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Mail on Sunday: Shell faces showdown in Nigeria

 

By Tom McGhie,

28 March 2004

 

THE Nigerian government is poised to launch an investigation into oil giant Shell's oil activities there.

 

Shell is already the subject of five investigations around the world after its admission that it had exaggerated its oil reserves. This has triggered the resignation of Shell's two most senior executives and more are expected to follow.

 

As Financial Mail has revealed, most of the problems are in Nigeria, a major source of profits for Shell.

 

Sources in Nigeria say that a secret investigation may already be under way. An announcement of a formal inquiry is expected soon.

 

Olusegun Obasanjo, the country's reformist president, may be tempted to wait for the results of an investigation by the Securities & Exchange Commission, the powerful US regulator, before moving in on Shell, industry sources said.

 

Financial Mail reported this month that a number of Shell managers in Nigeria might have been tempted by the prospect of huge bonuses to inflate the figures for oil reserves.

 

Proven oil and gas reserves are important assets and are closely watched by investors, who regard them as a key measure of an energy company's profit potential. They have been used to help judge Shell's performance in Nigeria where it has made huge profits for 30 years.

 

Nigeria is Africa's biggest exporter of crude oil with an Opec quota of just over two million barrels a day. The industry accounts for 95% of the country's foreign earnings.

 

But the Nigerian domestic petrol market is blighted by corruption and crippling shortages that cause widespread resentment.

 

Shell's involvement in Nigeria has caused unease for many years.

 

Environmental and human rights groups allege that the company has acted irresponsibly in the region, allowing oil spillages and pollution to wreck the environment of the Niger Delta and using the notoriously brutal Nigerian police to help quell dissent.

 

The Nigerian government should not have too much difficulty finding out what is going on at Shell - the president's adviser on oil, effectively the oil minister, is Edmund Daukoru, the former executive director of Shell in Nigeria who was with the company from 1970 to 1993.

 

In an interview, he described himself as 'a Shell man from the beginning'.

 

http://www.thisislondon.com/news/business/articles/timid76345


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