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Shell (SHEL) Faces Backlash for Leaving Niger Delta to Suffer

Shell SHEL is reportedly planning to leave the Niger delta by selling off its subsidiary, Shell Petroleum Development Corporation, operating in the area, to a consortium of local companies, also known as the Renaissance Africa Energy Company. However, the London-based energy giant is facing widespread criticism due to a report published by the Centre for Research on Multinational Corporations (“SOMO”), a Dutch non-profit organization. According to a SOMO report, Shell cannot be allowed to divest its assets and leave the delta without assuming the responsibility for the extensive pollution caused by it and ensuring safe decommissioning of its abandoned assets in the region.

The report highlights that the historical pollution in the region is a serious issue. Shell has been allegedly trying to avoid environmental responsibilities, even though it has earned huge profits from oil extraction in the Niger delta, leaving the region as one of the most polluted places on Earth. With SHEL’s exit, the only ones left behind to suffer the dire consequences of their actions will be the communities that reside there.

Shell, for long, has been holding its stance that the theft of oil and interference with the pipelines are the major reasons behind oil spills. However, the report stated that no matter what, Shell must take the responsibility to clean up the oil spills, per Nigerian law.

However, unlike its previous sales, Shell, this time, is transferring all its subsidiary shares to Renaissance, indicating a change in ownership. However, even with this change, SPDC will carry the current staff and assume the responsibility for remediation efforts in relation to the previous oil spills.

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Although SOMO has noted the arrangement, the report by SOMO mentions a big transparency gap around the funding needed for decommissioning.  The researchers at SOMO did not find any confirmation about funds allocated to cover the decommissioning of the oil mining leases sold by Shell.

The Dutch non-profit organization emphasizes that allowing Shell to simply walk away from this unjust energy transition, without holding it accountable for historical pollution, the lack of funding for safe decommissioning and poor financial transparency, will set a dangerous example for all multinational companies in the region.

British politician and Labour MP Clive Lewis has added to the conversation and raised concerns regarding Shell’s proposed sale of its Nigerian subsidiary, leaving behind an environmental disaster. He underscores the severity of the situation at Niger delta, highlighting that Shell’s actions are brutal and regressive for the residing communities.

Protesters, activists and international environmental groups want Nigeria’s government to delay the divestment of Shell’s onshore assets to ensure that the company takes the environmental and social responsibility for the polluted Niger delta.

Zacks Rank and Key Picks

Currently, SHEL carries a Zacks Rank #3 (Hold).

Investors might want to look at some better-ranked stocks in the energy sector, such as Energy Transfer LP ET, Archrock Inc. AROC and Repsol REPYY. While both Energy Transfer and ArchRock presently sport a Zacks Rank #1 (Strong Buy), Repsol carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Energy Transfer is a midstream player that owns and operates one of the most diversified portfolios of energy assets in the United States. With a pipeline network extending more than 125,000 miles, its network spans over 44 states. With a presence in all the major U.S. production basins, the company’s outlook seems positive.

Archrock is an energy infrastructure company based in the United States, with a focus on midstream natural gas compression. It provides natural gas contract compression services and generates stable fee-based revenues.

Repsol is a global multi-energy company, involved in exploration and production activities as well as refining and marketing petroleum products. The company is also actively involved in transitioning toward cleaner and more sustainable energy solutions. Recently, it announced the expansion of its network of renewable fuel refilling stations in Europe, demonstrating its commitment to a sustainable energy model.

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Energy Transfer LP (ET) : Free Stock Analysis Report

Repsol SA (REPYY) : Free Stock Analysis Report

Archrock, Inc. (AROC) : Free Stock Analysis Report

Shell PLC Unsponsored ADR (SHEL) : Free Stock Analysis Report

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