V. THE OIL COMPANIES

Corporate Responsibility
International human rights law establishes standards that states are required to uphold. Corporations, however, are not directly regulated by international human rights law. Nonetheless, as reflected in the United Nations Global Compact¹¹⁴ and in efforts to draft principles on the human rights responsibilities of companies,¹¹⁵ there is an emerging international consensus that corporations have a duty to abide by certain minimum standards in order to avoid complicity in human rights violations.

When states such as Nigeria do not adequately respect and uphold the human rights standards to which they have committed themselves, the government fails to fulfill its duties under international law. These governmental acts of commission and omission in turn may enable companies to benefit from an environment in which repression or conflict is created or tolerated and community members are unable to challenge corporate behavior through democratic or peaceful means. Human Rights Watch believes that, in such cases, corporations have a fundamental responsibility to take all reasonable steps to ensure that their activities do not lead to human rights abuses-whether in the immediate environs of their facilities or in nearby communities-and become complicit in human rights violations when they fail to do so.

The oil companies work in a difficult environment in Nigeria, both physically and politically. In particular, the political environment is one in which the Nigerian government has failed to ensure that the people who live in the oil-producing areas actually benefit from the oil. But the oil companies are also seen to have failed to give back anything to the delta for what they have taken out and are often a more accessible-and responsive-target for protest than the government. Following years of employee abductions and hostage taking, repeated protests, including occupations of their facilities that close down production, the oil companies now have quite extensive programs for community development projects in the "host communities" for oil facilities, make substantial payments for allowing oil work to be carried out both to local government authorities and to other interest groups in the areas where they are working, and frequently hire youth as "ghost workers" or for "surveillance contracts" in order to satisfy a demand for employment that cannot be met in this capital- rather than labor-intensive industry. In other cases, they hand out cash payments, sometimes to legitimate representatives of the communities where they operate, as compensation for spills, for example; but often to individuals or groups who have gone into hostage-taking or oil facility occupation as a means of earning a living. But these payments, even the best intentioned, have themselves generated problems, as noted in this report and elsewhere.

In addition, the cash economy created by oil undermines those trying to work for longer-term and more sustainable development initiatives. As one development expert noted: "Anything that does not deliver instant cash, people are not interested. Someone paid _30,000 [U.S.$230] a month does not want to do anything. We try to set up small scale enterprises, or other projects, they ask how much they earn, and then they're not interested. So they all depend on the oil companies. If we run a workshop nobody will come if they're not paid; when Shell pays a `seating allowance' they want to know why we don't."¹¹⁶

The companies have an ambivalent relationship with the Nigerian security forces. Mobile Police and army or navy detachments are posted to oil facilities by the Nigerian government, which can do so without the oil companies' consent. The oil companies are then expected to be responsible for the upkeep of the police or soldiers deployed at their property. In theory, the companies do not have any command control over these security forces, but in practice they do at least often exercise significant influence, even if armed force may also be deployed by the government against oil company wishes on some occasions. For example, the security forces may ask to use oil company boats or helicopters for transportation to remote areas, in which case the companies can-and do, though not always successfully-impose conditions on that use; or oil company staff may choose-or not-to request security force intervention in any particular case, thus influencing the outcome of negotiations. In these circumstances, the companies can deny that they are responsible for abuses carried out by the security forces while at the same time benefiting if those abuses mean that protests are dispersed or do not occur-but equally, they are blamed for abuses against community members even if they had no part in ordering or condoning them. The oil companies are thus both beneficiaries and victims of the government's attitude to law enforcement.

The oil companies operating in Nigeria must make greater efforts to monitor the human rights environment in which they are operating and actively intervene with all relevant authorities to prevent or curtail human rights abuses. The incident at Liama and the ongoing situation in Finima, in particular, show this need. If the companies do not know that there is a problem, that abuses have occurred, they cannot possibly fulfill the obligations they undertake under their own policies, or under international guidelines such as the U.S. / U.K. Voluntary Principles on Security and Human Rights (see below). Without doing so, they become complicit in current violations and risk future complicity in human rights abuse. There are minimum guidelines in place that can be assessed, and there is a pressing need to implement them. In addition, the companies need to take much greater care that the money and other benefits that they give to local communities and their representatives does not simply generate more conflict, rather than-as is presumably the intention-satisfying the demand for the oil companies to alleviate local poverty. Shell and Mobil are the companies affected by the incidents described in this report, and are thus considered at greater length below; however, all the oil companies operating in Nigeria face similar challenges.

Shell
SPDC is the operating company of a joint venture owned 55 percent by the Nigerian National Petroleum Corporation, 30 percent by Shell, 10 percent by TotalFinaElf, and 5 percent by Agip. SPDC is the largest private sector oil and gas company in Nigeria, and in 2001 produced 837,000 bpd, accounting for around 39 percent of Nigeria's crude oil production.¹¹⁷ Since the international focus on its Nigerian holdings that followed the Ogoni crisis and execution of Ken Saro-Wiwa in 1995, the Dutch-British Royal Dutch/Shell group of companies has undertaken a major review of its attitude toward communities and issues of human rights and sustainable development. Royal Dutch/Shell adopted in March 1997 a new Statement of General Business Principles, which recognized five "areas of responsibility": to shareholders, to customers, to employees, to those with whom they do business, and to society. As regards their responsibilities to society, Shell companies are now committed: "To conduct business as responsible corporate members of society, to observe the laws of the countries in which they operate, to express support for fundamental human rights in line with the legitimate role of business and to give proper regard to health, safety and the environment consistent with their commitment to contribute to sustainable development."¹¹⁸

Since 1998 Shell International has published an annual report on the Royal Dutch/Shell group of companies' economic, environmental, and social performance, People, planet and profits, which "describes how we, the people, companies and businesses that make up the Royal Dutch/Shell Group, are striving to live up to our responsibilities-financial, social and environmental."¹¹⁹ SPDC has also published annual reports on operations in Nigeria since 1996, titled People and the Environment. These reports have improved in quality over the years, containing more information and being more inclined to report negative as well as positive results. SPDC's 2001 report, for example, noted the number of community disturbances (245 in 2001; against 244 in 2000) and incidents of hostage taking (forty-five; most of short duration and all peacefully resolved); as well as the amount of production lost through such disturbances (35 million bpd in 2001; 45 million bpd in 2000).¹²⁰ Increasing efforts have also been made to ensure independent verification of the information presented; though much is still based only on Shell's own assertions. Among the oil companies, Shell has consistently supplied Human Rights Watch with the most comprehensive responses to our queries about human rights issues in the Niger Delta, and has been most open to meetings at which these issues can be discussed.

Shell in Nigeria has increased its spending on community development projects greatly over the last decade and has created an entire community development unit within SPDC to administer this money and attempt to redirect community relations from handing out cash to proper development schemes. In 2001, SPDC spent approximately U.S.$52 million on community development in the Niger Delta.¹²¹ While this development spending has undoubtedly brought benefits to the delta, much of the money has not been effectively used. According to an evaluation of Shell Nigeria's development projects carried out in 2001 by outside consultants paid for by Shell, less than a third of 408 projects were considered fully successful.¹²² In addition, SPDC paid U.S.$2.1 million in 2001 as compensation in respect of third-party claims resulting from oil spills and construction damage (none of the oil companies pay compensation if, for example, an oil spill is the result of vandalization of pipelines or wellheads).¹²³

SPDC has also held a number of "stakeholders' workshops" on its operations, attended in the last two years by several hundred individuals from nongovernmental organizations, various levels of government, journalists, academics, and community representatives. Although the format of the workshops, in particular their large size, means that little in the way of concrete results can be expected from them, they do provide a forum at which some people who would not otherwise be able to do so have an opportunity to express frustrations and criticisms to the company, and some company employees can be exposed to and learn from those frustrations. Shell has also taken steps to improve environmental practice, for example through the ISO 14001 certification process, and by initiatives to improve the quality of the environmental impact assessments carried out before new oil exploration or production can take place. While much remains to be done, these efforts have reportedly had some positive results.¹²⁴

In our 1999 report, The Price of Oil, Human Rights Watch concluded that: "the test of [the reforms'] effectiveness in changing Shell's practice can only be gauged by its performance on the ground in countries like Nigeria. It is too soon to tell whether this performance will be changed." Almost four years on, it seems that Shell has made serious efforts to improve its performance in Nigeria but that these efforts have in too many areas yet to yield meaningful results on the ground. The effects are largely visible only to those who have access to information about Shell's operations at quite a high level. For the villager living near Shell's facilities in the Niger Delta, little if anything has changed: too often, oil spills still destroy farming land or fishing grounds and remediation is poor¹²⁵; state security forces deployed to Shell's facilities continue to harass people indiscriminately; and the benefits of the oil industry are still channeled to a small elite.

From the point of view of government officials, of course, it is easier to blame the oil companies for problems than to take responsibility themselves. State-level officials from the oil producing states tend to see the problems of the delta as a conspiracy between the oil companies and the federal government, without examining their own duty to spend the money they are allocated appropriately, and without acknowledging the difficulties the companies themselves face. On being asked if Shell had changed its behavior in recent years, the commissioner for the environment in Bayelsa State responded:

No, no, no. The situation of Shell is abysmal. It has not changed and we do not believe there is a possibility of change. We see Shell as an active collaborator in the mindless assault on the minority tribes by the majority tribes. If the company had taken trouble to advise the federal government on the proper procedures, the system could have seen changes. As far as relations with communities are concerned we have not seen any changes at all. The flow stations are protected by armed soldiers, they don't give any employment to the youth. As commissioner of the environment I have not seen any changes in corporate philosophy.¹²⁶

Across the delta, there is a similar tendency among government officials to assign blame for the lack of development in the oil producing communities to the oil companies rather than local or state authorities. Fundamentally, it is the failure of government to take up its responsibilities, including responsibilities to regulate corporate behavior, that has placed the oil companies in a position where they effectively substitute for government, with all the negative consequences that this report and others have illustrated.

A development expert gave a view more focused on matters within Shell:

The Shell rethink has made no fundamental difference, though there has been some movement. Internally there is not 100 percent agreement on corporate responsibility issues. The structure for community development is not efficient. There are people within Shell who have benefited from the cash economy, infrastructure projects, and so on. They won't let that go and put the communities in the driving seat - some of those guys are trying to sabotage the efforts to change. So the results don't match resources spent; how much the communities get is small. But the other oil companies are no better - they spend huge sums of money for no results.¹²⁷

Many others working in the oil sector note that corruption is a key problem facing Shell and the other companies, and that corrupt handling of community development and compensation payments generates conflict in the delta. The oil companies admit that corruption is a problem for them in Nigeria, and state that they are doing all they can to combat it. By its nature much corruption is never exposed, though occasionally allegations surface in the media or in court. In March 2002, for example, a former employee of Baker Hughes, an oil service company headquartered in Texas, alleged that he was unfairly dismissed from the company in Nigeria in 2001 for refusing to participate in arranging a kickback on a drilling contract with SPDC.¹²⁸

ExxonMobil
Mobil Producing Nigeria Unlimited operates a joint venture owned 60 percent by NNPC and 40 percent by ExxonMobil, and produces around 600,000 bpd. The U.S. company Exxon-now ExxonMobil-has traditionally taken a hard line on issues of corporate social responsibility (for example, Exxon has opposed all initiatives to reduce the contribution of fossil fuels to climate change, and has taken a high profile stance in opposition to sanctions against countries such as Burma, or Nigeria under military rule). Mobil was historically less opposed to accepting such responsibility, but has been subsumed into the larger company. However, ExxonMobil has recently begun to make statements aligning it with the international trend for large corporations in the extractive industry to commit to making a positive contribution to the places where they work beyond those that flow from their business operations.¹²⁹ ExxonMobil contributes to an initiative to combat malaria-a major killer in Nigeria-run out of Harvard medical school. In Chad, ExxonMobil (partnered with ChevronTexaco and Petronas) has worked with the World Bank to build in at least some guarantees that a U.S.$3.4 billion oil field development program will result in revenues being spent on social programs, and has made efforts to minimize the negative impacts of the project. While acknowledging these efforts, environmental and human rights groups say they have had limited effect.¹³⁰ In Nigeria, Mobil contributed about U.S.$12 million to development and other social programs in 2001.¹³¹

Mobil's Nigerian headquarters is in Lagos, but the company's main operations are in Akwa Ibom State, at Eket, and at its Atlantic terminal at Qua Iboe. Most of its production is offshore, and so the company has not faced community relations problems to the same extent as Shell, whose Nigerian operations are scattered across the delta. Nevertheless, the company has faced demands from the Akwa Ibom government that it relocate its headquarters to Eket (in October 2001, the governor threatened to expel Mobil unless it relocated its headquarters to the state), and youth demonstrations supporting this demand and also calling for increased employment of Akwa Ibom indigenes in key positions in the company. Several times over the last few years, Mobil has been forced to suspend operations when youth have invaded or besieged the Qua Iboe terminal or its Eket premises and held workers hostage. As noted above, Mobil's Bonny River Terminal was occupied for several days in June 2001. In May 2002, the Nigerian government deployed hundreds of Mobile Police in defense of the Qua Iboe terminal.¹³²

114 The Global Compact, United Nations (January 31, 1999). Available at www.unglobalcompact.org. The Global Compact is not a regulatory instrument nor a code of conduct. Instead, it identifies nine "universal principles" and asks companies to act on these principles in their own corporate domains, become public advocates for the principles, and participate in the activities of the Global Compact, including thematic dialogues. Participating companies are asked to post, at least once a year, on the Global Compact website concrete steps they have taken to act on any of the nine principles and the lessons they learned from doing so.

115 The U.N. Subcommission on Human Rights has established a working group on the working methods and activities of transnational companies which has produced a draft document setting out "Principles relating to the human rights conduct of companies." See U.N. document number E/CN.4/Sub.2/2000/WG.2/WP.1 available at www.unhchr.org.

116 Human Rights Watch interview with head of development NGO, Port Harcourt, March 20, 2002.

117 People and the Environment Annual Report 2001 (Lagos: SPDC, 2002), p. 6.

118 Royal Dutch/Shell Group of Companies, Statement of General Business Principles, 1997.

119 Shell, Profits and Principles-does there have to be a choice? (London and the Hague: Shell International, 1998), p. 2. The name of the report changed after the first one to People, planet and profits.

120 People and the Environment Annual Report 2001, pp. 10-11.

121 "SPDC Response to Human Rights Watch Questions," May 31, 2002.

122 "Helping but not developing: Shell's Nigerian development projects," The Economist, May 12, 2001.

123 "SPDC Response to Human Rights Watch Questions," May 31, 2002.

124 See, for example, "When the Pressure Drops": An assessment of Shell's progress in the Niger Delta, (Oxford: Ecumenical Centre for Corporate Responsibility, April 2002), p. 7; also the documents on the engagement of Business Partners for Development with SPDC on the EIA process available at: www.bpd-naturalresources.org/html/focus_spdc.html. For information on the ISO 14001 standard see the website of the International Organization for Standardization, www.iso.ch. Human Rights Watch does not itself have the expertise to evaluate the significance of these environmental improvements.

125 See "When the Pressure Drops," appendix 3, on a June 2001 spill at Ogbodo, caused by corrosion of old pipes, on which cleanup did not start until August.

126 Human Rights Watch interview with Chief Lionel Jonathan, commissioner for the environment, Bayelsa State, March 16, 2002. Jonathan has since left his position as commissioner, amid allegations of his involvement in violence in Nembe, Bayelsa State, surrounding the primaries for local government candidates for the People's Democratic Party (PDP), the party of President Obasanjo as well as Governor Alamiyeseigha of Bayelsa State.

127 Human Rights Watch interview with head of development NGO, Port Harcourt, March 20, 2002.

128 He claimed that there was to be a kickback equal to 4 to 5 percent of a U.S.$70 million drilling contract with SPDC on which bidding took place in 1999 and that a senior official with SPDC promised to award the contract to Baker Hughes if he were to receive a share of the gross revenue. The U.S. Justice Department and the Securities and Exchange Commission both instituted investigations into Baker Hughes' operations in Nigeria. L.M. Sixel, "Internal inquiry by Baker Hughes challenged," Houston Chronicle, April 2, 2002; "SEC, Justice Department open investigation of Baker Hughes," AP, March 31, 2002; L.M. Sixel, "Suit claims Baker Hughes firing result of refusing bribery," Houston Chronicle, March 26, 2002; Neela Banerjee, "Ex-executive Sues Baker Hughes; Kickbacks Cited," New York Times, March 26, 2002. Baker Hughes has filed papers denying all charges of corrupt activities.

129 See, for example, Ken P. Cohen, Vice President, Public Affairs, "Corporate Social Responsibility Challenges," remarks at Gitelson Symposium, Columbia University, January 26, 2001; Frank B. Sprow, Vice President, Safety, Health and Environment, "Community Involvement: Essential to Long Term Business Success," remarks at Society of Petroleum Engineers International Conference on Health Safety and the Environment, Kuala Lumpur, March 21, 2002; Rene Dahan, ExxonMobil Executive Vice President, "Business in a World of Conflict," remarks to Denver, Colorado, International Chamber of Commerce, May 7, 2002, available at www.exxonmobil.com (cited July 21, 2002).

130 See, for example, Peter Rosenblum, testimony to the U.S. House of Representatives Committee on International Relations Subcommittee on Africa, April 18, 2002; Broken Promises: The Chad-Cameroon Oil and Pipeline Project, Profit at Any Cost? (Centre for Environment and Development, Yaoundé, and Friends of the Earth International, Amsterdam, June 2001).

131 Letter from Peter F. Francis, for General Manager External Affairs, Mobil Producing Nigeria Unlimited, to Human Rights Watch, May 15, 2002.

132 Anietie Ben-Akpan and Aniekan Bassey, "Mobil suspends operations in Eket as youth invade terminal," Guardian (Lagos), February 19, 2000; "ExxonMobil aims to reopen Nigerian oil terminal," Reuters, July 24, 2000; "Youths stage protest at Mobil plant in Akwa Ibom State," Guardian (Lagos), April 20, 2001; Jacinta Moran, Ross McCracken, "Nigerian crude output reduced by Unrest," Platts Oilgram News, May 11, 2001; Ani Akpan, "Nigeria deploys police near Exxon Mobil terminal," Reuters, May 16, 2002.