CHAPTER ONE
INTRODUCTION
1.1 Background to the Study
Nigeria has considerable oil and gas resources that can help accelerate growth on the continent if used strategically. The oil and gas industry is the one of the primary commercial industries in Nigeria and also a major source of wealth as it generates most of the country’s revenue. The involvement of Shell, Chevron, Texaco, BPAMOCO, Exxon Mobil, ENI, Occidental, Total Fina Elf, etc in the United Nations’ Global Compact, the Global Reporting Initiative (GRI), the Sullivan Principle, the Voluntary Principles on Security and Human Rights, the Millennium Development Goals (MDGs), the Sustainable Development Goals (SDGs), Dow Jones Sustainability Index, and the World Summits on Sustainable Development in Rio de Janeiro and Johannesburg.
Many African countries have been advocating on attracting Foreign Direct Investment (FDI) as a means of advancing their economies, including the extraction of Oil and Gas resources. Their footprints can be seen in developing countries most especially in Nigeria, in the transfer of Foreign Direct Investment (FDI), skills and technology, as major employers of labour, and accounting for a large proportion of state revenue. They have contributed to rural area development through different programmes such as education, health, commerce, agriculture, transport, construction among others, also known as Corporate Social Responsibility (Nwosu, 2017).
Corporate Social Responsibility has been a major concern of communities, governments, and civil society organizations in Africa and is expected to be integral to industry today as a password to not only overcome competition, but to ensure sustainable growth. The shareholders and other stakeholders, mostly encompassing the whole community, have supported it. Corporate Social Responsibility in reality is the alignment of industry operations with social values. It takes into account the interests of stakeholders in the company’s business policies and actions. It focuses on the social, environmental, and financial success of a company, the so-called “triple bottom line” with the aim of achieving social development alongside business success. More importantly, Corporate Social Responsibility is the point of meeting various initiatives aimed at ensuring socio-economic development of the community as a whole in a credible and sustainable manner (Nwosu, 2017).
Scholars have also argued that the Corporate Social Responsibility activities of many Multinational Oil and Gas Companies in Nigeria as well as other Africa countries have been mainly counteractive in approach. In other words, they purport that such activities are mainly focused on remedying the effects of their environmentally and socially harmful exploration activities in their host communities. It is, therefore, becoming more apparent that such gestures can amount to nothing significant development wise, not to talk in terms of sustainable development, because sustainable development initiatives are usually deliberate and purposeful attempts aimed at impacting positively the lives of the people and their environment. The focus of Corporate Social Responsibility practice in contemporary times has considerably shifted from mere philanthropic or charitable gestures to addressing real development issues of the people (Ekwok and Ugor, 2018).
However, a gruesome amount of environmental and social challenges has erupted in the region over the years, which have resulted in constant conflicts and war amongst communities, oil and gas industries and the governments in Africa. Various communities have mounted pressure on both the oil and gas industries and the government for some sort of sustainable compensation for the devastation that has plagued the entire region. This has consequently resulted in civil rights groups, voicing out on behalf of communities. These demands have sometimes been acknowledged and granted in the form of initiatives and projects for community members (Makpor and Leite, 2017).
1.2 Statement of the Problem
Under normal circumstance, the Oil and Gas Transnational Corporations played a active role in developing rural area, engage in good corporate practices and codes of conduct in the workplace and manage good relation with the society but it is the order way round in Nigeria. With the huge profit gained from their industrial activities, the Oil and Gas companies have not significantly contributed to the economic growth and development of rural areas, although, Multinational corporations have responded to this challenge by adopting Corporate Social Responsibility strategies as a means of contributing to community development (Nwosu, 2017).
The government has tried different policies in order to ensure the activities of these corporations is beneficial to both the government and her people yet there have been endless conflicts between local communities and Oil and Gas Industries. Sequel to the persistent incidence of Oil related environmental pollutions and degradation, Worker hostage taking, blockage of oil facilities, oil pipeline vandalization and human rights violations with subsequent damage to corporate reputation have had a negative impact on corporate profit, government revenue and rural development. Therefore, the reason for this research is to examine the role of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in Nigeria.
1.3 Research Objectives
The general objective of this study is to investigate the role of Oil and Gas Industries on rural development in Nigeria with focus on Shell Petroleum Development Company of Nigeria Limited (SPDC). The following are the specific objectives of the study are to;
- highlight the origin and objectives of Shell Petroleum Development Company of Nigeria Limited (SPDC) in Nigeria;
- analyze the activities of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in Nigeria;
- examine the impacts of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in Nigeria;
- identify the challenges of the oil and gas industry and recommend possible solutions on how Nigeria can use the existence of oil and gas industries for rural development.
1.4 Research Questions
This study seeks to proffer answers to the following questions:
- What are the origin and objectives of Shell Petroleum Development Company of Nigeria Limited (SPDC) in Nigeria?
- What are the activities of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in Nigeria?
- What are the impacts of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in Nigeria?
- What are the challenges of the oil and gas industry and How can Nigeria use the existence of oil and gas industries for rural development?
1.5 Significance of the Study
Outcome of this study will educate government, community leaders, management of the oil and gas industries, policy makers in the petroleum sector, stakeholders and the general public on the impact of oil and gas industry on rural development in Nigeria. The results of this research will also enlighten the aforementioned categories on the origin and objectives of Shell Petroleum Development Company of Nigeria Limited (SPDC) in Nigeria, activities of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in Nigeria, impacts of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in Nigeria and the challenges of the oil and gas industry and recommend possible solutions on how Nigeria can use the existence of oil and gas industries for rural development.
The findings from this study will constitute a basis for future research and also contributing to the body of knowledge since it will be used as empirical literature.
Outcome of this study will also be a guide for policy formulation both at state and national level as a way of improving rural development in Nigeria through improvements in oil and gas industries.
1.6 Scope of the Study
The study covers the role of Oil and Gas Industries on rural development in Africa in general. It will specifically cover the origin, objectives, activities and impact of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in African using Nigeria as a case study. The research also covers a period from 2014 to 2020, in order to focus on recent rural development issues in the oil and gas sector. Therefore, this research will focus on origin, objectives, activities and impact of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in Nigeria from 2010 to 2021
1.7 Methodology
The approach used in this study is the qualitative approach. Secondary sources will be used in the course of this study. The secondary sources consulted include books, journals, articles and online materials. There will be content analysis of the various data collected from the secondary sources
As Nigeria is the 10th largest oil producer in the world and the third largest in Africa, Nigeria has an economy that is very dependent upon its oil sector. It accounts for 95% of Nigeria’s foreign exchange earnings, and they have oil reserves estimated between 24 billion and 31.5 billion.
Nigeria is located in western Africa on the Gulf of Guinea and has a total area of 923,768 km2 (356,669 sq mi), making it the world's 32nd-largest country. It is comparable in size to Venezuela, and is about twice the size of the U.S. state of California. Its borders span 4,047 kilometres (2,515 mi), and it shares borders with Benin (773 km or 480 mi), Niger (1,497 km or 930 mi), Chad (87 km or 54 mi), and Cameroon (including the separatist Ambazonia) 1,690 km or 1,050 mi. Its coastline is at least 853 km (530 mi). Nigeria lies between latitudes 4° and 14°N, and longitudes 2° and 15°E. The highest point in Nigeria is Chappal Waddi at 2,419 m (7,936 ft). The main rivers are the Niger and the Benue. This is one of the world's largest river deltas, and the location of a large area of Central African mangroves. Nigeria has a tropical climate and about two-thirds of Nigeria lies in the watershed of the Niger River, which empties into the Atlantic at the Niger Delta (Uwakonye, Osho and Anucha, 2006).
Shell Petroleum Development Company of Nigeria Limited (SPDC) is the pioneer oil Trans-National Corporation (TNC) in the Nigerian oil industry and, by virtue of first-mover advantage (Frynas et al. 2000), has remained the largest and the most dominant oil Trans-national Corporation (TNC) in Nigeria. SPDC accounts for 40 per cent of Nigeria’s total crude oil production and has interests in five companies in Nigeria under the umbrella of SPDC Companies in Nigeria, including SPDC, the Shell Nigeria Exploration and Producing Company, Nigeria Liquefied Natural Gas, Shell Nigeria Gas and Shell Nigeria Oil Products.
1.8 Operational Definition of Terms
Oil And Gas Industry: organized economic activity connects with the production, Manufacture or construction of oil and gas which includes the global processes of exploration, extraction, refining, transporting (often by oil and gas tankers and pipelines), and marketing of petroleum and gas products.
Rural Area: rural area is a geographic area that is located outside towns and cities.
Development: is the process of changing and becoming larger, stronger, or more impressive, successful, or advanced, or of causing somebody or something to change in this way.
Rural Development: is the process of improving the quality of life and economic well-being of people living in rural areas often relatively isolated and sparsely populated areas.
Corporate Social Responsibility: is a company’s veritable commitment to operating in an economically, socially and environmentally sustainable manner that is transparent and increasingly satisfying to its stakeholder.
1.9 Chapter Outline
In order to achieve the objective of this study, therefore, the study will contain five chapters, chapter one is the introductory chapter. It contains the background to the study, statement of the problem, objectives of the study; significance of the study; scope of the study; methodology; operational definitions and chapter outline. Chapter two is review of related literature. It contains introduction, conceptual framework, theoretical framework, review of empirical studies and summary of reviewed literature. Chapter three discusses the origin, objectives, activities of Shell Petroleum Development Company of Nigeria Limited (SPDC) in Nigeria while chapter four examines the impact of Shell Petroleum Development Company of Nigeria Limited (SPDC) on rural development in Nigeria and finally chapter five contains summary, conclusion and recommendations.
