Shell Cuts Nigerian Jobs by 43 Percent
Declining Production Due to Unrest to Blame
By Obi Akwani, MGV Editor
On April 28, 2008, Shell Petroleum Development Company commenced a reorganization of its Nigerian operations.
The change is expected to reduce the Nigerian workforce of the Dutch oil multinational by 3500 personnel by
July this year. This is just over 43 percent of the oil giant's total workforce in Nigeria.
The retrenchments, which cut across all cadre of Shell's personnel, is expected to end by July 8 when the new
structure for Shell Nigeria is expected to be announced. Hardest hit, in the job cuts, are contract workers
-- those not directly employed by Shell but are on the payroll of subcontracting firms. They will lose 75
percent or 1500 of their number by the time the exercise comes to an end.
According to newspaper reports, executives at Shell blame the job cuts on drastic reductions in oil output in
Nigeria due to the disruptive effects of militant activities in the oil-producing Niger Delta region of the
country
Chidi Izuwah, a spokesman for the Shell Petroleum Production Company in Nigeria was quoted as saying that the
oil major is losing the equivalent of 30,000 barrels of crude oil or about $3.47 million in lost revenue per
day due to attacks against the company's installations.
Shell is one of Nigeria's largest oil operators and accounts for around half of the country's 2.1 million
barrels per day in output.
Plans for reorganization and massive staff reductions (large-scale severances and retirement of workers),
dubbed the ‘One Shell’ project, were put on the drawing board in early December 2007. At that time, the Shell
Group had announced a new management structure for its African operations that would result in the merger of
Shell Petroleum Development Company Limited (SPDC), Shell Exploration and Production Africa Limited (SEPA)
and Shell Nigeria Exploration and Production Company Limited (SNEPCo) into one streamlined operation under
the Shell Group.
“The One Shell project means that we will still meet all legal and other obligations to government and
partners as before, while achieving greater sharing of resources, reduction of costs and enhanced operational
efficiency,” the company said in a released statement.
The the first part of that reorganization process was announced on December 4, 2007. In it the current
Nigerian Managing Director for SPDC, Basil Omiyi, was elevated to country chair for all Shell operations in
Nigeria. Ann Pickard, the current executive vice president for Shell Exploration and Production in Africa,
retained her old position while being named to the same position specific for Nigeria. Mutiu Sunmonu moved up
from SPDC production director to double as managing director for SPDC and vice president production,
responsible for all African production. Chima Ibeneche, who was previously M.D. for SNEPCo, was moved
laterally and repositioned as managing director of Nigeria Liquefied Natural Gas Limited. Erik Slotboom was
named vice president human resources.
The appointments were to take effect from January 2008, but many of the sitting directors and other officials
of Shell Nigeria who had been omitted in the new structure agitated. More over, many of the stakeholders in
Nigeria, including the government and NNPC -- the national oil company that partners with the multinationals
in their Nigerian operations, objected to the new structure of Shell.
Abubakar Lawal Yar’Adua, the Group Managing Director (GMD) of the Nigerian National Petroleum Corporation,
while acknowledging that the restructuring may have been necessary, still expressed fears that it would
affect Joint Venture partners like the NNPC and accused Shell of going about it without consulting with the
partners and other stakeholders. Abubakar Yar'Ardua also told the House of Representatives Committee on
Petroleum Resources that the Federal Government was putting together a special financial aid package for
Shell, which was losing about $1.2 billion annually, and other affected oil companies faced with militant
unrest, vandalism and disruption of production in the Niger Delta. The financial package was being
offered in return for suspension of the retrenchment exercise which would affect about 3000 Nigerian workers
in Shell. Rotimi Amaechi, governor of the oil-producing Rivers State in the Niger Delta also urged Shell to
shelve retrenchment plans in the state and region where unemployment was a major contributor to crime and
militancy.
All the lobbying and negotiations were only partly successful. In February 2008, Shell agreed to
rescind or at least delay the
'One Shell' project which would have saved the company about $200 million annually. It agreed to Federal
Government (Nigerian) demands to keep SPDC and Shell Nigeria Exploration and Production Company as separate entities
with separate, identified management and boards. But the long-expected job cuts would go on. It commenced on
April 28 with the issuance of severance letters to some of the workers.
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