Shell: Corporate Crimes

Shell is a name already infamous with many campaigners. Be they concerned with climate change, human rights abuses or health and safety, the Royal Dutch Shell group has a sullied reputation and not only among environmentalists: In September 1993 the TGWU (transport and general workers union) launched a nationwide boycott of Shell petrol stations due to union derecognition at their Shell haven refinery in Essex.
Shell now paints itself as a caring company wishing to dissociate itself from past 'mistakes' in Nigeria and 'accidents' in the North Sea.
Some of the examples here are historical, but they give an insight into Shell's culture and despite liberal greenwash, things haven't really changed so there are more recent examples as well.
Climate Change
When it withdrew from the Global Climate Coalition in 1998 (see Influence/Lobbying section) Shell wished to be seen as one of the pioneer corporations, taking climate change seriously. Even before it withdrew from the GCC, Shell had been attempting to cultivate this image. In May 1997, the day after John Browne gave his speech at Stanford university stating that BP had reached a point where it must consider "the policy dimensions of climate change"[65] (see BP profile), Heinz Rothermund, Managing director of Shell UK Exploration and Production, asked in a lecture he gave at Strathclyde University, "How far is it sensible to explore for and develop new hydrocarbon reserves, given that the atmosphere may not be able to cope with the greenhouse gases that will emanate from the utilisation of the hydrocarbon reserves discovered already? Undoubtedly it is a dilemma".[66]
Shell, however has not translated this concern into action, it has not ceased or scaled back its exploration and production activities. Quite the opposite, Shell has ambitious plans to increase extraction by 5 per-cent year on year[67]. So far the company is on target: "Compared to the third quarter last year, total hydrocarbon production increased by 5 per-cent"[68]. However, a question mark hangs over the potential for sustained growth at this rate: Phil Watts, delivering the group's 2nd quarter results for 2001 said that plans to grow output by 5 per-cent between 2000 and 2005 now looked "Very challenging" amid the slowing world economy. Analysts predicted that Shell could scale back its growth target to 3 per-cent, but Mr. Watts refused to be drawn on a figure for longer- term production growth[69].
Scaling back production does not suit a company like Shell whose worth, despite some investments in renewables, is measured in production volumes and proven reserves. In June 1990, the then chairman and Chief Executive Designate of Shell UK, Sir John Collins, suggested that we "see this great challenge [climate change] as a spur to ingenuity, the free market and sustainable economic development."[70]. So Shell has opted for a techno-fix: In 2000, Shell, together with Siemens began developing a pilot gas-fired power station in Norway, which will capture its Carbon Dioxide (CO2) emissions and pump the gas underground[71]. There are both technical and ethical questions over the use of this unproven technology in combating climate change[72]. Most bizarrely of all, CO2 injection will be used for what is known as 'enhanced oil recovery' gas will be injected to increase the pressure of declining fields[73]. What is sold to the public as a solution to climate change will actually be used to extract more oil.
In accepting the reality of climate change, Shell announced in 1989 that the company was going to increase the height of its giant 'Troll' platform by 1 meter, to counter predicted rise in sea-level. The platform can be raised further if it becomes necessary over the proposed 70 year lifespan of the rig[74].
West of Shetland
Environmental campaigners have long opposed the opening of the so-called Atlantic-Margin or Atlantic-Frontier to oil exploration. Opposition was on the grounds of climate-change but also because this area of deep ocean, west of Shetland and further, beyond Rockall had previously been largely free of commercial activity.
Most of Shell UK's production comes from the North Sea: Gas fields are mainly in the southern sector and oil comes from the more northerly fields, including the large Brent field. Companies which operate in the North Sea are aware that these areas are probably already past their peak and that production is likely to decline over the coming decades. Because no tax is payable on oil and gas from UK waters, the UK is a operating environment favoured by companies, so these corporations have been looking for new reserves in the UK to replace declining North Sea production.
In November 1997 Shell was a partner with operator BP in the Foinaven field, 190km west of Shetland, the first Atlantic Margin field to come on-stream[75]. But on the 6th of December 2000 Shell announced that it had completed an asset swap agreement under which it would part with its 28 per-cent interest in the BP-operated Foinaven field, plus its interests in discoveries and prospects in areas adjacent to Foinaven. In exchange Shell would acquire an interest in Sakhalin Energy Investment of Russia[76].
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Renewable Energy
As part of efforts to brand itself as a forward-looking new-energy company, Shell has begun to invest in off-shore wind energy. Shell is a partner in the Blyth offshore wind project in Northumberland[77]. Industry analysts see this investment favourably, since unlike BPs investment in solar Shell already has expertise in off-shore operations which it can transfer to its renewables division.
As Shell itself states: "Wind energy should profit everyone and harm no-one". A laudable sentiment, but in continuing to explore for more oil, the company fails to recognise that renewable energy will only be a solution to climate change where it replaces energy which would otherwise have been generated from fossil fuels.
For more on Shell's climate change strategy see the 'Influence and Lobbying' Section of this profile.
Missing The Big Picture
Since the 1980s Shell has cut its air and water pollution and, through energy efficiency cut its own energy usage. Shell has described its approach as "The pursuit of excellence in environmental performance" [78]. Sadly, the company fails to acknowledge that oil and gas is inherently a highly polluting business, both locally and globally, upstream and down. Despite token moves into offshore wind energy Shell, like all oil companies believes that fossil fuels will remain the dominant source of energy for decades to come, and that renewable energy simply could not meet world energy demand. But this is a prescription dressed up as a description: It comes from the companies which dictate the nature of our energy supply[79].
Measurable reductions in local environmental pollution at Shell facilities have been achieved relatively easily and have been good for public relations, but this disguises the fact that in the early 1990s Shell was regularly breaching its pollution consent limits (35 times in 1991)[80] and as such had, in the UK at least, a statutory duty to improve environmental performance. It also ignores the reality that to reduce local pollution whilst simultaneously seeking new oil and gas is to fudge the pollution issue. Genuine good environmental and social practice cannot be achieved piecemeal or out-sourced to public relations consultants.
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Oil Leak and Drilling Muds
Shell was less proficient in reducing local pollution in August 1989 when 150 tons of thick Venezuelan crude leaked from a Shell pipeline, into the River Mersey (UK)[81]. The spill caused a 20 mile slick and killed at least 300 sea birds, putting another 2000 at risk due to oil ingestion. The nearby New Brighton mussel beds were also contaminated[82]. The incident was made worse because Shell, against the warnings of local police and councillors[83] flushed the pipeline with lighter crude and water, in order to stop oil from solidifying and blocking the pipe.
The National Rivers Authority was not informed of the spill by Shell but by the local fire Brigade, two and a half hours after the event. If they had been notified earlier, the flushing attempts would have been prevented[84]. The official Department of Energy report concluded that the pipe was badly corroded and that the monitoring equipment was so inadequate that it could not detect problems[85]. Shell was fined one million pounds at Liverpool Crown Court, with costs of 6573 pounds - the largest ever fine in the UK for a pollution incident[86].
After several further spills and leakages, and amidst mounting criticism of the refinery, the General Manager of the plant, Bob Brawn told employees, that: "If I was running this plant in the United States or in Canada I would be in jail by now"[87].
Contamination also emanates from exploration and production. For example, in April 1989, there was a 50000 gallon leak of toxic drilling muds from Shell's North Cormorant oil field in the North Sea[88].
Better Britain
The now well established Shell Better Britain campaign (SBBC) is an attempt by Shell to win public support by funding "Communities in efforts to improve their local environment in a sustainable manner, from organic growing to cycle taxis"[89].
However, the scheme has split environmental groups over the ethics of accepting such money, particularly since the scheme has been so successful in earning Shell the image of a good corporate citizen. For example, the judge who, in 1990 fined Royal Dutch/Shell Group one million pounds over an oil leak into the river Mersey (UK) the previous year (see above), commented that the fine would have been substantially higher if Shell had not had such a good record in conservation, the arts and other worthwhile causes[90].
As long ago as 1991, then campaigns director of Friends of the Earth: Andrew Lees criticised the Shell Better Britain campaign as being an example of corporations buying a green image rather than actually earning one[91].
In 1989, Shell defeated a decision by Kent County Council (UK) to stop the company drilling in a classified Area of Outstanding Natural Beauty,[92] and in 1990 the company decided to build a pipeline construction facility on Morrich More, a grade one Site of Special Scientific Interest and an EC (European Community) Protected Area, and the only breeding site in the UK of the whimbrel, a rare wading bird[93]. In 1992, Shell began drilling 21 miles off the Sunderland coast, north east England. The area is close to 21 sites of special scientific interest (SSSI) and to Flamborough Head, a well known nesting site[94]. Shell's contribution to Britain is distinctly mixed.
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Human Rights Violations
In 1991 EIRIS (Ethical Investment Research Service) stated that Shell was operating in 24 Countries where extra-judicial executions or disappearances had been reported, 44 countries where torture has been reported (according to Amnesty International), 36 Countries where 'official violence against citizens' was reported, and 26 countries which were holding prisoners of conscience (according to Amnesty International)[95].
By 1999, following extensive public relations on the part of Shell, including the annual publication of "People, Planet and Profits, The Shell Report" EIRIS had revised its opinion of Shell, stating that "a number of companies such as Shell ... have now recognised ... the new emerging agenda"[96].
A copy of "The Shell Report" can be read online at: www.shell.com/shellreport
Others, such as UNPO (Unrepresented Nations and Peoples' Organisation) have been less convinced by the greenwash: "Although Shell International stopped its activities in Ogoniland [Part of Nigeria], the degradation of the environment still continues. Abandoned pipelines cause major troubles. Due to leakages the oil runs freely and destroys the Ogoni lands. Shell accuses the Ogoni people of sabotaging the pipelines; the Ogoni people blame Shell for not keeping the pipelines in repair."[97].
eraction@infoweb.abs.net
Chad-Cameroon
Under pressure from human rights activists Shell withdrew from the 3.7 billion dollar Chad-Cameroon oil and pipeline project in 1999. The project will involve the development of more than 300 oil wells in southern Chad and the construction of a 1050km pipeline, southwards to Cameroon's Atlantic coast. The project could still go ahead and will likely be backed by ExxonMobil and Chevron. The project can only strengthen Chad's repressive regime and there are worries that it will lead to destruction of rivers and coastal rainforest[104]. Shell's oil Exploration activity continues in less controversial off-shore Cameroon[105] where, fortunately for Shell, it does not have to contend with indigenous communities blighted by oil.
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Peru and Columbia
Shell mounted a similar retreat from Peru. In 1996 Shell Prospecting and Development (Peru) signed a licensing agreement with the Peruvian government for the Camisea project, controversial because exploration was to place in pristine rainforest, in an area inhabited by several vulnerable indigenous populations, including 2 of the world's last isolated nomadic peoples[106]. Since 1996, Shell has found Gas along the Urubamba River in Peru[107] but has pulled out of the Camisea project. Despite attempts to portray the project as a model of sustainable development, the company was unable to win the 'green' stamp of approval from NGOs, without such support the cost of the project to Shell in public relations would have been too great.
Seemingly for similar reasons, Shell also pulled out of a joint venture with Occidental Petroleum, a venture engaged in exploration activity in the equally fragile Colombian rainforest[108].
Pakistan
Like a number of other oil companies, Shell takes a keen interest in the potential for downstream marketing activities in the emerging markets of central Asia and the Indian subcontinent. Shell is also involved in exploration and production in Pakistan[109]. This included the Dumbar concession, which covered exploration rights over most of the Kirthar National Park in the south-eastern Sind province. The concession was granted by the provincial government to a joint venture between Shell Pakistan and Premier Oil (See Corporate Watch profile: Premier Oil). Public controversy over oil exploration in such a sensitive, protected environment erupted after Pakistani 'Sustainable Development Policy Institute' in Coalition with 8 other NGOs announced, in February 2001 that it was mounting a legal challenge to have the concession overturned[110].
In response to such bad press, and concerned for its reputation, Shell announced in May 2001 that "it was seeking to end its Pakistan joint venture with Premier Oil by proposing to swap its 49.9 per-cent stake in the joint venture for an increased holding of up to 28 per-cent in Premier's Bhit gas field elsewhere in Pakistan. Industry sources said that shell "was looking to lessen its exposure in exploration activities and the move could be part of the strategic decision"[111].
Shell's strategy is clear: Following bad publicity in the 1990s, and wanting to brand itself a caring company, Shell is withdrawing from the most controversial projects in Nigeria, Cameroon and Pakistan, whilst continuing to operate in those countries and support those regimes.
Real concern for human rights would mean pulling out of dictatorships such as Nigeria, Pakistan and China. For details of Shell's interests in these countries see: Financial and Operating Information, 1996-2000[112].
Health and Safety
Examples of poor health and safety are given here from Shell's North Sea operations where they operate in joint venture with Esso[113]. Access to information on such incidents is relatively easy in the UK, but health and safety, like environmental performance is generally worse in poorer countries, where statutory standards are often lower. The company is also less dependent on those markets for selling its products and so has to worry less about its public image. Royal Dutch/Shell group states that its "companies act in a socially responsible manner within the laws of the countries in which they operate"[114]. As such, Shell's approach is consistent with principle 11 of the Rio Declaration from the Earth Summit of June 1992 which states that "...Standards applied by some countries may be inappropriate and of unwarranted economic cost to other countries in particular developing countries."[115] In practice, Shell will adopt lower standards in the developing world, where it can get away with it.
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North Sea
Health and safety is paramount in the harsh environment of off-shore oil exploration and production. The British North Sea has been the scene of a number of serious incidents which have often led unions to criticise management's approach to health and safety.
After a massive escape of gas in January 1989, on Shell's Delta platform in the Brent field, (east of Shetland) Shell was criticised for not informing HM coastguard of the incident[116]. Independent experts believed that Shell was fortunate not to experience a disaster similar to that on Occidental's Piper-Alpha platform.
In 1992, half of Shell exploration-and-production's staff-management committee resigned, frustrated with the company's attitude[117].
The union OILC which represents a large proportion of offshore workers in the British North Sea believes that nothing fundamental has changed since these incidents and that problems with health and safety are systemic. Health and safety is implemented by Shell as it is by other companies in a top down manner. Unions and workers are not adequately consulted and impossible, conflicting demands are made of employees: Work must be done, ever more quickly in the drive for 'efficiency' but safety must not be compromised.
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References
[65] www.worldwatch.org/chairman/issue/000725.html
[66] Heinz Rothermund, speaking at the 1997 celebrity lecture for the Institute of Petroleum, Strathclyde University, 20th May 1997
[67] Shell, Strategy presentation to financial analysts 18/12/2000
[68] 'Earnings by Industry Segment, in: Results, Third Quarter, 2001, Royal Dutch/Shell Group
[69] www.gasandoil.com/goc/company/cne13588.htm
[70] Collins, J. 1990 'Global Environment, Energy Industry's Biggest Challenge', Chairman and chief executive designate of shell UK, Press Release, Shell UK House, 28 June, 1990
[71] www.sustdev.org/energy/industry%20news/04.2000/0132.shtml
[72] Muttitt, G. and Diss, B. Carbon Injection, The Ecologist Report, Climate Change, November 2001, p28
[73] Muttitt, G. and Diss, B. Carbon Injection, The Ecologist Report, Climate Change, November 2001, p29
[74] The Times, 1989, 'Shell to Raise Offshore gas Platform to Offset Anticipated Rise in Sea Level', 7 September, 1989 pp3; Reuter News service, 1990, 'North Sea Platform Raised to Offset Global warming', Oslo, 1 February, 1990
[75] www.gasandoil.com/goc/company/cne85020.htm
[76] www.gasandoil.com/goc/company/cnr10270.htm ; www.shell.com/files/investor-en/sec20f.pdf
[77] Shell advertisement, Evening Standard (London) Tuesday, 20 November, 2001, p14
[78] Van Wachem L. C. 1992 The Three Cornered Challenge - Energy, Environment and population, The Cadman memorial lecture, London, 14 September 1992
[79] Muttitt, G. and Diss, B. 2001, Carbon Injection, The Ecologist
[80] Report, Climate Change, November 2001
ENDS, 1992, Ethical Investors Weed Out Water Polluters, ENDS Report 2005, February 1992, p9
[81] Daily Telegraph, 1989, Shell Facing Legal Action Over 150-Ton Oil Spillage, 26 September, p2
[82]Lloyds List, 1990, Shell Oil Pumped Into Mersey 'To Save Pipeline' Causes Environmental Pollution, 23 February, pp2; Independent, 1990, Shell Pumped Oil into the River to Save Pipeline, 23 February, p2
[83] Independent, 1990, 'Shell UK Close to Causing an Environmental Disaster', 23 February, p2
[84] Dunn A, 1990, 'Shell Pleads Guilty to Mersey Oil Spill', The Guardian, 23 February, pp3
[85] Brown P, 1990, 'Shell Could Not Find Pipe Corrosion, Says Department of Energy Report', Guardian, 5 December, p2
[86] Financial Times, 1990, 'Shell Fined 1M for Mersey Oil Leak', 24 February, p4
[87] Palmer R, 1990, 'Shell to Face Court Again for Pollution', Sunday Times, 21 October, p3
[88] The Guardian, 1989 4 April
[89] www.shell.com/nr-en/directory/0,6032,45131,00.html
[90] Financial Times, 1990, Shell fined 1M for Mersey oil leak, 24 February 1990, p4
[91] Garrett, A. 1991 Sponsorship - Business buys its way to a greener image, Independent on Sunday, 10 November 1991, p26
[92] Mackerron C B, 1993, Business in the Rainforests: Corporations, Deforestation and Sustainability, Investor Responsibility Research Centre, Washington, p122
[93] McIlroy A J, 1990, 'RSPB Returns £2,000 Gift From Shell', Daily Telegraph, 10 July, p6
[94] Hamilton Fazey I & Hargreaves D, 1991, 'Shell to Seek Oil Off North East Coast', Financial Times, 22 August, p9
[95] EIRIS, 1991, The Shell Transport and Trading Company Factsheet, London, p7
[96] www.eiris.org/Files/Otherpublications/EMSPAPER.pdf - EIRIS: Ethical Investment research Service, 1999, Corporate Environmental policy, Management and Reporting
[97] Unrepresented Nations and Peoples' Organisation: www.unpo.org/member/ogoni/ogoni.html - last updated 2001
[98] The Shell Petroleum Development Company of Nigeria Limited, 2000, People and the Environment Annual Report, page 5
[99] New Internationalist, Mired in Crude, June 2001, p23
[100] New Internationalist, Mired in Crude, June 2001, p23
[101] Royal Dutch/Shell Group, 2000, People, Planet and Profits, p21
[102] The Shell Petroleum Development Company of Nigeria Limited, 2000, People and the Environment Annual Report, p8
[103] New Internationalist, Mired in Crude, June 2001, p23
[104] New Internationalist, Mired in Crude, June 2001, p23
[105] Financial and Operating Information 1996-2000, Royal Dutch/Shell Group of Companies, p17
[106] http://forests.org/ric/wrr39/shellperu.htm
[107] Financial and Operating Information 1996-2000, royal Dutch/Shell Group of Companies, p21
[108] http://forests.org/ric/wrr39/shellperu.htm
[109] Financial and Operating Information 1996-2000, Royal Dutch/Shell Group of companies, p19
[110] www.gasandoil.com/goc/news/nts11225.htm Alexander's Gas and Oil Connections, Source: Al Nisr Publishing LLC
[111] www.gasandoil.com/goc/company/cns12282.htm Alexander's Gas and Oil Connections, Source: Dow Jones
[112] Royal Dutch/Shell Group of Companies pp17-20
[113] FT Oil and Gas Yearbook, 2000
[114] Shell International Limited, 1997, Statement of General Business Principles.
[115] Nickson, E.W. 1993 Environmental Questionnaire, Response of Andrew Rowell, Shell International Petroleum Company, 13 September 1993
[116] Glasgow Herald, 1989, Shell Criticised For Brent Field Gas Leak, 6 January 1989, p4
[117] Grant, K. 1992 Employees Walk Out, Aberdeen Press and Journal, 9 September, 1992, p1
	 	
Category: Oil IndustryCategory: Transnational Corporations