Australasian Oil and Gas Exhibition and Conference, Perth
Feb 20, 2013
Speech by Country Chair, Shell in Australia, Ann Pickard at the Australasian Oil and Gas Exhibition and Conference, Perth, Western Australia on February 20, 2013.
There’s a new definition of success in the oil and gas industry today. It’s no longer just about finding technical solutions to engineering problems - success is about earning community acceptance, and that is the most challenging aspect. We have to move beyond the technical and look at how we manage social impacts, embed these strategies into everyday operations and bring our staff along on the journey.
Good afternoon everyone. I’d like to begin by acknowledging the traditional owners and custodians of the land on which we are meeting today. I would also like to pay my respects to the Elders past and present.
I hope you are enjoying the first day of the conference. Today I’m going to talk to you about Shell’s approach to Indigenous and community engagement. I will focus on examples from Nigeria and Australia, where I have just had experience.
Shell has a long history of working in countries with Indigenous populations. Oil and gas companies co-existing with people who often live off the land - it’s a sensitive area.
I’ll admit upfront that our track record isn’t perfect. It’s a journey, one which never ends and which can always be improved. But, I do think it’s fair to say that in many countries around the world, we are making a real difference in areas like economic development, social investment, local sourcing, and of course, jobs. We also go beyond that into areas you might not expect, like health and education.
Our approach is all about sharing benefits with the communities we work in. At the heart of this is Shell’s Statement of General Business Principles which we introduced back in 1976. This is now part of Shell’s DNA. These principles set out the core values that underpin our work: honesty, integrity and respect for people. And they also commit us to contribute to sustainable development. It all makes sense because we are resident too, where we work and produce oil and gas.
We’re also guided by our Local Content Framework, which is a proactive approach on our part. We work with host governments and local companies to build local content into the contract and procurement process and embed local content in the supply chain.
The Nigerian example
I’ll focus now on the Nigerian example. Despite what you might have heard or read about Shell in Nigeria, I think we are getting runs on the board and we are recognized as the local content industry leader.
Nigeria is a complex, exciting and fascinating place to work. I spent 5 years there and I look back on those years as a career highlight.
Let me give you some fast facts about Nigeria for those who aren’t familiar with its oil landscape. Nigeria is the most populous country in West Africa. Nigeria used to be a breadbasket to a lot of Africa. Unfortunately, when oil was discovered in commercial quantities in the 1950s, it supplanted agriculture and became the country’s largest industry, and the main generator of gross domestic product. Still, many people work in subsistence farming and fishing, and there is a strong connection to the land.
The Niger Delta is a challenging place to operate for many reasons. For decades onshore oil revenue did not trickle down to the oil states, even though government taxes on the oil exceeded 90%. Although this has started to change, many areas lack basic infrastructure. Poverty and a lack of jobs contribute to criminal behaviour. Oil theft is a big issue, one that costs Nigeria and the oil companies operating there about a billion dollars worth of oil each month. A lot of the theft is caused by local gangs who are trying to force the federal government to give a bigger share of the revenues earned from oil to the region where it is produced, and to see those revenues put to work in the communities where they live. Too often, oil companies are seen as a substitute for government, which is not the right answer either, but it is important for us to give back to the communities where we operate in a range of ways, and I’ll take you through these today.
Some history for you. Shell companies are Nigeria’s oldest energy companies. We’ve had an upstream presence in Nigeria since the 1950s. We have both oil and gas interests in the region, including a significant joint venture partnership in the Shell Petroleum Development Company (SPDC) with the government-owned Nigeria National Petroleum Corporation, along with Total and Agip. SPDC has the largest acreage in the country, from which it produces nearly 40% of the nation's oil.
In SPDC, over 95% of our 3,500 or so staff are Nigerian, including our Managing Director and most of our Vice Presidents.
Shell’s impact on the Nigerian community can be measured in many ways, one of which is economic. From 2007-2011, $38 billion of revenues went to the Nigerian government from SPDC. Using local businesses and local people is also a deliberate business strategy in all parts of our value chain - from design and engineering, to exploration and drilling, to welding and logistics services.
We know it’s not always easy for local vendors and it’s important that we give them a head start. In 2007, the SPDC started the Community Content Initiative - this means contracts which match the services offered by local vendors, are set aside for them. This capacity building helps them develop their technical and entrepreneurial skills, as well as their capacity in areas like safety and quality.
In 2012, Shell companies in Nigeria awarded $2.4 billion dollars in contracts to Nigerian companies. And we spend around $200 million each year in contracts directly with service providers from the communities where we operate.
We also help small to medium sized enterprises through a partnership between the Shell Foundation and GroFin, which is a specialist business developer and financier. SMEs can traditionally find it hard to access loans, so we help them with business development assistance and finance.
We’ve learnt lessons about what does and doesn’t work. We’ve had some good success with our Global Memorandum of Understanding concept, which we sourced from Chevron in 2004 and have since built on. The MoUs commit reliable funding to communities, along with advice about how to set priorities and spend the money. By the end of 2011, agreements had been signed with 27 clusters, covering 290 communities or about 30% of the local communities around our business operations in the delta. $79 million has been given in funding to date.
Money is an obvious way to contribute to a developing nation, but not the only way. We don’t try to take over the role of government in providing social infrastructure, but you don’t have to be an expert to know that improving living standards for Nigerians is critical to making their lives better.
Health care is one of Nigeria’s biggest challenges. We’ve been supporting health care delivery in Nigeria since the 80s. We work with state governments to support 27 health facilities in the Niger Delta.
For those that can’t get to hospitals, the “Health-in-Motion” programme takes free healthcare services to the doorsteps of people in remote communities of the Niger Delta, a bit like the Royal Flying Doctor service here in Australia. Health-in-Motion reached 144,000 people in 2011.
We also took the lead on a HIV/AIDS response and started up the Niger Delta AIDS Response (NiDAR) project which was Nigeria’s first comprehensive programme at the primary health care level. This programme was highly successful and was handed over to the Nigerian government in 2009. It has since been extended to include malaria control and child survival services.
It doesn’t matter whether you are Nigerian, Australian or American, education is one of the best ways to set young people up for success in life. Education is one of the key pillars of Shell’s social investment programme in Nigeria, as it is here in Australia.
We run a whole range of activities that address access to education including scholarship programs, graduate awareness programs, internships and digital learning schemes.
In 2011, we awarded more than 2,500 scholarship grants to secondary school students and 750 university undergraduates.
In terms of training, there are lots of success stories, but one I like was our scaffolding program for scaffolders working on the Gbaran-Ubie integrated oil and gas project – they were able to attain Construction Industry Training Board UK (CITB) certification, levels 1 and 2, and now compete easily for jobs elsewhere in Nigeria.
It’s also important for us to empower women in Nigeria. One good example is a micro credit scheme that was launched in 2009 for the Ijaw Mothers Union. Many of these women had lost sons who died tragically in oil stealing accidents. About 100 women received a loan to help them expand existing businesses or set up new ones. They were looking to help start up businesses to keep their sons away from dangerous illegal activities.
Obviously, reducing unemployment among young people is a top priority. They are Nigeria’s greatest hope for the future.
Our Livewire programme has trained more than 3,000 Niger Delta youth in enterprise development and management. Of these, 708 trainees were given further help to set up their own businesses through business start-up awards. These young entrepreneurs have also created jobs for other youth, starting a cycle of job creation and employment that’s independent of Shell.
Of course, I couldn’t do a speech about Indigenous and community engagement without touching on what we are doing locally. I won’t pretend that we’ve made a huge difference in Indigenous participation here in Australia – it’s too early for that – but we are committed to turning our good intentions into action.
You may be familiar with our Prelude project, involving the world’s first floating LNG facility which will be off the coast of Western Australia. Well, every project gives us opportunities to build capacity and expertise, but world first projects give us more opportunities than most.
Our recruiting strategy for Prelude is quite simple: We want Australians. And we’ll be working hard to skill up local people. For example, we are partnering with Curtin University and the Challenger Institute to take people through a unique, multi-year training program to become the world’s first FLNG operators.
We’ve also developed an Indigenous training and recruitment strategy in preparation for the start-up of the facility in about 4-5 years from now.
Given that the floating LNG plant will be offshore, we need to go beyond the traditional land-based local content options. We’re also working on some interesting marine-based ideas and some educational initiatives – watch this space.
Another angle we’re coming at it from is through our Reconciliation Action Plan. We launched our first one in 2011 and we’ve made some good achievements since then. We have a network of 40 RAP champions around the country who help grow the enthusiasm for RAP projects at a local level.
We’ve formed good relationships with groups like the Indigenous Community Volunteers, Indigenous Communities Education & Awareness (ICEA) and the Australian Indigenous Mentoring Experience through our social investment program.
I spent some time in the Kimberley last year with the Kimberley Land Council Ngurrara Rangers, one of our social investment partners. Shell has supported them to document their traditional knowledge. It was an eye-opening experience for me and I really enjoyed it.
We’ve also become a member of Supply Nation (formerly the Australian Indigenous Minority Supply Council) to increase our use of Indigenous- owned businesses, especially in the Kimberley and Perth metropolitan areas. This will be part of our Prelude floating LNG Operate phase contracting strategy.
An Indigenous Relations Manager will come on board this month to help us further develop our indigenous peoples plans.
The launch of our second RAP is a chance to consolidate what we’ve managed so far. We want to achieve some hard targets, like increasing the number of Indigenous people we employ at Shell and to continue our cultural shift so that indigenous engagement is part of the way we do business.
So, why do we do it all?
Let’s be honest. While constructive Indigenous and community engagement is good for Indigenous people, it’s also good for us. It’s good for business and it’s about being good citizens in the countries and communities in which we live.
There’s a new definition of success in the oil and gas industry today. It’s no longer just about finding technical solutions to engineering problems - success is about earning community acceptance, and that is the most challenging aspect. We have to move beyond the technical and look at how we manage social impacts, embed these strategies into everyday operations and bring our staff along on the journey. It’s an ongoing process and we are continually learning about what works and what doesn’t. But, I think we are making some headway and I’m proud of what we’ve been able to achieve.