Stakeholder Networks in the Nigerian Oil Sector

Case study 2

PROGRAM: SSCM
COURSE: Sustainable business relationships
AUTHOR: Moustafa Dadamahmoud
JÖNKÖPING 30.08.2021
 Table of Contents

Question 1: ................................................................................................................................................3
Question 2: ................................................................................................................................................4
Question 3: ................................................................................................................................................5
References: ....................................................................................................................................................7
Question 1: Provide an analysis of SPDC’s network position by using the ARA
model. Try to map some of the principal stakeholders (i.e. actors) in the case
context in terms of the activities and resources that link them vertically and
horizontally.
Sol:

Activity, Resource, and Actors are the three main components of the ARA model. First of
all, we will look into the Activity component of the Shell Petroleum Development
Company of Nigeria Limited (SPDC). SDPC energy products are used by both
businesses and individuals in more than forty nations. In 1957, SPDC began oil drilling in
Nigeria. The partnership company's of SDPC account for more than forty percent of
Nigeria's total petroleum products. Offshore shale gas, as well as downstream petroleum
and petrochemical revenue, are covered by the firm's management.

As per the Energy Information Administration, Nigeria had 37.2 billion barrels of known
gas resources as of Jan 2010, with a production capacity of roughly 2.9 million barrels
per day. That places it as the globe's tenth-largest oil-producing country, with
approximately 30% of the region's known proven deposits. All of this is in the Niger
Delta, where SPDC is transferring its petroleum production outside with the Bonga
deepwater venture. SDPC owns around ninety oil wells, thousand operating wells, 72
flow stations, 10 gas facilities, and two main oil export ports in Nigeria, which cover
30,000 square kilometers. It has a 6,000-kilometer network of flow lines and pipelines.

Shell's operations in Nigeria are divided into 3 corporations, the most important of which
is the Shell Petroleum Development Company of Nigeria, or SPDC. It is a joint effort
between Shell (30%), Agip's NAOC (5%), Total's TEPGN (10%), and Nigeria's state oil
corporation, the Nigerian National Petroleum Company, which owns a 55 percent stake.
From Bayelsa to Ondo, the Niger Delta is made up of nine states. Each of these
provinces, in turn, is made up of several sub-districts. Although ever more petroleum is
currently being discovered in Nigeria's territorial seas, deep in the Atlantic, which no
nation can legally lay claim to, the corporation views the governments and its local
elements as a series of shareholders. Although the Niger Delta has been defined in a
variety of ways, including hydrological, biological, and political borders, the Niger Delta
Development Commission estimates that it covers 112,000 square kilometers. (Burger,
2011)

Looking for and extracting oil and gas is a high-risk endeavor. The advantages of
abundant fuel and power, as well as the jobs and revenue they bring, are enormous. They
also have expenses, which aren't often seen or felt right away, or even during a particular
timeframe. They are essentially primarily economic, but are more fully understood and
comprehended in terms of costs to environmental and human health and safety, as well as
their long-term viability.

Question 2: How should SPDC fairly prioritize its stakeholder relationships? That
is to say, on which actors, and with what resources and activities, should the
company focus most of its attention, and why?
Sol:

The NNPC (Nigeria National Petroleum Corporation), Shell, as well as Total and Agip,
are all oil firms. The primary objective of these corporate investors is to increase the
valuation of their equities. In the unlikely event that the SPDC does not produce the
intended results, any of the stakeholders may choose to leave the strategic alliance. This
is improbable, given their dedication to this capital- and innovation sector, where Shell,
for example, backs up its gasoline products with considerable R&D conducted by 150
scientists across Europe, the United States, and Singapore. The corporation owes it to its
owners to make a reasonable ROI in sectors like as mining, purification, and R&D. As a
result, large existing shareholders like Shell are essentially made up of small private and
corporate investors who may raise, sell, or keep their ownership stakes for a variety of
factors.
So SDPC should concentrate on these small investors and shareholders, who are most
likely to opt-out. SDPC should also focus on its research and development sector and
need to review the budget allocated to it.

Another key stakeholder of SDPC is its skilled workers. While unionized workers are
among the highest-paid in Nigeria, contract workers have been protesting about poor
wages and an unfavorable working environment. Managing partnerships with all of these
different stakeholders is an ongoing challenge for SPDC's management. (Adekola, 2013)

Shell's fifty year presence in Nigeria is a continuing process, prone to changing

governmental, financial, since the country has undergone several changes in
administration, transitioning from a military regime to the present democratic
representation. In some ways, it's a cultural and commercial exercise, as is every
corporate venture, from which much could be learnt. And it is one that impacts people all
across the world, not just those in the Niger Delta. It's a journey including Humans,
Environment, and Money.

Question 3: Are there any ethical issues regarding anti-competitive practices

amongst certain actors within the oil sector? Could this be seen as a ‘dark side’ of
network collaboration?
Sol:

SPDC collaborators Total and Agip and competitors like US giants Chevron and
ExxonMobil are the other prominent international oil firms operating in Nigeria. Shell's
competitors expect the organization to follow the market's fair competition guidelines as
it has the major (more than 40%) petroleum production in Nigeria. Since Nigeria has a
very rich resource in petroleum products, it is not possible or feasible that one company
will have a monopoly there. The petroleum production process is a cumbersome process,
which has numerous factors and stakeholders involved. Some of the processes involved
in oil production are site preparation, drilling, well making, testing, recycling,
environment restoration, etc.
The main oil-rich area is the Niger delta in Nigeria, which is a very big area and it is not
feasible that only one company operate in the whole region as it’s a costly affair. Hence
all other competitor works on their respective area and does not indulge for resource
sharing. These oil firms are mostly friendly to one another. Each one has its
establishment and market. Even in the low market environment, there isn't much
competition. Rather than participating in any fierce parallel rivalry, it appears that they
are splitting the business among themselves.

Some of Shell's host actors in the Niger Delta, who are always at odds with SPDC. As a
result, these angry populations have birthed several militant groups. They are currently
putting Shell to ransom by detaining and extorting payment from its overseas personnel,
as well as participating in destructive actions against Shell's installations, such as torching
pipelines. Even though Nigeria is rich in oil, natural gas, and other natural resources, it is
estimated that 70 percent or more of the population lives in poverty. So it is one of the
dark sides of network collaboration.
References:

Burger, A. (2011, July 29). Shell in nigeria: Oil, GAS, development & corporate social
responsibility. TriplePundit. https://www.triplepundit.com/story/2011/shell-nigeria-
oil-gas-development-corporate-social-responsibility/75266.

SPDC – the Shell Petroleum development company of Nigeria. Shell Nigeria. (n.d.).
https://www.shell.com.ng/about-us/what-we-do/spdc.html.

Adekola, G. (2013). Relationship between Shell Petroleum development COMPANY

(SPDC) and her HOST communities in the promotion of community development
in RIVERS State, Nigeria. International Education Research, 1(2), 21–33.
https://doi.org/10.12735/ier.v1i2p21