Shell oil in nigeria case study pdf

part one I N T E G R A T I N G C A S E 1

Shell Oil in Nigeria

Introduction Nigeria is a country that is slightly more than twice the size of California. In July of 2011, its population was estimated at just over 155 million people making it the 8th

most populated country in the world. It is Africa’s most populous country and is composed of more than 250 ethnic groups. The country has the second highest rate of HIV/AIDS deaths and is ranked number three with respect to total number of people living with HIV/AIDS in the country.

The country itself is full of rich natural resources such as natural gas, petroleum, tin, iron, coal, and limestone. Despite these rich resources, the country has been crippled by civil wars, military rule, religious tensions, and corruption. Even more devastating was the poor macroeconomic management that has left the country completely dependent upon its number one resource which is petroleum. Petroleum provides 95% of the foreign exchange earnings and close to 80% of its budgetary revenues. In 2010, Nigeria surpassed Iran to become the second largest oil producer behind Saudi Arabia. It shipped 2.464 million barrels of oil per day compared to Iran who shipped 2.248 million barrels per day.

The United States imports 17% of its petroleum from West Africa with Nigeria being the key supplier. That number is estimated to rise to over 25% in the year 2015. Despite the potential for oil to change the lives of this resource rich country, the majority of the Nigerians live on less than $1USD per day. The poor living condi- tions, low wages, and lack of quality of life improvement is attributed to the large amount of corruption by the citizens, politicians, and companies who exist within the country.

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A History of Corruption While petroleum drives the majority of the economy, it also drives the majority of the corruption. Nigeria has long been considered the most corrupt country in the world. Its citizens, government and corporations have been party to and involved in political corruption, bureaucratic corruption, electoral corruption, embezzle- ment, and bribery. In fact, it has been said the corruption is actually a viable enter- prise in the society with no way to trace these activities or prosecute those involved.

The companies operating in this region have long been blamed for allowing, par- ticipating, and even creating the corruption that has taken place. Not only have they failed to engage reformers but they have been accused of doing things like bribing officials, obscuring oil revenue figures, and failing to invest in the infrastructure and improvement of the people in the country. While the oil companies point to mil- lions of dollars of investment into the region, one look at the impoverished condi- tions common to the people of Nigeria and its difficult to say it was enough.

An estimated $200 billion in revenues is planned to go to African treasuries in the next 10 years as new oil fields are opened throughout this region. This oil will bring the largest influx of revenue in the continents history and more than 10 times the amount western donors give each year in aid. There is great concern about what countries like Nigeria will do with this money and the potential corruption that will take place.

Oil giant Royal Dutch Shell Group stands to benefit the most from these new oil fields as they are the largest producer of oil in the region. The company produces more than 1 million barrels of oil per day. With that said, there is much concern due to Shell’s storied past in this country.