Shell Tries to Repair Reputation With Nigeria

``They're just putting more fuel on the fire,'' said Carol
Welch, an analyst at the environmental group Friends of the Earth.
Even the World Bank unit that's helping finance the fund
acknowledged in an internal report obtained by Bloomberg News that
it faces a risk to its own reputation in associating with Shell,
which pumps almost half Nigeria's daily oil output of 2 million
barrels.
Shell is facing a lawsuit in the U.S. by the relatives of
playwright Ken Saro-Wiwa, who was hung by Nigeria's then-military
government in 1995 for protesting Shell's work in the delta. The
suit accuses Shell of recruiting police to attack villages to
suppress opposition to its work, a charge Shell denies.
Shell also abandoned an oil well in one area, Ogoni land,
eight years ago after local people demanded a greater share of oil
wealth. Early this month the abandoned well sprang a leak, and
Shell had to dispatch firefighters to the scene.

Good for Nigeria

The World Bank says that long-term lending to oil service
companies will help them tap into $1.5 billion a year contracts
from Shell and develop the delta, one of Nigeria's poorest and
most violent regions.
The project aims to alleviate ``unemployment and poverty in a
difficult area, and increases the benefits of oil production to
the economy,'' said Shawn Miller, a spokesman for the bank's
private sector arm, the International Finance Corp.
The fund, which the bank's executive board is likely to
approve next week, is set to be financed equally by the IFC, Shell
and an unnamed local bank. It will be administered by the local
bank to companies that contract with Shell.
In the IFC's internal report, the World Bank unit said it
faces risks in associating with Shell because of the company's
reputation in Nigeria, Africa's largest oil producer.
``Due to the public perception and opinion of oil companies,
IFC's involvement in the Niger Delta region and the association
with Shell could pose a reputation risk to IFC,'' the report said.

Shell's Image

``The proposed project is one facet of Shell's efforts to
improve its image and approach community issues in the Delta,''
the report said.
Many groups have criticized the company for its more than 60
years of work in Nigeria and perceived close association with
corrupt, military regimes of the past.
Despite the emergence of a democratic government in Nigeria
two years ago, the situation in the region continues to
deteriorate, according to the U.S. State Department most recent
human rights report.
Last year, 250 foreign oil workers in the Niger Delta were
the targets of kidnapping by local youths, who have demanded only
oil industry jobs as ransom, the report said.
``Confrontations between increasingly militant `youths' (who
tend to be unemployed males between the ages of 16 and 40), oil
companies, and government authorities continued, the U.S. said.
Oil spills dumped more than 2.5 million barrels of oil -- the
equivalent of 10 Exxon Valdez spills -- in the Niger Delta in the
two decades to 1996, according to a CIA report.
Shell's ``record is pretty atrocious,'' said Daphne Wysham, a
critic of the World Bank's oil projects from the Institute of
Policy Studies, a research group. Wysham said she visited the
Niger Delta in recent years to study local conditions.

Corporate Welfare

``The people who are most impoverished are those that live
right on top of the oil,'' she said.
Other critics questioned why Shell should need money from the
World Bank in the first place.
``If one of the richest companies in the world can't get
funding from the private sector, then that's a pretty good
indication that this is not a sound investment,'' said Ian
Vasquez, who wrote a book for the Cato Institute, a research
group, saying the World Bank perpetuates poverty.
``What this amounts to is a gross form of corporate
welfare,'' he said.
Shell said its work in Nigeria has benefited the country, and
has always tried to make sure the benefits reach more of those in
the Niger Delta.
``We have worked hard to deliver helpful and beneficial
projects across the Niger Delta,'' said Shell spokesman James
Herbert.

`Misinformed' Critics

Critics of Shell are ``misinformed,'' Herbert said. Even
during the rule of General Sani Abacha, Shell pushed the
government to distribute more of its oil revenue in the delta, he
added.
The World Bank also said it's trying to benefit Nigerians.
The two-year-old democratic government of President Olusegun
Obasanjo has promised to provide more oil revenue to local
communities to help them benefit from the oil wealth.
And Shell Petroleum Development Co., its Nigeria-based arm,
spends $20 million a year on health, education, roads and water in
the Niger Delta, according to the company's Web site.
Helping build up local industry is one way to make sure the
benefits of oil make it to the local people, the bank says.
Shell ``currently awards annually about $400 million worth of
contracts to approximately 2,800 local contractors to produce
various services for its oil and gas operations in Nigeria,''
according to the internal report. Yet ``local contractors lack
access to capital, thereby limiting their ability to grow.''
Credit for Nigerian companies often comes at interest rates
of more than 30 percent, according to the World Bank.
``Despite being the source of the bulk of Nigeria's oil and
gas production, the Niger Delta remains impoverished and
underdeveloped,'' the bank wrote. ``Ultimately, the facility would
help establish a strong base of local service companies, which
would produce all around benefits.''
Yet those on the outside say this project is unlikely to
address that need.
``Providing funding for local businesses is important, but
the IFC seems to ignore the larger context of the devastation in
the region,'' Welch said.

--Mark Drajem in Washington (202) 624-1964 or
[email protected] /mm

Story illustration: To compare Shell Transport's recent share
performance with stock indexes: {SHEL LN COMP }.

NI NIGERIA

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Neil Watkins
World Bank Bonds Boycott campaign
Center for Economic Justice
1830 Connecticut Avenue, NW, 4th floor
Washington, DC 20009
Tel: (202) 299-0020 Fax: (202) 299-0021
Web: www.worldbankboycott.org