Annex IV
SECURITY IN
NIGERIA
Since 2005, the security situation in Nigeria
has severely deteriorated. Militancy and insecurity have escalated
in the Niger Delta. Armed attacks, vandalisation of oil industry
facilities, crude theft, kidnapping and hostage-taking are widespread.
Barges take stolen oil to tankers waiting offshore for export.
In the period 2006-08, 133 employees and contractors of the Shell
Development Petroleum Company (SPDC) were kidnapped and five have
been killed. Temporary amnesty for the militants by federal government
is providing short-term relief.
The ongoing security situation has seen parts of
our operations remain shut for some time and production has been
significantly reduced, depriving government of much needed revenues.
A long-term strategy to resolve the Niger Delta issues is urgently
needed. While it is difficult, Shell has a genuine desire to work
with the communities and the government to find solutions to some
of the problems that the country faces.
GOVERNANCE AROUND
OPERATIONS
In Nigeria's energy industry, partners fund
joint ventures with government based on equity share. Since the
government-owned Nigerian National Petroleum Corporation (NNPC)
owns 55% of the SPDC joint venture (Shell's share is 30%) the
joint venture's funding depends on the Government's ability to
provide this share. The Government has consistently failed to
meet its funding obligations to the Joint Venture for several
years, affecting many planned projects and programmes—including
gas gathering, which would end gas flaring.
New funding arrangements were agreed early in 2009.
Shell provided loans to the government, which afforded a short-term
solution and progress on some key projects. A long-term solution
is still required.
Along with these challenges, the Government's
proposed industry and tax reforms, through the Petroleum Industry
Bill legislation, have potential to cause further, major disruption
to operators and to deter future investment in the country.
8 October 2009
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