Royal Dutch. Shell in Nigeria

As described in the Harvard Business School case Royal Dutch/Shell in Nigeria (A), the primary issue facing Shell is scrutiny over their involvement, or lack of involvement, in the civil unrest between the Nigerian government and a group of activists representing the Ogoni people – one of Nigeria’s 240 minority tribes. Publicly the conflict is between the Nigerian government and the Ogoni people. However the core of the problem for Royal Dutch/Shell is establishing a strategic approach to manipulating the political landscape within Nigeria.

In the year leading up to the arrest of Ken Saro-Wiwa, an Ogoni activist, Shell had been the target of increased scrutiny in Europe by Greenpeace. The controversy centered on the company’s handling of the Brent Spar, a North Sea storage buoy of hazardous pesticides. Although Shell had been the subject of criticism by environmentalist before, the Brent Spar incident had an economic impact that lead to boycotts and low sale volumes throughout Europe. This led to image problems for Royal Dutch/Shell, whom only a year earlier had ranked third in the Financial Times survey of Europe’s “most respected companies” (1994).

The impact to their image resulted in Royal Dutch/Shell taking a weak stance against the corrupt Nigerian government. As the largest oil company in the world, Royal Dutch/Shell controlled 60% of Nigeria’s known oil reserves, providing them the opportunity to positively impact the Ogoni people and the Nigerian Delta as a whole. Poor leadership and lack of a strategic plan resulted in turmoil for Royal Dutch/Shell and the surrounding Ogoni community.

In 1995 Ogoniland housed 100 oil wells – 96 of which where owned by Royal Dutch/Shell. Royal Dutch/Shell however only received 4%, or $208 million, of the $5.2 billion in total gross revenues with Nigerian government receiving 79%, or 4.1 billion, with other companies receiving 2% and 15% going to capital and operating costs. Royal Dutch/Shell is in a position to leverage the disparity in income between them and the Nigerian Government to change policies.

Although Royal Dutch/Shell has an investment in capital infrastructure, the negative image is not worth the $208 million income. Royal Dutch/Shell is in a position to graciously realize their presence as a guest in Nigeria while simultaneously impacting future policies and the treatment of the Ogoni people.

Shell Petroleum Development Company (SPDC) of Nigeria Limited was a joint venture between the Nigerian government and Royal Dutch/Shell. This joint venture re-invested 3% of oil revenues on an annual basis back to the Delta. However, the funds being invested in Ogoniland were not having the desired impact. Local administers of the funds claim the money was never received and the government claimed the funds were lost to local corruption and poor investments.

Royal Dutch/Shell managers in Nigeria and London were in agreement that the funds were not being invested in a manner to enhance the Delta region. This represents another opportunity for Royal Dutch/Shell to establish a relationship between the Nigerian Government and the Ogoni people to ensure proper development of the neighboring community.

In 1994, twenty-one years after the inception with the relationship with the Nigerian Government, Royal Dutch/Shell began discussions with non-government organizations (NGO) to explore new approaches for the distribution of funds to the Ogoni people. In my opinion, if these discussions had taken place years earlier the community would be much more stable. Developing a successful infrastructure for Ogoniland eliminates negative environmental publicity affecting Royal Dutch/Shell. By developing a stable environment for the country’s majority youth population would also eliminate the current breading ground of extreme activist, such as Saro-Wiwa.

This “misperception” of Royal Dutch/Shell’s impact in the region left the company as an easy target for Ken Saro-Wiwi’s campaign against the alleged disregard of the well being against Ogoni land. Emeda Achebe, External Relations Manager for Royal Dutch/Shell, felt that – Saro-Wiwi’s focus on Shell reflected his failure to get the Nigerian Government to respond, and also his belief that Shell’s international presence and multinational stakeholders would help garner international support for the Ogoni cause.

Ironically, Achebe attacks Saro-Wiwi for not being able to establish relations with the Nigerian Government, yet Royal Dutch/Shell has also failed to establish relations with the Nigerian Government to benefit the Ogoni people.

Although Shell’s business principles committed the company to an apolitical role, the company’s ability to remain politically neutral in the region was lost the moment it signed the joint venture agreement, SPDC. This agreement in essence made Shell business partners with the Nigerian Government. As a business partner, more should have been done to avert the abundant corruption in the region.

If advising Brian Anderson, Managing Director of Royal Dutch/Shell’s Nigerian Oil exploration, I would emphasize to Royal Dutch/Shells committee of Managing Directors the importance of leveraging our influence with the Nigerian Government to reduce corruption. In addition, I would recommend that Royal Dutch/Shell assist in providing an infrastructure for Ogoniland that reduces the need for radical extremist. Ultimately Nigeria has the potential for long-term revenue growth. However, if Royal Dutch/Shell is unable to affectively reduce government corruption the venture is destined for failure.