Letter to Terrie O'Leary RE: World Bank to support Shell's activities in Nigeria - June 4, 2000

Terrie O' Leary
Executive Director for Canada
World Bank Group
1818 H St. NW
Washington, DC  20433
June 4, 2000

Dear Ms. O' Leary,

We are writing to express our serious concerns related to a proposed IFC investment, the Niger Delta Contractor Revolving Credit Facility, and to urge you to vote against this project.  This project involves IFC and the Shell Petroleum Development Company teaming up to provide credit to Nigerian contractors who are providing services to Shell.

Despite elections which brought General Olusegun Obasanjo to power, the Niger Delta  remains an extremely volatile region, in which human rights violations continue to occur. Shell's operations in the Niger Delta have been the target of national and international human rights and environmental campaigns for almost a decade. Years of oil drilling by Shell have destroyed local livelihoods, polluted the environment created social unrest, and led to the militarization of the Delta region.  Shell's culpability for this irreparable damage has poisoned relations between the local people and Shell. The Ogoni people have demanded that Shell address its legacy of failure, and Shell has not complied.  In 1995, under the brutal rule of Abacha, the Ogoni writer and environmental and human rights activist Ken Saro Wiwa and eight of his fellow Ogonis were hanged after false charges were filed against them by a kangaroo court.  This is one reason why Ogoniland remains closed to Shell to this day.

A report commissioned by Shell, and not made public, has found that its efforts in the past three years to promote development in Nigeria have failed.  (Economist, May 12, 2001)  According to a Human Rights Watch report from December 2000, "independent visitors to Ogoniland who have interviewed local people uniformly report their view that the majority of Ogonis oppose a return of Shell to the area.  Any activity that can be interpreted as indicating a desire of Shell to resume operations, even if not directly related to oil production, therefore has the potential to create significant tension with the community."  In fact, in March and April 2000, controversy over various development projects led to violence in Ogoniland, resulting in the killing of several Ogoni civilians by paramilitary Mobile Police

Partnerships between IFC and Shell will only worsen these problems, and as IFC notes in the Project Summary (May 18, 2001), "IFC's involvement in the Niger Delta region and the association with Shell could pose a reputational risk to IFC."By going forward with this project, IFC would be providing financing to support the very activities that have led to the volatile situation in the Niger Delta.

The fact that this investment is being channeled through a Financial Intermediary (FI), rather than through direct IFC financing, only serves to make matters worse. The IFC's increasing use of FIs as a vehicle for private sector financing, and the resulting reduction in social and environmental oversight of FI subprojects, is worrying in and of itself. However, it is particularly problematic for projects that are both controversial and located in volatile situations. FI sub-projects are not as closely scrutinized by IFC social and environmental staff relative to IFC direct lending. Not only will the lower level of IFC oversight make it difficult to ensure compliance with IFC policies, but there is also some ambiguity as to whether or not IFC environmental guidelines are applied to Type 2 FI sub-projects. Furthermore, the already limited information disclosure requirements that applied to IFC direct lending do not apply to FI sub-projects. This lack of transparency is a major concern since it will reduce the ability of project-affected peoples to understand and input into FI sub-projects.  We are deeply troubled by the IFC's intentions to extend this controversial financing through an FI.

This project is not one that will result in the reduction of poverty of the poor of Nigeria.

We have included for your review a letter from environmental and human rights groups from Nigeria, which outlines the problems associated with the project.  We share their concerns and urge you to use your voice and vote to ensure that the World Bank Group will not support this project.

We appreciate your attention to these concerns and look forward to your response.


Pamela Foster
May 28, 2001

President James Wolfensohn
World Bank Group
1818 H Street, NW
Washington, DC 20433 USA

Dear President Wolfensohn,

The Environmental Rights Action/Friends of the Earth, Nigeria and the undersigned Niger Delta based organisations are writing you to express our concerns about the proposal of the International Finance Corporation (IFC), a member of the World Bank Group, to support the activities of Shell in Nigeria. The proposal involves the IFC contributing US$15 million to a fund to be managed in a partnership with Shell Nigeria and an unnamed Nigerian Bank. The purpose of the fund is to provide loans to so called small and medium-sized local contractors working for Shell and other Shell affiliates in the Niger Delta area of Nigeria.

We are shocked that the IFC will ignore the safeguard policies of the World Bank in this project that will impact on the environment, livelihood and communal integrity in the violated Niger Delta area of Nigeria.

It appears that the IFC has considered the profitability of the proposed investment and ignored the social and environmental costs to be borne by the communities of the Niger Delta area as a result of the proposed project, due to the following factors:

Shell Nigeria otherwise known as the Shell Petroleum Development Company has been widely condemned for human rights abuses, including its collusion with the Nigerian authorities for the mass murder of community people impoverished as a result of the devastation of their natural environment and the destruction of community sources of livelihood by Shell and other transnational oil companies operating in the Niger Delta area. We understand that Shell has over the past years invested heavily on an image laundering campaign in Europe and North America. However, the media campaigns have not resulted in improvement in practice of the company in the Niger Delta of Nigeria. Oil spills continue regularly as a result of breakdown of old, ill-maintained pipelines, oil wells and other facilities. Shell and her contractors continue to disregard even basic environmental precautions in the forests, wetlands and community farmlands as oil spills are burnt openly and waste products are disposed of indiscriminately etc. Shell is very tardy in investing in the elimination of the destructive flaring of associated gas. And the company continues to be protected by soldiers in some of its installations in Rivers, Bayelsa and Delta States. It is exactly the activities of companies like Shell that have made the Niger Delta area risky for investors like the IFC , and most importantly, for the local communities in the area.

The contractors to Shell have been operating in an environmental and socially destructive manner as Shell does not encourage real compliance with standards and as the Nigerian government continues to treat environmental protection of the Niger Delta as low priority issue.

Oil and gas contracts and oil and gas contractors do not create jobs in a sustainable way. Contractors to Shell operate on a hire and fire basis depending on the availability of contracts. During brief spells on the employ of Shell contractors, workers are forced to operate under difficult working conditions with very low wages in and up to 12 hours working days. Shell is increasingly relying on contractors to avoid providing real employment. We should point out that the unsustainability of oil and gas contract employment has resulted in hundreds of thousands of displaced unemployed labourers inhabiting the slums of oil cities such as Port Harcourt and Warri in the Niger Delta.

The pattern of award of contracts to local contractors by Shell suggests a tendency towards bribery of influential individuals within communities who become agents of destabilisation within their communities. Many communal crises in the Niger Delta area are a direct result of the mode and execution of contracts by the Shell.

The oil industry as presently structured can create huge profit for companies and revenue for government but cannot be relied upon for eradication of poverty in communities. On the contrary more investments in the oil-mining sector will exacerbate poverty and dislocation in the communities of the Niger Delta area of Nigeria. This is also the experience of other communities in developing tropical countries.

Considering the foregoing, it is our position that the proposed IFC partnership with Shell Petroleum Development Company is irresponsible and is in contempt for the communities of the Niger Delta area. We, therefore, call on the IFC and the World Bank Group to abandon the dangerous idea of the so-called Niger Delta Contractor Revolving Credit Facility.

We implore the World Bank Group to discontinue lending and strategic support to unsustainable oil and mining projects that destroy our environment and impoverish our peoples.


Oronto Douglas, Deputy Director
Environmental Rights Action (ERA)
Nnimmo Bassey, Director
Environmental Rights Action (ERA)

Isaac Osuoko
Oilwatch Africa