In its 77 years operating in Nigeria, Royal Dutch Shell PLC has certainly pumped lots of oil, but it has also come in for plenty of grief. Over the years it has been accused of involvement in human-rights violations and environmental pollution, and its pipelines and personnel have periodically been menaced by armed groups.
From time to time, this troubled situation has prompted speculation that the U.K.-listed oil company would quit the West African country, but on Friday Shell gave a clear signal that it intends to remain in Nigeria by announcing new investments from its joint venture there totaling $3.9 billion.
The largest chunk of the money–$2.4 billion–will be spent on five gas supply and infrastructure projects that will ensure adequate future supply for domestic power plants and a liquefied natural gas export project, Shell said. The more interesting investment of $1.5 billion is in a new pipeline intended to bypass one of the Niger Delta’s oil-theft hot spots.
An entire black economy has built up around the theft of oil from pipelines in the Niger Delta. According to Shell and the Nigerian authorities, thieves regularly drill into pipelines that crisscross the region, pump oil into small ships, process it in illegal refineries and sell it on local or international markets. Efforts to stamp out the bootleg industry have proved largely futile, and Shell recently has sought international help on the matter.
Shell hopes the new loop off the existing Trans Niger Pipeline will reduce spills often caused by oil theft because it will avoid an area where the practice is common, passing instead through a swampier area where access will be more difficult for thieves, reports The Wall Street Journal.
The need for action is clear. The Trans Niger Pipeline spilled oil and caught fire last week–an event that Shell blamed on oil thieves. Whether the re-routing will prove successful is less clear because, as one risk analyst pointed out, oil thieves have shown themselves to be organized, determined and resourceful.
Enforcing laws in the Niger Delta can also be a tricky business. Even the government acknowledges there is collusion between the people supposed to prevent oil theft and those committing the crime.
The confusion over who is a good guy and who is a bad guy was amply demonstrated over the weekend. Nigerian security forces arrested a number of contractors of Shell’s joint venture at the site of the fire on the Trans Niger Pipeline, on the suspicion that they were involved in oil theft, the Journal reports. The manager of one of the contracting firms denied the accusation.
On top of its new investments, Shell also announced a strategic review of some of its onshore oil assets in the Niger Delta, which may well result in the sale of further licenses. Shell has already sold $1.8 billion of oil licenses in Nigeria since 2010, reports the Financial Times.
FRACKING PSYCHOLOGY
The controversy over the safety of the process used to produce shale oil and gas–hydraulic fracturing, or fracking–is starting to show some of the hallmarks of that other hot energy debate, climate change. And that’s probably a bad thing.
A study by Yale University suggests that people’s views over whether fracking is a benefit or a menace depend more on their political allegiance than their level of understanding of the topic, reports Mother Jones magazine.
On the left wing, people with higher scientific literacy tend to think that fracking is riskier, the study found. On the right wing, people who understand more about science think fracking is safer. The survey found a very similar pattern when asking people their view of the dangers of climate change.
The Yale researchers drew no conclusions about whether fracking, or climate change, are dangerous. But they did have something to say about people: “The more they know, the more biased and polarized they’ll be, the more likely to double down on their beliefs.”
The difficulty in changing people’s minds has important consequences for the shale industry, especially in places like Europe where fracking has barely started but public anxiety about it is already high.
The U.K.’s leading shale-gas explorer, Cuadrilla Resources, has had to delay plans to drill a single well near the town of Balcombe in southeast England after local opponents raised concerns about its permitting with the Environment Agency, reports Geoffrey Lean of The Daily Telegraph.
Protesters against Cuadrilla’s plans in Balcombe appear to be largely immune to the company’s assurances that it doesn’t plan any fracking operations in the area, and would need additional permits if it did. Environmental groups are also likely to be emboldened by their early victory over the company, writes Mr. Lean.
MARKETS
Oil futures were slightly lower Monday as concerns about the Chinese economy caused nervousness in markets.
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