Oil theft, sabotage (intentional damage) and political anxiety has resulted in uncertainty about the sustainability of operating Royal Dutch Shell, Chevron and Eni oil plants in Nigeria. According to Morad (2013) Nigeria has an average oil production of 2 million barrels per day, however between 2009 and 2011 Nigeria lost (due to theft) potential revenues of more than 10 billion American dollars. Approximately 250,000 barrels per day is linked to criminal gangs who steal crude oil, vandalize pipelines and secretly send oil out of the country in large tankers.
Shell obtains approximately 9% of its world production from Nigeria, however in March 2013 Shell closed one of its compounds in Warri (which they had operated for 40 years) and closed the trans Niger pipeline (which for many years has been a target of theft). Morad (2013) quotes Sunmonu (the Managing Director of Shell companies in Nigeria) “crude theft continues to pose significant challenges to the people, environment and the local and national economy and all stakeholders must work together to stop this criminal activity”
The oil company, Chevron (who has operated in Nigeria for 50 years) is also reviewing its portfolio but Chevron has also recently sold sections of their business in Nigeria. Even though in the past Chevron showed strong support for the region by spending 50 million American dollars on setting up the Niger Delta partnership initiative foundation with a goal to help improve socioeconomic conditions (more than 60% of Nigerians live on less than one American dollar per day, which is very low considering the amount of natural resources that Nigeria benefits from).
This year, the Italian oil company Eni has also reported financial losses (due to crude oil theft and intentional damage to oil facilities in Nigeria and production interruption in Libya). This demonstrates that the theft and damage is affecting all oil companies.
Nigerian officials are aware of the major impact that oil thefts and pipeline vandalism is having on international companies. They are developing strategies which they hope will resolve the situation; one of their proposals is to deregulate the oil industry to enable the region to move forward but it is not clear if this is the best or most ethical solution. Other ideas could be to create new regulations to provide confidence to international oil companies and in turn their investment could help to improve the standard of living for Nigerian citizens.
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1. Identify and discuss the key and supporting functions of a company’s value chain. Be sure to refer to examples from the case study. Markting research and development
2. Discuss the responsibility and potential dilemmas associated with the R&D Department as it relates to this case study.