For more than 60 years, Shell has invested in Nigeria’s economy and the Nigerian people. It has built robust oil and gas businesses and contributed to neighbouring communities. Its commitment remains strong, even as the content of its asset portfolio changes. it has also announced a review of its Nigerian onshore oil investments, but this notwithstanding as it has decided to focus its ambitions on two key areas:
- Deep-water exploration and production in the Gulf of Guinea, where the renewal of the OML 118 licence for 20 years has opened up further opportunities; and
- Expansion of the gas supply and distribution network within Nigeria and to international markets.
These ambitions align with Shell’s Powering Progress strategy and support Nigeria’s vision to provide reliable, affordable power to its people. In 2021, Nigeria continued to receive the largest concentration of social investment in Shell. Its health-care and education programs helped thousands more people over the last year. We continue to work to bring energy to off-grid communities through All On, our not-for-profit impact investment company.
The company has also vowed that it will continue to clean up oil spills, despite the challenges arising from the illegal actions of third parties, such as sabotage and crude oil theft. The clean-up and remediation in the Ogoniland community of Bodo has made solid progress, with around 60% of the area remediated and 300,000 mangrove seedlings planted.
Shell’s Nigerian businesses support the development of local communities and companies. The businesses in which Shell has interests employed 2,500 people directly in 2021 and provided jobs for many others in supplier networks. In 2021, Shell Companies in Nigeria (SCiN) awarded contracts worth $800 million to Nigerian-registered companies.
In addition to paying $986 million in 2021 royalties and corporate taxes to the Nigerian government (SPDC $424 million; SNEPCo $562 million), Shell Companies in Nigeria (SCiN) also contributed $33.82 million in direct social investment. The social investment was mainly in projects related to community, health, education, road safety and enterprise programmes. These projects are often implemented in partnership with local authorities.
In 2021, Shell launched Shell Energy Nigeria, which aims to develop new gas distribution solutions and deliver competitive and reliable energy for power generation and industrial use across the country.
FINANCIAL
Shell Companies in Nigeria spent $800 million on contracts on Nigerian-registered companies which is the same level as 2020 spend.
$986 million in corporate taxes and royalties paid to the Federal Government of Nigeria (SPDC $424 million and SNEPCo $562 million), compared with $900 million in 2020.
The SPDC JV, SNEPCo and SNG spent $33.82 million in direct social investment, compared with $49.4 million in 2020.
The SPDC JV, in compliance with statutory requirements, paid $38.7 million in 2021 to the Niger Delta Development Commission (NDDC).
SNEPCo and its co-ventures paid $23 million to the NDDC.
Combined production from SPDC and SNEPCo (Bonga) declined to 493,000 barrels of oil equivalent, compared with 614,000 barrels of oil equivalent in 2020.
Shell Companies in Nigeria directly employed 2,500 people (of whom 97% were Nigerian nationals) with more than 8,500 contractors supporting operations.
SOCIAL INVESTMENT
The All On impact investment company increased the size of its total portfolio of renewable, energy access investee companies from 31 to more than 40, and the All On Hub increased its supported businesses from 41 to 81 ventures.
All On, together with Odyssey Energy Solutions and the Global Alliance for People and Planet, launched the Demand Aggregation for Renewable Technology (DART) programme to bring affordable, high-quality solar products to communities most in need
Community Health Insurance Scheme added 8,180 people. More than 85,000 people have been enrolled across the Niger Delta since its launch in 2010. The scheme is a partnership between the SPDC JV, Rivers State Government and local communities
Health-in-Motion mobile community health outreach programme added 2,451 people. More than one million people across the Niger Delta have benefited since 2010.
Shell Companies in Nigeria contribute to economic growth in Nigeria by generating revenue for the government through taxes, creating employment opportunities and contributing to the development of local businesses.
In 2021, Shell Companies in Nigeria directly employed 2,500 people, 97% of whom were Nigerian nationals. More than 8,500 contractors supported our operations during the year.
Shell Companies in Nigeria awarded contracts worth $800 million (the same as in 2020) to Nigerian-registered companies, of which 92% was to companies where the Nigerian ownership was at least 51%. In 2020, Shell’s business in Nigeria collected and paid a total of $3.5 billion in production entitlements, royalties, fees and taxes. Some tax numbers are available for 2021: SPDC paid $424 million and SNEPCo paid $562 million in corporate tax and payments to the government.
Shell Companies in Nigeria are investing in expanding offshore oil and gas production and developing infrastructure for domestic and export gas. These projects and assets will continue to bring employment and contract opportunities to Nigerians and their businesses.
Onshore Production
Shell Companies in Nigeria have a track record of strong production. In 2021, the combined production from the SPDC JV and SNEPCo (Bonga) was 493,000 barrels of oil equivalent per day from 614,000 in 2020.
The SPDC JV produced 383,000 barrels of oil equivalent in 2021, compared with 497,000 barrels of oil equivalent in 2020. The fall in output was largely a result of curtailed oil production because of heightened security issues, such as crude oil theft and illegal oil refining. Production numbers were also down as a result of divestment action, including the sale of SPDC’s 30% interest in OML 17 for $533 million.
In the last quarter of 2021, crude oil theft from pipelines across the region increased ostensibly as a result of rising oil prices, which made the activity more profitable.1 Security risks have heightened and production in some areas has been put on hold. The situation is impacting operators across the Niger Delta.
The Nigerian National Petroleum Corporation (NNPC) has reported that crude thefts in 2021 reached 200,000 barrels per day – a quarter of onshore production.
Developing gas Opportunities
Nigeria has around 200 trillion cubic feet of proven gas reserves and about 600 trillion cubic feet of unproven reserves.
However, a lack of adequate power grid infrastructure results in unreliable power supply from the electricity grid and power shortages in urban and rural areas. The development of energy infrastructure is a priority for the country. Nigeria has declared 2021-2030 the “Decade of Gas Development for Nigeria” and is determined to develop the gas sector to transform the country into an industrialised nation.
Gas has enormous potential to diversify and lift the Nigerian economy. Shell is investing in a gas portfolio that will increase supply for Nigeria’s growing industrial and commercial sectors, as well as to international customers via an expanding network of plants, pipelines and export terminals.
Shell has interests in two gas supply operations in Nigeria: NLNG and SNG. Both are supplied with gas by the SPDC JV and SNEPCo. However, Nigeria needs to create an enabling environment to continue to foster investments in the gas sector.
According to Ed Ubong, SNG Managing Director and President of the Nigeria Gas Association, an enabling environment rests on the development of infrastructure across the gas value chain and a predictable regulatory, commercial and legal framework. He also states that all stakeholders need to uphold contracts and that resolving the security challenges in the Niger Delta is critical if Nigeria is to benefit from the “decade of gas”.
Shell Energy Nigeria
Nigeria has a population of more than 200 million and this is expected to double by 20505, so there is enormous potential to expand businesses within the domestic gas market. In 2021, on the back of the successes of SNG, Shell launched the Shell Energy Nigeria (SEN) business line. SEN aims to grow Shell’s natural gas marketing and sales business in Nigeria.
In 2021, SNG supplied more than 400 megawatts (MW) equivalent of gas-generated power in Nigeria. SEN’s goal is to distribute 1 billion cubic feet of gas in the domestic market by 2030. SNG has a distribution network of 150 kilometres and is the only gas distribution company in Nigeria certified according to the ISO14001 international standard for an effective environmental management system.
In 2021, it provided gas to more than 130 commercial and industrial customers. In the same year, it also signed a 20-year agreement for the domestic distribution of gas to industrial customers and manufacturing plants in Lagos and Ogun States.
The new deal with the Nigerian Gas Marketing Company (NGMC) will also enable SNG to extend its distribution network to Badagry to serve a new market in the community that borders the Republic of Benin. By the end of 2021, SNG had agreements in place with 165 customers across six states: Ogun, Abia, Rivers, Bayelsa, Oyo and Lagos. The agreements will enable the supply of reliable, lower-carbon energy that drives industrialisation, provides employment for both the skilled and unskilled local population, as well as directly improving internally generated revenues in these states. Infrastructure is being built to supply gas to new customers where necessary.
Developing Local Content And Skills
Shell Companies in Nigeria contribute to the growth of Nigerian businesses that can provide technical and support services to the industry.
This includes the manufacture of tools and technical kits, the operation of helicopter flights in the Niger Delta, and strategic partnerships between foreign and local companies to stimulate technology transfer and capacity development.
While there are government-required programmes in some areas, such as the Nigerian and Community Content Strategy embedded in the Assa North/Ohaji South gas development project, Shell Companies in Nigeria deliberately seek to contract local businesses wherever possible.
In 2021, Shell Companies in Nigeria awarded $800 million worth of contracts to Nigerian-registered companies. Of these, 92% were companies with at least 51% Nigerian ownership.
SNEPCo has awarded major engineering and construction contracts to companies that are indigenous, have local staff, or possess domestic capabilities in the country.