UNTIL the queries raised over its planned restructuring are satisfactorily answered, the Federal Government has directed Shell Petroleum Development Company of Nigeria (SPDC) to put the exercise on hold.
The order was given after a meeting of the Presidency and the Nigerian National Petroleum Corporation (NNPC) held with Shell in Abuja last week.
Although dialogue with government is still on-going, The Guardian learnt that the directive would remain in force until the government completes the on-going reform in the oil and gas sector. The government through the NNPC is the senior partner in the joint venture operations with Shell and other multinational oil firms.
When contacted yesterday on the government’s action, Shell spokesman, Precious Okolobo, said: “We’ve continued our discussions with government and in the meantime, we’ve decided to suspend further announcement on the process.”
But a senior government official stated that the “government has made it clear to Shell to suspend action on the exercise until the reform process in the oil and gas industry is concluded.”
It was learnt that the meeting also directed the heads of NNPC and Shell to resolve some of the key issues raised by the government in respect of the exercise and report back to the government immediately. The official said that Shell stressed the need for government to complete the exercise on schedule.
The government, he said, is not particularly happy with the proposed organogram where too many vice presidents are being appointed to indirectly lord themselves over Nigerians in the name of regional office in the country.
He said that the government did not accept Shell’s explanation on the new structure, which merged SPDC operations with other sister companies in the group. The government was said to have insisted that the Joint Operating Agreement it signed with Shell did not include the Production Sharing Contract (PSC).
“Though Shell maintained that the exercise was a cost-cutting measure but the truth is that each of Shell companies in Nigeria signed separate working agreement with the government through the NNPC,” he said.
The government had directed the NNPC to demand justification for the exercise, which will throw many Nigerians into the labour market and negate its local content policy.
Acting on the government’s directive, the NNPC last month asked its upstream supervisory body, the National Petroleum Investment Management Services (NAPIMS), to call a meeting to seek explanation on the grey areas in the restructuring from Shell.
The government deplored the move, which it said had become too frequent with the Shell group in Nigeria.
Last month, The Guardian reported that among the issues to be tackled at the meeting include that Shell must submit all the names of the expatriate workers that are to be affected in the exercise and their Nigerian counterparts.
The government also queried the rationale for bringing expatriates to occupy positions Nigerians had held for years. It insisted that Shell must give justification for the action, considering that Nigerians in the firm are eminently qualified for the affected offices.
The government also asked Shell to explain the concept of “common services” in the proposed re-organisation as the company’s Joint Venture Operation (JV) and PSC, which fall under different fiscal regime or contracts with the government.
It also demanded how the severance package, yet to be approved by all the partners in the joint operation, would be funded, particularly whether it was part of the JV budget for 2008.
The official added that there were so many other issues that the company did not resolve with the government before embarking on the action, stressing that as an outfit operating a joint venture business, Shell must get approval from NNPC or NAPIMS before executing any project.
Okolobo had in an e-mail to The Guardian said all categories of employees (Nigerians and expatriates) would be affected in the exercise.
According to him, “Shell is committed to following all the legal requirements and contractual agreements associated with any disengagement of workers and we will honour such obligations. “Beyond this, we are unable to provide details of individual agreements, as these are covered by confidentiality obligations”, he stated.
Okolobo said that SPDC’s JV partners had been informed of the development, noting that Shell had also indicated interest to operate as a single entity in Nigeria.
In the background information on the mail, Okolobo said that the re-structuring was to enhance efficiency and accountability as well as reduce costs by taking advantage of synergies and eliminating duplication by reorganising the core business functions and the provision of support services between the three companies – SPDC, Shell Exploration and Production Africa (SEPA) and Shell Nigeria Exploration and Production Company (SNEPCo) into an organisation under a project called ‘One Shell’.
In the last three years, Shell has been losing about 650,000 barrels of crude daily due to the facility shut-in caused by militant activities in the Niger Delta region.