Royal Dutch Shell Plc is on the verge of leaving Nigeria completely after half a century of pumping oil out of Nigerian swamps. The oil company acknowledged that its spill-prone operations in the West African country aren’t compatible with plans to go green, Bloomberg Reported.
The outbreak of COVID-19 which plummeted global oil revenue and sent oil companies reeling from the impact, spurred Shell and others in the industry to hasten their plan of shifting to green energy.
According to Bloomberg, the Anglo-Dutch company has been gradually selling onshore assets in Nigeria for more than a decade, as it sought to put aside chronic problems such as pollution caused by ruptured pipelines and the resulting legal battles with local communities.
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Since 2020, Shell has been pushing harder for transition into green energy as environmental concerns gather momentum, forcing companies caught in the web of carbon emission to take more responsibility for their actions. Shell, in line with the 2050 net-zero carbon emission goal, pledged to transform itself into a clean energy giant and gradually wind down its oil and gas business.
“The balance of risks and rewards associated with our onshore portfolio is no longer compatible with our strategic ambitions,” Chief Executive Officer Ben van Beurden told investors at Shell’s annual general meeting on Tuesday. “We cannot solve community problems in the Niger Delta“ and the company has started discussions with the government on how to move forward, he said.
With heightening environmental challenges that have been compounded by COVID-19-induced oil decline, Shell’s oil business days in Nigeria appear to be numbered.
The report said Van Beurden didn’t say explicitly that Shell wants to sell the remainder of its oil assets in the Niger Delta, nor did he provide a timetable. Yet a full retreat would be an obvious end point to years of gradual divestment. Shell has reduced its total number of onshore licenses in Nigeria by half over the past decade.
The company has been exploring ways to reduce spending on oil and gas production by 30% to 40% for its upstream sector, its largest division. For the downstream sector, the company plans to cut 45,000 service stations, the biggest in the world, from its network. Part of the plan was to limit its oil production to a few key places that include Nigeria, Gulf of Mexico and the North Sea.
With the latest move, Shell Nigeria operations appear to be among the first casualties of its divestment plan.
COVID-19 plummeted oil-based economies, spurring a cleaner energy revolution among oil firms. Shell, BP, Eni, Saudi Aramco etc. are all working to transit from fossil fuel to cleaner energy.
BP and Eni are following the steps of Shell, cutting jobs and shutting down operations to build new low-carbon businesses in the next decade in preparation for the era of cleaner energy.
In February, Shell reached an agreement with Amazon to provide renewable power from a subsidy-free offshore wind farm being constructed off the coast of The Netherlands, marking a major step in its quest to go green.
With these major oil companies pointing to the exit door, oil-based economies, including Saudi Arabia, have been increasing their push to diversify from the crude oil economy. However, among them, Nigeria is still mainly dependent on oil, and is showing no sign that it understands what the 2050 net-zero goal will mean for oil-based economies.