Shell sets carbon reduction targets

• NPDC takes over operatorship of OML 11 from Shell

Royal Dutch Shell yesterday said it planned to reduce carbon emissions from its oil and gas operations and product sales by between two per cent and three percent by 2021. This is the first time the oil major is issuing carbon footprint targets.

Meanwhile, Nigeria, its major operating country in Africa, has relieved its local arm, Shell Petroleum Development Company (SPDC) of the operatorship of oil mining lease (OML 11) and transferred it over to the exploration and production arm of the Nigerian National Petroleum Corporation (NNPC), the Nigerian Petroleum Development Company (NPDC).

The oil block located in Ogoniland in Rivers State was operated by Shell but communities chased Shell away from the asset due to conflicts including lack of attention to the host communities and the killing of the nine Ogoni activists including Ken Saro-Wiwa. OML 11 lies in the southeastern Niger Delta and contains 33 oil and gas fields of which eight are producing as at 2017.

For over two decades Shell had not had access to the asset, hence the Federal Government revoked the operatorship held by Shell and transferred it to NPDC.

In a letter dated, March 1, 2019, with reference number: SH/COS/A/8540, signed by Chief of Staff to President Muhammadu Buhari, Mr. Abba Kyari, Buahri directed the NNPC and its upstream subsidiary, the Nigerian Petroleum Development Company to take over the operatorship of the entire asset.

The memo titled: “Operatorship of Entire Oil Mining Lease (OML) 11” signed by Abba Kyari and addressed to the Group Managing Director (GMD), NNPC, Dr. Maikanti Baru, the President directed “NNPC/NPDC to take over the operatorship from Shell Petroleum Development Company (SPDC) of the entire OML 11 not later than April 30th 2019 and ensure smooth re-entry given the delicate situation in Ogoniland.”

It also directed NNPC/NPDC to confirm by May 2, 2019 of the assumption of the operatorship. The federal government had last year denied SPDC renewal of OML 11 but decided to split it into three because the acreage is too large (2,800spkm).”

Shell has 45 per cent stake in OML 11 while the Federal Government through the NNPC has 55 per cent. Whether the Federal Government will strip Shell of its equity holding in the asset and transfer it to another company is yet to be determined

The targets, which will be linked to executive pay, aim to cut greenhouse gas emissions from its oil and gas extraction and refining as well for fuels and other products sold to millions of customers, known as Scope 3 emissions.

Rivals BP and Total have already set short-term targets on reducing carbon dioxide emissions, but those planned cuts are limited to their own operations and exclude Scope 3 emissions.

“Early 2019, it was decided to set a Net Carbon Footprint target for 2021 of 2-3 per cent lower than our 2016 Net Carbon Footprint of 79 grams of Co2 equivalent per megajoule,” Shell said in its 2018 annual report, released yesterday.

The targets will be linked to the remuneration of around 150 executives this year and expanded to 16,000 employees next year.

The Anglo-Dutch company last year announced an “ambition” to halve its carbon footprint by 2050 by increasing its output of lower-carbon products including natural gas, biofuels, electricity and hydrogen.

Its decision to set targets in 2019 comes a year earlier than it had previously indicated.

The oil and gas industry has come under growing shareholder pressure to tackle carbon emissions following the 2015 Paris climate agreement seeking to reduce emissions to net zero by the end of the century, mostly by lowering fossil fuel burning.

Mark van Baal, head of the shareholder activist group said the targets were not sufficient.

“Shell takes another step towards Paris. However, this will not get us to Paris,” van Baal said in a statement.