“Warri – in Delta state used to be the oil and gas hub of Nigeria before,” Omaseye Junior says, thinking of life without Shell in the Niger Delta. “When they sold their assets in Warri and moved to Port Harcourt – the capital of neighbouring Rivers state, they went with 3,000 contractors. All these contractors have dozens of staff working for them. Warri died when Shell left, if Shell sells their onshore assets the same thing will happen to Port Harcourt.”
Junior was a supervisor with an oil producing company. He was on the field when the federal government started announcing lockdowns across the country in March 2020. By the time he returned to base in April, a letter of dismissal was waiting for him.
“The firm said production was low, jobs were not coming like that so they didn’t see the point of keeping many staff.” His experience is the same with thousands of persons across the globe, who were laid off by both oil and gas producing and servicing firms across the world.
Before it considered vacating the Niger Delta’s land and swamps, Shell dismissed 9,000 staff across its global operation, including in its Nigerian firm, Shell Petroleum Development Company (SPDC).
Other IOC’s took the same route, leading to thousands of job losses across the world. In the USA, which employs the third largest staff in the industry, Norwegian-based Rystad energy says 120,000 persons were dismissed. That figure was much higher in China, where 170,000 staff lost their jobs.
These job losses are seasonal; the companies would put out new ‘call for applications’ if activities pick up. Rystad did not take contract staff into account and this type of employment represents 60 percent of the employment in Nigeria’s oil and gas industry according to some observers.
The 2020 downward curve in the global fossil fuel industry is the second in less than ten years. This one could bite harder, with environmental campaigners toughening their call for increased energy efficiency and demanding that fossil fuel use be forced down faster.
One such order was given to Shell by a Dutch court on May 26. The judge demanded that Shell reduce its carbon emission by 45 percent from 2019 levels by 2030, less than a year after the Anglo-Dutch firm promised to reduce its greenhouse gas volumes by 20 percent in ten years.
That ruling was handed down following a case file by local environmental group, MilieuDefensie and the climatecasechart.com database says there are 1,800 more cases like this across courts all over the globe.
Although this ruling only has effect in the Netherlands, Shell’s chief executive, Ben Van Beurden, announced that the company was in talks with the Nigerian government to sell all its onshore assets in the country seven days before the Dutch judgment was due. With the reality of more structural job cuts dawning, many like Junior might never find another employer either on full time or contract basis.
“Part of what I see Shell doing to reduce their carbon footprint is to sell-off assets in countries where they have issues with spillage,” says Jesse Manufor of environmental group, Stakeholders Democratic Network (SDN). His sentiments are echoed by other experts who say the COVID-19 pandemic and divestments are the only ways IOC’s have tried to bring down their emissions so far.
This is not the first time SPDC is shrinking its Nigerian portfolio. Between 2014 and 2015, the firm sold at least four Oil Mining Leases to local companies. The financing of those deals were powered chiefly by five indigenous banks, First Bank of Nigeria, First City Monument Bank, Eco Bank, Diamond Bank and Sky Bank. Two of these commercial lenders have since gone under.
Local players like Iteo, who purchased some of SPDC’s offerings at the time, did so just before the oil price started to tank. A lot of the lenders were forced to restructure the loans offered to these companies two years into the deal thanks to a slump in the value of a barrel of crude neither party preempted.
“The banks lent way too much,” a foreign oil executive who supervised the deals between 2012 and 2014 told Financial times in 2016. “The assumptions made by the local oil companies were inaccurate. The value of the assets is basically zero with the low oil price.”
Five years after this view was expressed, observers in Nigeria do not think local banks are healthy enough to display the heroics of 2012.
“While there is an appetite by Nigerian operators to purchase these assets, important questions remain as to how easily they will be able to raise financing given the challenges faced by the domestic banking sector and the pullback from fossil fuel deals by global banks,” research firm SBM Intelligence said in a May 2021 newsletter.
SPDC disposed at least 7 assets between 2010 and 2015. The purchase of the first three, which were bought by Seplat Petroleum Development Company, was funded by a French-based Maurel and Prom.
“I don’t think the banks have recovered from funding the last set of transactions in 2014,” says Victor Ndukauba, Deputy Managing Director at Afrinvest. He however ‘reckons’ that Nigerian ‘banks will continue to view upstream oil and gas investments positively.
He expects valuations to be more stringent though and anticipates that the lenders will take a measured approach to how they lend.
“the pace of Shell’s divestment will be moderate, expected to take 3-5 years for its onshore assets,” he projects.
Asides from the financial consideration of Shell’s 18 onshore assets, there is an environmental sheen to the conversation. One of the assets SPDC sold to Iteo in 2016 was the Nembe Creek Trunk Line, which carries 150,000 barrels per day of Nigeria’s best crude oil grade, Bonny Light, from Nembe in Bayelsa state to the Bonny Export Terminal in Rivers State.
As early as 2013, the pipeline, which was constructed in 2010, has been repeatedly shut down up until 2020, due to varying technical and reported incidents of sabotage. This pipeline contributes to the oil spillage the firm is determined to get off its books.
“Who is going to buy these assets? Who is going to take on the environmental cost and liabilities of these assets?” Ayo Adedayo, professor of Law at the University of Lagos mused. “The communities are awake right now and they don’t want a company to walk away and give it to a very small local player who will not be able to clean-up and remediate the environment the way it should be done.”
SBM Intelligence offers a slightly complex answer that would see a subsidiary of the NNPC – Nigerian Petroleum Development Company (NPDC) purchase the assets on offer.
“One option that may be the easiest for all parties involved may be for the operatorship of the blocks to be handed over to NAPIMS (owned by the federal government and the states) who could then either subcontract operatorship to NPDC (owned by the Nigerian Government only) or to sell its own stake (not Shell’s stake) to the NPDC on sweetheart terms with payment made over a very long period of time,” the firm suggested. “Then Shell can decide to sell its own stakes to financial entities like private equity funds who would not need operatorship of the assets.”
While the Nigerian government thinks of how to keep its fossil fuel assets oiled, Shell has been taking advantage of reducing exploration in Nigeria to develop green energy solutions back home.
Shell says it has built four solar parks in the Netherlands, operates two offshore wind farms, runs over 200,000 electric vehicle charging points across Europe and is developing biofuel plants.
“We are investing billions of dollars in low-carbon energy, including electric vehicle charging, hydrogen, renewables and biofuels,” the firm noted in response to the court judgment. “We want to grow demand for these products and scale up our new energy businesses even more quickly.”
While Shell plans to leave swathes of polluted land behind, it is making some contribution to Nigeria’s off-grid energy industry. Through its subsidiary, All-on, the company says on its website that it provides ‘impact investment’ to companies in the solar power value chain, with specific focus on the Niger-Delta. So far, the firm says it has funded Auxano solar, a solar PV manufacturing firm in Lagos south-West Nigeria; EastWind laboratories, a solar powered cold room in Osun State south-West Nigeria and Oolu Solar a firm in the Senegalese capital – Dakar.
Companies like Shell and Total, who have developed some form of renewable energy scheme in Nigeria, appear to be more forward thinking than the federal government. Although the NNPC has a renewable energy department and several policies have been written on the country’s adoption of diverse green energy technologies, Shiroro and Kainji dams remain the only evidence of on-grid generated renewable electricity in the country.
Just like the IOC’s, the Nigerian government has mainly invested in solar offtake programmes in rural areas.
“Nigeria is still totally dependent on fossil fuel and the theme of the Petroleum Industry Bill is to make the industry lucrative for foreign investment,” says SDN’s Manufor. “This is something they should have done more than 20 years ago.”
While the Nigerian government still tries to earn more revenue from fossil fuel, dismissed oil and gas workers like Junior are looking forward to it.
“There is something Bill Gates says: ‘Think of where the world is going to, go to that place and wait for the world to meet you there,’” Junior says.
“I will be starting my data analysis class in a few days, I’m positioning myself as a marketer.” Manufor believes the oil and gas market in Nigeria will continue to contract even if local players snap up any onshore assets vacated by the big players. Not everyone will be able to make a smooth transition and there is no sign the government at federal, state or local government level is bothered.
“The hooliganism in Rivers and Bayelsa will be worse if Shell leaves,” predicts Colins Newuwumi, an environmental campaigner who witnessed the company’s migration from Warri to Port Harcourt. “The government is not trying at all. There are local governments in these areas. If there is no money, political zones can be created and industrialised, at least four or five factories per zone.”
Insecurity and job loss are two of several negative outcomes for the Niger Delta from a potential series of onshore divestments. Every Oil Mining Lease ought to have a Field Development Plan (FDP) that guarantees funds are set aside for the decommissioning or abandonment of all wells on the lease at the end of their life cycle. But Professor Adedayo says not all onshore assets in Nigeria have an (FDP) in place.
“Decommissioning and abandonment was not considered an issue for many years, the laws and regulations governing them are just coming in gently,” he says. “Not all the leases have decommissioning and abandonment plans.” Without plans for decommissioning and site restoration, the people of the Delta would have forfeited their lands and swamps permanently for an income that has benefited a few Nigerians and their foreign partners.
“Everything you’re seeing now with Shell applies to all other oil companies, including the local ones. Even if the indigenous companies buy the assets, at some point they will not have customers to sell to, there will be bank loans to service and you will be looking at bankruptcy. By then, you will have lots of pollution left behind and there will be no one to hold, because the companies have closed,” the University of Lagos law professor predicts.
This story was produced under the NAREP oil and gas 2021 fellowship of the Premium Times Centre for Investigative Journalism.