Why Oil Majors are leaving Nigeria

Most of the international oil companies (IOCs) operating in Nigeria are selling off their assets and leaving the country.

Some people believe that this divestment of assets by the IOCs could be due to the global push for an energy transition from fossil fuels to renewables.

However, Shell CEO, Mr. Van Beurden, at the company’s Annual General Meeting (AGM) in 2021, said, and I quote, “The balance of risks and rewards associated with our onshore portfolio is no longer compatible with our strategic ambitions,” Mr. Beurden said. “We cannot solve community problems in the Niger Delta.”

Because of constant vandalism, oil theft, sabotage, and spills, Mr. Beurden said that Niger Delta oil no longer fits the company’s strategic business goals.

I do not believe that these companies are leaving because of the global energy transition or due to the carbon net-zero commitment, but rather because of the oil theft and security challenges in the Niger Delta.

With the current oil price of more than $100 per barrel, no sane company would abandon Nigerian sweet crude for any other venture.

If I owned any of these IOCs, I would still take the same action.

These IOCs, especially Shell, are seen as companies that cause oil spills and other environmental damage.

The media and some individuals have promoted this idea for several years now, and the companies are seen as being defensive whenever they come up to clarify the issues.

IOCs are multinational companies that work hard to maintain a positive reputation, which, if impugned, can affect their share prices in the countries where they are listed.

Many Nigerians, especially the leaders of community groups in the Niger Delta, rely on this to file lawsuits against these companies in a number of international courts in a bid to make them pay outrageous sums of money to the communities.

The irony of the entire saga is that most of the oil spill incidents are not caused by the carelessness of the IOCs. Rather, they occur as an aftermath of oil theft by the Niger Delta youths and their collaborators.

I have worked in this industry for over two decades, so I am writing from a position of knowledge.

These companies lose as much as 30% of their crude oil production to theft.

I worked in an oil facility where we were forced to shut down production every week due to leaking flowlines. These criminals will always vandalize the pipelines to steal crude oil, and because they lack the competence to manage the flow, it will result in oil spillage.

The company, on the other hand, will be forced to shut down operations to reduce the environmental impact of the spill.

This happened on a weekly basis.

When the community becomes aware of the spill, they will confront the affected company, accusing them of polluting the environment. Some notorious ones among them will even snap pictures and post them online to show the entire world how the oil company is damaging their environment.

A joint investigation team is usually set up to investigate the root cause of the spill. The team is made up of people from the DPR, the state government, the oil company, and the affected community.

However, the company bears the responsibility of cleaning the spill site and paying for the environmental damage.

No business owner wants to operate in such a callous environment, notwithstanding the potential profit of the business.

I believe this is one of the major reasons the IOCs are leaving the country in droves, besides other issues like cash-call payments by NNPC.