcome of several grievances by the oil producing communities, including environmental degradation. Are these grievances being addressed?
I agree that there are issues of development in the Niger Delta but we have to be careful in blaming all that happened on this single problem. We are aware that much of the crime in the Niger Delta was against innocent people from the same area. You talk of environmental degradation - the reality on the ground is usually different if you take the time to visit and investigate. I will even go further to say that the environment has been significantly affected by spills from militant attacks, pipeline vandalisation and illegal refineries. This is the other side of the coin that is often not seen.
But having said this, I must stress that poverty, unemployment and under development in the Niger Delta have to be addressed. Shell has said this all along, and will continue to show commitment to this. We have invested billions of dollars in various development projects, many implemented with international development agencies. When I attend meetings with development agencies, I talk about the Niger Delta and tell them the challenges and the role they can play in terms of expertise and funding. Many come and invest. This is an advocacy role that we are taking on increasingly.
But no matter what we do, issues of transparency and government responsibility must be addressed as a foundation for the sustainable development of the Niger Delta.
There have been many cases of spillages in your areas of operation. How are you working to combat this?
Oil spills are bad for communities, bad for the country and bad for Shell. I say this to point out that the majority of spills in the Niger Delta are caused by sabotage, crude theft and illegal refineries. For example, in 2009/2010, there were 155 reported incidents of crude theft from our facilities. The trend is continuing this year. On a single day [June 9] our Trans Niger Pipeline, which transports production from SPDC and third parties in its eastern operations to Bonny Terminal, was affected by leaks and five separate fire incidents in Bodo, Bera, Biera and Mogho, all in Ogoni land.
It is our policy to clean up spills when they occur no matter who or what caused them. Depending on access and security, we get to impacted sites as quickly as possible, jointly conduct investigations with government regulatory agencies and the communities and determine how to carry out clean up and remediation. This can take weeks, months or even years; it depends on the site access and size of spills. The cost of doing this does not include repair, if equipment is damaged. That is why I say spills are bad for us, for the people and for the government. And that is why no company will deliberately cause spills. After spending so much to find the oil, I would rather sell it than waste it.
I'm not saying that we do not have operational spills caused by equipment failure or human error. But we are improving all the time, upgrading facilities, replacing pipelines and reviewing oil spill response systems. Still, no matter how much we improve our performance, until the activities of oil thieves and illegal refiners are brought to an end, the vast majority of oil spills in the Niger Delta will continue.
There is a perception that the Petroleum Industry Bill (PIB) failed in the National Assembly because the oil industry lobbied against it. Why was the industry so opposed to the bill?
I'm not aware that the PIB failed in the National Assembly. What I know is that the Bill is undergoing the normal legislative process. It is not true that oil companies, or in fact, Shell opposed the Bill. At Shell, we broadly welcome the objectives of the intention to reform the industry, and have made our views known in the consultation process. As you can imagine, a successful oil and gas industry is key for Nigeria to achieve its long-term goals, and our hope is that the PIB will help in this regard. Like all stakeholders, we await the passing of the Bill into law.
The Federal Government has floated the idea of incorporated joint ventures. How is this progressing?
I cannot comment in detail on this issue. But I'm aware that the idea ofIncorporated Joint Venture was one of the ideas considered in the PIB.
Has the cash call funding improved?
The SPDC N is made up ofNNPC 55 per cent, Shell 30 per cent, Total 10 per cent, Eni (Agip) 5 per cent with funding in proportion to the holding of each party. The funding situation has generally improved, but we are still way off the required levels to finance our growth programme. We are talking with government on this issue.
In the past two years, Shell has not announced any major investment in the Nigerian oil industry. At the same time, you are trying to offload some of your interests. Do you plan to limit your exposure in Nigeria?
We have continued to examine businesses and taking the best options. We have been busy in Nigeria. For example, our Gbaran-Ubie project, currently the largest development in SPDC, has achieved an average monthly production of over 450MMscfi'd achieved (in line with current NLNG requirements). At peak, production will be 1 billion sefid of gas, and more than 70,000 bid of oil.
Shell has also been active here - at Bonga - in gas supplies and so on. The short answer to your question is that we will continue to invest in the conntry, as elsewhere, with the right conditions.
Let me touch on the divestment issue. Our divestment from some blocs is not a pull out from the Niger Delta or Nigeria, as some have alleged. It does not even mean that we are scaling down or presence here. It simply means giving a miniscule portion of our interests to local companies in a bid to help them grow in this key sector. Shell is in Nigeria for the long haul, and I'm sure this is not the first time you are hearing this.
Are conditions in Nigeria not good enough for investment?
I haven't said so; and I will quickly make this point: Nigeria is a key area of our business and we always look out for investment opportunities given the right conditions. Actually, it is not just about Nigeria. In every country, you have to assure potential investors that there will be respect for the sanctity of contracts and the rule of law which encourages disputants to resolve issues through the courts or arbitration as the case may be; and of course, security and consistency of policies.
Why doesn't Shell have a refinery or petrochemical plant in Nigeria What is responsible for this policy?
We need the right climate to attract investments in this area.
What is the right climate?
The whole industry needs to be deregulated - unless you do that, investors will not have the confidence that they will be in a position to secure their investments. It is really about deregulation, making it a level playing ground for both multinationals and local investors.
The Afam power plant has become a flagship of private public sector co-operation in solving Nigeria's power problem? To what extent can this model be adopted to boost power generation in Nigeria?
Afam VI integrated power plant project is a world-class development which is supplying 450MW of power to the national grid. The plant's three gas turbines were fully commissioned in July 2009. The Afam Integrated Gas and Power project reached commercial operations in combined cycle mode on December 1 2010. The plant is powered by gas from SPDC's Okoloma gas plant which has the capacity to increase the nation's gas supply by approximately 20 per cent. Afam VI project is a good example of Shell's commitment to the development of Nigeria. Here again, I will say that, ifthe conditions are right, we will see more of such investments, not only from Shell but from other international companies.
The Nigerian government believes the oil companies are not doing enough make gas available for domestic consumption. What is Shell doing in this regard?
The other day I read the outcome of a major investigation by a national newspaper, which said the power supply issue in Nigeria was not because of lack of gas but obsolete power plants and equipment. I cannot speak for other companies, but I can tell you that Shell has led efforts in gas development in Nigeria. In 1998, Shell became the only international oil and gas company to set up a wholly owned company, Shell Nigeria Gas, that has been supplying gas to industrial consumers. SPDC was the first energy company in Nigeria to have a domestic gas business and contributes over 70 per cent of the domestic gas supply to industry for electricity generation and home use. Shell was a pioneer in developing Nigeria'S first liquefied natural gas plant in Bonny, in which it is a shareholder (25.6 per cent). This started operations in 1999 and now takes significant quantities of gas that would otherwise be flared. So, with the right amount of investments, the future of the gas business is bright.
You appear to be moving away from onshore to offshore production. Is this the future of the Nigerian oil industry?
We are active both onshore and offshore. There are still significant reserves onshore, but I imagine that it is only a matter oftime before offshore activities pick up. As you aware, our sister company Shell Nigeria Exploration and Production Company (SNEPCo), commenced production from Nigeria's first deep offshore field [Bonga[ in 2005. SNEPCo, 100 per cent owned by Shell, was formed in 1993 to operate primarily in the deepwater frontier where no concerted exploration effort had previously taken place.
What is your assessment of the future of Shell in Nigeria?
Very bright, given the right conditions.
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