This article first appeared as an introduction to a report, Risking Ruin: Shell’s dangerous developments in the Tar Sands, Arctic and Nigeria, published on 18 May 2012 by Indigenous Environmental Network and Athabasca Chipewyan First Nation.
As economic austerity bites, major oil companies are making staggering profits. A high oil price in 2011 made Shell $30.92 billion in annual net profits, equivalent to $2 million per hour.1 Chevron came close behind and despite numerous setbacks, BP made a cool $25.7 billion. Most of these profits come from finding and extracting oil and gas. Yet the core activities of these companies are unsustainable. As profits soar, communities, the environment and the climate are paying an unreasonably high price.
This report raises key questions about Shell’s planned expansion in the Canadian tar sands and the Alaskan Arctic. What are the costs to society and environment? Who bears the risks? Could the political and legal climate ultimately render these 'frontier oil' projects uneconomical?
These risks form part of a much wider picture of Shell’s low health and safety standards, inadequate environmental management and underinvestment in maintenance of infrastructure. All this contributes to a long history of global environmental devastation.
Nigeria, where Shell has operated for over 50 years, is a prime example. Oil spills have become an almost daily occurrence in the oil region of the Niger Delta. A 2011 UN report confirmed the horrifying extent of pollution in the minority Ogoni region of the Delta and estimated it could take 25 to 30 years to clean up. The UN condemned Shell for falling below its own operating standards and under-reporting pollution.2 A London lawsuit brought by 11,000 Nigerians from Bodo town, where a Shell pipeline caused two major spills in 2008-9, could raise substantial liabilities and reputational issues, particularly if the claim is widened to include thousands more in neighboring communities.
Shell’s failure to mitigate its impacts is well illustrated in the village of Ejama-Ebubu, where a Shell pipeline became damaged in 1970, causing a major spill. Oil washed into the surrounding creeks and rivers and destroyed 85,000 square meters of farmland. The soil was caked in crude oil and caught fire, leaving a thick crust of burnt tar. Over 42 years later, after multiple spills and clean-up attempts, the land remains destroyed. The contamination has outlasted generations, as average life expectancy in the Niger Delta region is only around 43 years.3
Shell is deeply invested in the world’s dirtiest and riskiest fuels. Both tar sands and Nigerian oil have lifecycle carbon emissions substantially higher than other fossil fuels.4 In 2012 Shell is planning to invest further billions in Nigeria, and the Canadian tar sands.5 Furthermore, in summer 2012, Shell is planning to start deepwater drilling in the fragile Arctic, off the coast of Alaska, yet the company has no proven method of cleaning up oil spills in Arctic conditions, and drilling threatens the traditional livelihoods of the Inupiat people. Like BP, Shell has recently ditched its investments in solar, wind and hydro energy to pursue controversial investments in biofuels.6
In terms of its social responsibility, Shell’s global operations have been linked to conflict and widespread human rights abuses. In Syria, Shell supported President Assad’s regime with over $55 million during government crackdowns in the summer of 2011.7 Shell continued drilling and exporting Syrian crude oil throughout the first year of the popular uprising. It was only after a swell of global outrage and Western oil sanctions that Shell was forced to withdraw from Syria on 2 December 2011.
In Nigeria, Shell has been charged with complicity in human rights abuses for over two decades. Shell provided transportation and payments to government forces who committed crimes against humanity in the Ogoni region, the subject of a case before the US Supreme Court this year. Between 2000 to 2010, Shell continued to fund government crackdowns in the Niger Delta. The company made routine payments to armed militant groups, exacerbating conflicts that in one case led to the complete destruction of Rumuekpe town where at least 60 people were reported killed.
There is growing international recognition by investors and fund managers that the impacts of oil extraction outweigh the benefits. In 2010 the Dow Jones Sustainability Index excluded Shell following concerns about the company’s global operations and pollution in Nigeria.8 The Norway Government Pension Fund is currently investigating Shell’s record of oil spills in Nigeria and may divest its substantial share holding. Most recently, German bank WestLB announced it would not invest in any company drilling in the Arctic because the “risks and costs are simply too high”.9
Shell’s impacts expose the company to both reputational damage and political risk, including litigation from First Nations communities in Canada who have filed lawsuits concerning Shell’s violations of their constitutional rights. Shell faces thousands of claims related to oil spills in Nigeria and this trend is likely to continue.
Legal challenges may or may not be able to impede Shell’s investment decisions. In many cases, Shell acts like it is above the law. Since 2005, Shell has refused to comply with a Federal High Court order10 to end gas flaring in the Iwherekan community in Nigeria and is avoiding payment of $1.5 billion in compensation to the Delta’s Ijaw ethnic group for decades of pollution.11 Flexing its legal muscles, Shell recently obtained an injunction pre-emptively banning Greenpeace USA from coming within 500 meters of it Arctic drilling vessels.12
Shell may be able to delay proceedings and evade penalties, but this will not prevent the company from accumulating embedded risks and liabilities. As the Ogoni writer and activist Ken Saro-Wiwa told the tribunal that sentenced him to death in 1995, sooner or later, Shell would have to answer for “the ecological war the company has waged”.
The US administration's rejection of the Keystone XL tar sands pipeline has shown that social and political opposition to the tar sands has the potential to influence major investment decisions. Alert to this vulnerability, the oil industry is trying to restore its public image through greenwashing advertisements, cultural sponsorship, political donations, and attempts to re-brand tar sands as “ethical oil”.
Yet no amount of re-branding can change the fact that Canada’s tar sands are dirty, dangerous and extracted by multinationals with a track record of pollution and human rights abuses across the globe. And no amount of arts sponsorship can hide the mess created in Nigeria, nor the lack of a viable plan to clean up a spill in the vulnerable Arctic.
It is time for Shell to end its risky activities around the world. This report makes the following recommendations:
Make the right to free, prior and informed consent (FPIC) of Indigenous peoples a condition of all new project decisions.
Cancel plans to drill in the Arctic Ocean as a large spill would do untold damage to the local ecosystem and communities dependent on a subsistence lifestyle.
Replace its aged pipelines and facilities in Nigeria, clean up existing pollution, adequately compensate local residents and halt the harmful practice of gas flaring.
Address the grievances of Indigenous communities in relation to existing tar sands developments before moving forward with applications for the expansion or development of new projects in the region.
Identify and address the human health and accumulative impacts of its projects on local communities, drawing on independent expertise, guidance and best practice
1 Shell profits up 54% to £2m an hour, Guardian.co.uk, February 2012. http://www.guardian.co.uk/business/2012/feb/02/shell-profits-up-54-percent-oil
2 Environmental Assessment of Ogoniland, p 11 and 135, UNEP 2011. http://postconflict.unep.ch/publications/OEA/UNEP_OEA.pdf
3 The UN estimates that life expectancy in the Delta is between 43 to 46.8 years: Niger Delta Human Development Report, p 24 UNDP 2006. http://hdr.undp.org/en/reports/nationalreports/africa/nigeria/nigeria_hdr_report.pdf
4 Big Dirty Secret, Friends of the Earth Europe, June 2009. http://www.foeeurope.org/corporates/Extractives/shellbigdirtysecret_June09.pdf
6 Shell's subtle switch from renewables to the murky world of 'alternative' energy, George Monbiot, March 2009. http://www.guardian.co.uk/environment/georgemonbiot/2009/mar/18/shell-renewable-energy-biofuels1
7 Shell supports Syrian regime with $55 million during crackdown; one out of six Syrian tanks runs on Shell oil, Mika Minio-Paluello, May 2011. http://blog.platformlondon.org/2011/05/29/shell-supports-syrian-regime-with-55-million-during-crackdown-one-out-of-six-syrian-tanks-runs-on-shell-oil/
8 Shell to scrap bonus link to sustainability index, Reuters, March 2011, http://af.reuters.com/article/energyOilNews/idAFLDE7261PQ20110307
9 WestLB is the First Bank to Refuse Finance to Offshore Oil Rigs in the Arctic, Mark Nicholls, April 2012. http://oilprice.com/Energy/Energy-General/WestLB-is-the-First-Bank-to-Refuse-Finance-to-Offshore-Oil-Rigs-in-the-Arctic.html
11 Shell told to pay Nigeria's Ijaw, BBC News, February 2006. http://news.bbc.co.uk/1/hi/world/africa/4746874.stm
12 Shell gets legal ban on Arctic protest, Greenpeace UK, March 2012. http://www.greenpeace.org.uk/blog/climate/shell-granted-legal-injunction-against-greenpeace-20120330