Académique Documents
Professionnel Documents
Culture Documents
Grazielle A. Mallari
Bernadette Raiza C. Peneyra
Michelle G. Reyes
TABLE OF CONTENTS
Content Page
IV. References
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I. Background of the Case
A. Rationale
The discovery of Nigeria’s commercial quantities to produce oil in 1956 have transformed the country’s
economy, bringing its foreign exchange earnings by 90 percent and federal revenue by 80 percent, with a
huge reserve of natural gas that has yet to be exploited. However, despite being the largest oil producer in
Africa and the eight largest in the world, Nigeria still failed to be one of the most prosperous states on the
African continent as the windfall income from oil only benefited a small minority while increasing the
rate of impoverished.
Since Nigeria is under a military government, corruption exacerbated as large commissions and
percentage cuts goes to the hands of the soldiers and politicians, making power and money concentrated
to the few and worsening poverty. As the government benefited from the oil production, serious damage
to the environment and the livelihood of the people living in the oil-producing communities were often
disregarded.
Given a situation where government intervention was minimal, the leaders of the Ogoni ethnic group,
headed by Ken Saro-Wiwa, a well-known Nigerian author, established the Movement for the Survival of
the Ogoni People (MOSOP) to address their grievances on the oil production on a national and
international stage, which, in turn, sparked a violent response from the Nigerian military government.
According to MOSOP, environment in Ogoniland had been completely devastated by three decades of
reckless oil exploitation of ecological warfare by Shell. Although Chevron Nigeria Ltd is also operating in
Ogoniland, but on a smaller scale, Shell Petroleum Development Company (SPDC) production in the said
area was roughly 28,000 barrels a day, which is approximately 3 percent of its overall production.
With the pressure of MOSOP, together with Saro-Wiwa’s use of media to put a spotlight on the issue,
Shell ceased its production and facilities from Ogoniland in 1993. However, this organization’s political
opposition lead to a military crackdown in Ogoniland wherein Saro-Wiwa and the other leaders of
MOSOP have been detained several times.
In 1994, when four Ogoni leaders were brutally murdered by a mob of youth, Saro-Wiwa and other Ogoni
activists were arrested in changes of murder and incitement to murder, despite lack of evidence, as these
murdered leaders were regarded by some as the government collaborators.
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On November 10, 1995, Ken Saro-Wiwa together with eight other Ogoni activists was executed by a
special tribunal appointed by the military government despite blatantly violation of international standards
of due process. Shell was then blamed both locally and internationally by executing the core of the
organization’s leadership. The oil company denied all the accusations but later on admitted that they
made direct payments to the Nigerian security forces in 1993.
As Shell face intensifying pressure to boycott its products in Europe and United States, and upon realizing
that the issue has been affecting their image with regards to human rights concerns, they resumed their
funding for the development projects of Ogoniland, such as hospital restoration and training for the Ogoni
youths.
In May 1999, Shell has been engaged in meeting and consulting Ogoni groups and organization to build
trust and have an understanding on their issues but has no plans on resuming the oil production in Ogoni
in the short term. However, despite the company’s effort, MOSOP remained opposed to the reopening of
their production in Ogoniland.
B. Company Profile
Shell Petroleum Development Company (SPDC) is the first and the largest petroleum company in Nigeria
for more than 50 years. It produces 39 percent of the country’s oil wherein operations on onshore and
shallow water oil and gas production were concentrated in the Niger Delta.
With more than 6,000 kilometres of pipelines and flowlines, 87 flowstations, 8 gas plants and more than
1,000 producing wells, the company has around 5,000 employees wherein 95 percent of which are
Nigerians. Furthermore, since the company’s operations were mainly in the Niger Delta, 66 percent of
their Nigerian staff is from this area as well. The remaining percentage of employees is sourced indirectly
from its suppliers.
SPDC's Mission
The mission of SPDC is to be the operator of first choice in Nigeria through its commitment to strong
economic performance and to every aspect of sustainable development.
How it began
SPDC was originally known as Shell D'Arcy and later as Shell-BP which was jointly financed by the
Royal Dutch/Shell Group of Companies and the British Petroleum (BP) Group on an equal basis. The
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Company discovered the first commercial oil field in the country at Oloibiri Bayelsa State, in 1956 and
through a sustained exploration effort had since discovered more oil fields that have firmly established
Nigeria as one of the world's major crude oil producers with significant gas potential.
SPDC today
Together with its Joint Venture Partners, SPDC is capable of producing some 1 million barrels of oil per
day on an average. Through its community investment programme, SPDC is demonstrating its
commitment to improving the quality of life for all those who live and work in the Niger Delta.
SPDC's Values
The values of SPDC of honesty, integrity and respect for people form the basis of the Shell General
Business Principles.
Business activities in Nigeria
▪ Shell Nigeria Exploration and Production Company (SNEPCO) operates the Bonga field,
Nigeria’s first deepwater oil discovery. The Bonga facility has the capacity to produce more than
200,000 barrels per day of oil and 150 MM standard cubic feet of gas per day.
▪ Shell Nigeria Gas (SNG) is the only international oil and gas company to set up a gas distribution
company in Nigeria to supply industry customers.
▪ Nigeria LNG (NLNG) is a joint venture incorporated in 1989 to produce LNG and natural gas
liquids for export. It was Nigeria’s first LNG project. Shell holds a 25.6% share, together with
NNPC (49%), Total (15%) and ENI (10.4%).
First Steps
▪ 1936 - The Royal Dutch/Shell Group founded Shell D'Arcy, the first Shell company in Nigeria.
▪ November 1938 - Shell D'Arcy was granted Exploration licence to prospect for oil throughout
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Nigeria
▪ January 1956 - First successful well drilled at Oloibiri by Shell D'Arcy
▪ April 1956 - Changed name to Shell-BP Petroleum Development Company of Nigeria Limited
First Oil
▪ February 1958 – The first shipment of oil from Nigeria
▪ April 1961 - Shell's Bonny Terminal was commissioned
▪ September 1971 - Shell's Forcados Terminal was commissioned
Agreements
▪ April 1973 - First participation agreement; Fed. Govt. acquires 35% shares in the Oil Companies
▪ April 1974 - Second Participation Agreement; Federal Government increases equity to 55%
▪ July 1979 - Third Participation Agreement (through NNPC) increases equity to 60%
▪ August 1979 - Fourth Participation Agreement; BP's share holding nationalised; NNPC = 80%,
Shell = 20%
▪
Changes
▪ December 1979 - Company name changed to Shell Petroleum Development Company of Nigeria
(SPDC)
▪ August 1984 - Agreement consolidating NNPC/Shell Joint Venture
▪ January 1986 - Signing of Memorandum of Understanding (MOU)
▪ June 1989 - Fifth Participation Agreement; (NNPC = 60%, Shell = 30%, Elf = 5%, Agip = 5%)
▪ July 1991 - Signing of Memorandum of Understanding & Joint Venture Operating Agreement
New Frontiers
▪ April 1993 - Production Sharing Contracts signed - SNEPCO
▪ July 1993 - Sixth Participation Agreement; (NNPC = 55%, Shell = 30%, Elf = 10%, Agip = 5%)
▪ April 1995 - SNEPCO starts drilling first Exploration well at Bonga (Nigeria's first deepwater oil
field)
▪ November 1995 - NLNG Final Investment Decision taken
▪ March 1998 - Shell Nigeria Gas Company established
▪ December 2002 - Commencement of production from EA field
How would Shell maintain the business operation in Nigeria and promote sustainable
development?
1. Identify the environmental, development and human rights consequences of oil operations in
Nigeria
2. Maintain the company’s operation in Niger Delta
3. Promote sustainable development
4. Establish a sound recommendation on Shell’s best course of action
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III. Case Analysis
SPDC and its joint venture partners have five major fields in Ogoniland dating form 1960s and 1970s
, each with its own flowstation (where gas is separated and flared from the oil collected from different
individual wells and the oil pumped on to terminals for export). In 1993, the total production
potential from SPDC’s Ogoni fields was roughly 28,000 barrels a day, which is approximately 3
percent of SPDC’s overall production.
Oil Workers
Full-time employees in the oil industry are paid high wages for skilled work. However, they are few
well-paid individuals surrounded by a mass of unemployed or underemployed. In addition, most oil
workers do not come from the oil producing community.
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Boycott Campaign
Due to environment and human rights issues, Shell faced pressure from campaigns to boycott its
products in Europe and United States. In order to force the military to step down, there were calls for
the adoption of an international embargo on Nigerian oil. This move also threatened the operation of
the company in Nigeria.
The concept that companies have responsibilities to the community at large other than to make money
has gained increasing currency. However, international law is only just beginning to address the
behavior of non-state actors such as transnationals. Consumers, activists, and concerned shareholders
have begun to put pressure on the major transnationals to pay more than lip service to ideas of good
corporate citizenship, calling for international regulation of corporate activities.
In 1999, Shell reported “People, Planet & Profits: An Act of Commitment,” that covers issues on
surrounding sustainable development.
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As it seems to be a common practice for the oil companies in Nigeria, Shell admitted that they had
payments with the Nigerian security forces. Also, given that Nigeria’s oil sector contributes to 40
percent of the country’s GDP, clearly, the government is benefitting from the oil production than the
Ogoni community. Perhaps the primary reason why the government is more biased to the oil
companies than its people.
Relationship with the Company should promote 25% The oil economy of Nigeria is
Government good relationship with the very important to the country, but
governing body of Nigeria the people of Nigeria still suffer
from a corrupt government.
Despite the revenues being
brought in from oil exports, the
Nigerian government still holds a
large unemployment rate and a
high poverty rate.
Markkula Framework
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Utilitarian Under utilitarian, this option will be favorable to Nigeria in order
to recover all the environmental damages that destroy thousands of
people in the country caused by oil production of Shell.
Rights & Duties Niger Delta is one of the most oil-polluted places in the world.
This is because companies like Shell are failing to prevent or clean
up spills after occurrence. It is the responsibility of Shell do
necessary solution to clean up its environmental damages brought
in the country.
Justice & Fairness This ACA promotes the campaign of environmental justice for
Ogoni people on the challenges of accessing justice to argue for
the need of a legally binding mechanism to hold company
accountable for their human rights violations.
Virtue Beyond the issue of clean up and remediation are far more
important issues of human rights violations and crimes. In this
action, Shell oil company provides justice in all damages they
brought to Nigeria.
Care This ACA shows that the company has as greater responsibility
towards the people of Nigeria.
Markkula Framework
Utilitarian This ACA discussed that both Shell Oil Company and the
Nigerian community are mutually benefiting in oil and gas
production, revenue and profit of the company.
Rights & Duties Shell companies in Nigeria play a key role in lifting people
from poverty through their contribution to society. It is the
duty of the company to increase the role of Nigeria’s economy
and society.
Justice & Fairness The shell company should establish just and fair treatment
with Nigerian people by providing them the needs of the
society.
Virtue This action shows that the company provides fairness in order
to give back to the society and regain the company’s public
reputation.
3. Establish an independent body that will investigate the alleged environmental and human rights
violations allegedly committed by Shell.
During Ogoni crisis, Ken Saro-Wiwa, a well-known Nigerian author and spokesperson for the
Movement for the survival of the Ogoni People (MOSOP) highlighted that the environment in
Ogoniland was completely devastated by the operations of Shell. In addition, the group accused the
company of collusions with Nigerian military who enforced ruthless military operations that were
needed for oil production to resume in the region. Although Shell initially denied the said allegations,
investigating these matters by establishing an independent body can contribute in improving the its
relationship between the ethnic group.
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● Integration of Ethics Concept
Companies should consider the impact of their business operations to the primary stakeholders,
stakeholders and wider society. They should “take actions that protect and improve the welfare of the
society as a whole along with their self-interest” (Davis and Blomstrom).
In this case, the company apparently committed environmental devastation and human rights
violations. Thus, Shell must promote social accountability by establishing an independent body that
will investigate these matters. If proven guilty, it must provide just compensation for damages that its
operations had caused to the Ogoniland and its community.
Corporate Reputation
Good reputation can affect consumer preference. This was evident when due to its issues, Shell faced
mounting pressure from campaigns to boycott its products in Europe and the US. Thus, it will be
necessary for the company to conduct an investigation of the issues and provide compensation Ogoni
people.
Markkula Framework
This ACA will promote the common good. The Ogoni people can
utilize the monetary compensation that will be paid by Shell to
Utilitarian improve their standard of living. In turn, the company will have an
opportunity to repair its tarnished image and maintain its market
share in Europe and the US.
Virtue By providing just compensation, the company will espouse the virtue
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of “accountability” to the people of Ogoniland.
Through this action, the company will show care to the Ogoniland
Care
and its community.
4. Strengthen commitment to company’s thrust of 3Ps or triple bottomline and its relations with
the Nigerian government.
Despite of the adoption of the new Statement of General Business Principle, the overall relations
between Shell and the oil-producing communities of the Niger Delta had worsened by the end of
1999. In fact in January 2000, the MOSOP remained opposed to reopening of Shell production in
Ogoniland. Although much of this deterioration could be attributed to the government’s failure to
respond to the demands of the peoples in delta, the continuing problems also illustrate the difficulty of
putting the fine words of the Statement of General Business Principle in practice.
With this, it is important for Shell to strengthen its commitment to human rights principles or
sustainable development. Moreover, the company can leverage its bargaining power – as Nigerian
economy was heavily dependent on oil industry – to influence government to comply with human
rights and environmental policies.
As indicated earlier, companies should “take actions that protect and improve the welfare of the
society as a whole along with their self-interest” (Davis and Blomstrom). Thus, it is morally right to
address not only the impact of past and current issues faced by the company, but also integrate
environmental and social considerations into its business decision-making to prevent future.
Sustainable Development
One of the issues that companies are facing today is to embrace sustainable development. According
to The World Bank, it has three pillars – economic growth, environmental stewardship, and social
inclusion. It is necessary for Shell to ensure that its economic activity produces inclusive growth and
efficiently utilizes resources to deliver short-term and long-term benefits for people, planet and profit.
Markkula Framework
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This ACA will promote the greatest good to the greatest number.
This can help reducing the poverty among Ogoni people and preserve
their environment. On the other hand, this action will enable the
Utilitarian
company to maintain its operations in the land. Moreover, it can
address the boycott threats to the company due to its environmental
and human rights issues.
This action will allow the Nigerian community to have a share on the
Justice & Fairness
money generated from oil extraction.
E. Evaluation of ACAs
F. Best Solution
As the execution of the Ogoni Nine further highlighted the anomalies between the government and
Shell, also increasing the threat to the oil company’s operation due to product boycott and reputation
damage, Shell had its change of heart and decided to face its commitment to the human rights.
Therefore, the company had adopted a new Statement of General Business Principles in March 1997.
However, such effort to the Ogoniland seems to be insufficient as the company’s relations with its oil-
producing communities, Niger Delta as a whole, had worsened.
Given such hostile situation, the question arises as to how Shell can maintain its business operation
not only in Ogoniland, but on the whole Niger Delta and maintain its market share, particularly in
Europe and the US.
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With the use of the decision criteria stated above, the best solution for Shell is to strengthen its
commitment to the triple bottom line (i.e. Economic, Social, and Environmental) and to improve its
relations with the government in terms of providing equality to its people. Aside from strengthening
its Statement of General Business Principles, Shell, which was considered to have influence to the oil-
dependent government, can engage in talks with the latter and closely coordinate reduce the
environmental and social impact of Shell operations not only in Ogoniland, but to the whole Nigerian
community.
IV. References
http://www.shell.com.ng/about-us/what-we-do/spdc.html
http://www.shell.com.ng/about-us/who-we-are.html
http://www.worldbank.org/en/topic/sustainabledevelopment/overview#1
Shell in Nigeria: The Social Responsibility and the Ogoni Crisis
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