Shell Petroleum Development Co. (SPDC) has suspended its plans to restructure its joint venture in Nigeria following a request from Nigeria National Petroleum Corp. (NNPC) to resolve its oil production problems and improve efficiency. The development leaves in limbo the jobs of 5,000 employees, most of whom are Nigerians.
Shell had announced last November plans to reduce costs by cutting jobs and to boost efficiency and productivity in its JV, which it operates and shares with NNPC, Total, and Agip, as militants and vandals’ attacks on its oil and gas facilities in western Nigeria have shut down 470,000 b/d of oil capacity for the past 2 years. Shell estimated that slimming down the organization will save $200 million/year.
A Shell spokesman told OGJ it could not say for how long it would suspend its restructuring, adding that it was continuing talks with NNPC about the problems in western Nigeria. “NNPC has asked for more information about our plans. We don’t know how many jobs will be affected by the restructuring as we haven’t finished working out the details. Figures in the press that it would be 3,000 are pure speculation.”
NNPC head Abubakar Yar’Adua told a parliamentary hearing Feb. 18 that, although it appreciates the production challenges Shell is facing, NNPC had not been consulted before Shell began the exercise. According to Nigerian reports, the federal government plans to bail out Shell and other such companies through a special financial package that would be arranged shortly.
Shell, one of the major operators in Nigeria, has had to struggle to implement its projects in Nigeria because of insecurity in the Niger Delta and because NNPC has failed to contribute its share of funds to the JV. Rising production costs also have exacerbated the problems.
Mutiu Sumonu, Shell’s managing director, told the parliamentary committee that the restructuring was crucial to Shell JV’s survival and would create a synergy between SPDC and Shell Nigeria Exploration & Production Co.
He was quoted in reports as saying: “We used to produce 1 million b/d but due to the Niger Delta crisis, we are struggling to meet up with half of that. There is no access to our production in the west, and we have maintained our staff strength up until this moment. We took a look at our future development plan covering 2008-12 and discovered that business is already half of what it ought to be. The whole business output requires that we take some action in the interest of the business.”
