Royal Dutch Shell in Nigeria: Operating in a Fragile State

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Abstract

Royal Dutch Shell is one of the largest multinational corporations operating in the oil and gas industry of Nigeria. Shell focuses on developing the socially responsible operations in the country. However, the Niger Delta region is the zone of conflicts where the political, economic, and social situation is unstable. The absence of the government’s protection, corruption, and the public’s oppression cause significant challenges for Shell’s operations.

Royal Dutch Shell p.l.c. is the largest multinational company in the world which operates in the oil and gas industry. The company was founded in 2005 as a result of the merger of the Royal Dutch Petroleum Company and Shell Transport and Trading Company (Shell at a glance, 2014). Today, the company is headquartered in the Netherlands (Royal Dutch Shell, 2014). Shell is presented globally, and it also operates in Nigeria over 60 years.

The Challenges Facing the Companies’ Merger and Recommendations

The merger of the UK-based Shell Transport and Trading Company and the Royal Dutch Petroleum Company was initiated in 2005. The new Anglo-Dutch group faced many challenges as a result of the merger, and these challenges can be divided into internal and external ones.

Thus, the main challenging effect which influenced the corporate structure of the company was the focus on the single-board structure. The changes were rather challenging because of the necessity to replace the dual-board structure typical for Shell Transport and Trading Company (Cullen, 2011, p. 149).

Moreover, the new group was also influenced by the unstable situation in the Nigerian society. The Niger Delta is the zone of the constant conflicts which are challenging for the business development because the government cannot provide the necessary protection for the public and enterprises (Cullen, 2011, p. 150). Furthermore, the operations made by the multinational company were not supported by the public because of its focus on the environmental damage and contributions to the social instability.

While providing recommendations on overcoming the challenges, it is necessary to concentrate mostly on the external factors as the influential ones. The unstable situation in society, military conflicts, and violence are the basic problems to challenge the work of Shell enterprises.

That is why, it is necessary to focus on the promotion of the human rights in the society and on the support of the company’s employees as the representatives of the Nigerian diverse society. The next step is the response to the public criticism in relation to the company’s inability to overcome the negative environmental effects and people’s poverty. It is important to pay the public’s attention to the company’s efforts and achievements in the field of realizing the sustainable and socially responsible business.

What Has Made Shell’s Operations in Nigeria More at Risk and More Valuable

Shell’s operation in Nigeria can be discussed as valuable in spite of all the experienced challenges because the Nigerian oil and gas resources are estimated as the largest ones in Africa, and Shell is operating over 50% of these resources during more than 60 years (Cullen, 2011, p. 152).

However, the fact that Shell has the largest investment in the region makes the corporation vulnerable in relation to the risks associated with the Nigerian government and public. Shell is under the constant pressure of the government and society because these parties expect to receive some benefits as a result of the company’s operations.

Being focused on increasing profitability and gaining significant revenues, Shell should also provide the government and public with the details of the company’s operations. Nevertheless, in spite of the fact that the company promotes the idea of the sustainable development and social responsibility, the public image of the company is still negative.

Providing the employment for the Nigerian population, Shell not only benefits from affecting the country’s economy and influencing the public image but also loses many resources because of the necessity to cope with the weak policies and government’s ineffective decisions as well as with developed social unions (Cullen, 2011, p. 155). However, having the significant opportunities for increasing the profits, Shell chooses to continue operations within the Nigerian environments in spite of many barriers.

The Implications of the Nigerian Economic System and Political Risks for Shell

The Nigerian economic system is closely connected with the activities of the Nigerian government and society. The unstable economic system is directly influenced by changes in the politics. The development of economy in the zone of conflicts depends on the decisions of community, political, union, and tribe leaders.

Shell as the multinational corporation operating in the region experienced all the problems associated with the unstable economic and political environment. The most important issue is the rise of the domestic fuel prices which is traditionally associated with the oil and gas companies’ activities, and it also provokes the development of the labor unions’ strikes.

The most important political risks are the results of the connected actions performed by the community, political, union, and tribe leaders. These politically and socially active groups contribute to complicating Shell’s activities in the region. The weak legal system and the issue of corruption limit the company’s progress and creation of the positive image.

The political situation in Nigeria is unstable, the years of military dictatorship and undeveloped democratic strategies affect the politics and society negatively. Shell has to face the risks of corruption and the absence of the government’s protection (Cullen, 2011, p. 158). Constant changes in the political situation of Nigeria cannot contribute to the stable development of Shell in the region.

How the Role of Government Can Influence Shell’s Nigerian Investments, Operations, and Future Stake in the Oil Industry

The Nigerian government does not provide the necessary conditions for the effective operations of Shell in the region because the government’s support and protection for multinational corporations is absent, and the issue of corruption cannot be resolved with references to the effective legal policies.

Shell invests in the development of the Nigerian enterprises significantly because of the expected profits. However, the role of the government to stimulate this process is minimal because of the difficulties associated with the operations in the zone of conflicts.

The Nigerian government influences Shell’s operations negatively that is why the corporation cannot observe the necessary support and cannot contribute adequately to the Nigerian economy and social development. As a result, the future of Shell in the oil industry of Nigeria depends significantly on the further government’s strategies to cope with corruption in the country’s economy and with violence in society.

It is important for the Nigerian government to pay more attention to the development of the private sector in the country’s economy and to the progress of the civil society, free from military dictatorship. The fact that Shell chose to participate in the Bonga Deepwater Project supports the idea that the corporation is inclined to continue its operations in Nigeria because of significant profits, but it is almost impossible to speak about the positive impact of the Nigerian government on the situation (Cullen, 2011, p. 161).

Benjamin Aaron’s Underlying Assumptions, Observations, and Recommendations

Focusing on Shell’s operations in Nigeria, Benjamin Aaron can notice that the main problems associated with the development of the sustainable strategy and promotion of the social responsibility ideals in the country are caused by the ineffective government’s approaches to overcome the political, economic, and social instability in Nigeria.

The tasks of Shell are not only to contribute to gaining more profits to satisfy the company’s shareholders but also to improve the economic and social situation in Nigeria as a result of the significant investment (Cullen, 2011, p. 158).

To develop the effective recommendations to affect the future company’s operations in the region, it is necessary to pay attention to the experienced risks, threats, and challenges. Although the company is concentrated on contributing to the public’s welfare, Shell is still discussed as the ‘villain’ by the Nigerian public because of the company’s role in the political and economic spheres of the country.

That is why, in his recommendations, Aaron can focus on overcoming the observed challenges and improving the effective strategies. Thus, it is necessary to recommend the improvement of the company’s image while reporting on the company’s achievements in the economic and social spheres and to draw the public’s attention to the fact that Shell operates according to the principles of sustainability and social responsibility to meet the interests of stakeholders (Cullen, 2011, p. 155).

The next important recommendation should include the focus on developing the long-term goals and strategies. For instance, Shell’s participation in the Bonga Deepwater Project demonstrates the company’s interest in the development of the Nigerian society and environments. Thus, the active involvement of Shell in such social activities should be promoted in the country.

References

Cullen, J. (2011). Multinational management: A strategic approach. Mason, OH: Cengage Learning.

Royal Dutch Shell. (2014). Web.

Shell at a glance. (2014). Web.

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