17:36 | 31/ 08/ 2006 

MOSCOW, August 31 (RIA Novosti) - Russia’s environmental protection agency has completed the first part of a comprehensive audit of Sakhalin Energy activities under the massive Sakhalin-II energy project off the country’s Pacific coast, the agency said Thursday.

The Federal Service for the Oversight of Natural Resources started the inspection of Sakhalin Energy’s alleged violations of ecological legislation and project specifications on July 25 on the orders of Natural Resources Minister Yury Trutnev.

The first part of the probe included a thorough study of documentation concerning three offshore production platforms: the Molikpaq, which will start year-round oil production next year, and platforms in the Piltun-Astokh and Lunskaya license areas, as well as the pipelines connecting these platforms with the shoreline.

Experts found the company had failed to check the condition of abandoned wells at both fields in order to ensure the protection of water resources from pollution, the agency said in a news release.

The company also failed to submit timely reports on all prospecting and geological works, the document said.

“In addition, Sakhalin Energy has consistently violated the schedule for submitting statistical reports on water consumption,” the agency said. “In 2005, the Federal Service for the Oversight of Natural Resources registered excessive disposal of industrial wastewater from the Molikpaq platform, which is a violation of the Russian Water Code.”

The Natural Resources Ministry and the environmental protection agency will conduct the second phase of the Sakhalin-II audit in September-November 2006. It will include on-site inspection of all facilities under the project.

The Sakhalin-II project comprises an oil field with associated gas, a natural gas field with associated condensate production, pipeline, a liquefied natural gas plant and an LNG export terminal. The total reserves of the two fields are 150 million metric tons of oil and 500 billion cubic meters of natural gas.

Sakhalin Energy faces another potential setback after the Russian Academy of Sciences submitted a report to the Natural Resources Ministry highlighting geological processes endangering shoreline-pipelines as part of Sakhalin II.

The report said about 20 kilometers (12.4 miles) are under threat from floodwaters, which could endanger human lives as well as lead to an environmental disaster, and suggested suspending the construction of the pipelines while an environmental report is conducted to identify ways to reduce the risk of pollution.

The Russian government has threatened to sue Shell, which holds a majority stake in Sakhalin Energy Investment Company, if it fails to suspend work on the pipeline, though some analysts have interpreted the move as a wave to pressure the British/Dutch company to a deal with Gazprom. The energy giant is looking to gain a 20% share in the Sakhalin project in return for a 50% stake in a massive Siberian field.

The environmental agency also said Thursday it had asked prosecutors to investigate whether any forestland had been destroyed or damaged illegally in the laying of a shoreline pipeline.

The Sakhalin-II product sharing agreement was signed in 1994 between Russia and the Sakhalin Energy Investment Company, which currently comprises Shell Sakhalin Holding (55%), Mitsui Sakhalin Development (25%) and Diamond Gas Sakhalin (20%). It was the first PSA to be signed in Russia and came into force in 1996.

CALGARY, Alberta (Reuters) - Alberta regulators have approved a 100,000 barrel-per-day expansion of Shell Canada Ltd.’s Scotford upgrading refinery, part of a planned oil sands project that could cost up to C$12.8 billion ($11.9 billion).

The Alberta Energy and Utilities Board gave Shell Canada the green light to proceed with construction at the upgrading refinery near Edmonton, Alberta. The upgrader converts tar-like bitumen from the oil sands into refinery-ready synthetic crude.

Construction isn’t expected to begin until next year but Randy Provencal, a spokesman for Shell Canada, said the firm may begin clearing land and preparing the site next month.

The upgrader work is part of an expansion of the Shell Canada-operated Athabasca Oil Sands Project, which includes an oil sands mine near Fort McMurray, Alberta.

The company said last month the cost of the project had ballooned to between C$10 billion and C$12.8 billion from C$7 billion because of higher labor and materials costs. The Athabasca project currently produces about 155,000 barrels of synthetic crude oil a day.

Shell Canada hasn’t made any public estimates on the cost of the upgrader improvements, but Provencal said it would account for about 60 percent of the price tag for the entire expansion.

Shell Canada is 78 percent owned by Royal Dutch Shell . It has a 60 percent stake in the Athabasca project while Chevron Corp. and Western Oil Sands Inc. each hold 20 percent stakes.

($1=$1.11 Canadian)

31 Aug 2006 bbj.hu

Russia may open a criminal case against Royal Dutch Shell Plc’s Sakhalin-2 project because of “numerous” environmental violations, the country’s Natural Resources Ministry said. Oleg Mitvol, the deputy head of Russia’s environmental inspectorate, is ready to provide material from a recent inspection to the Prosecutor General’s office, the ministry said in an e-mail yesterday. Charges may be brought in relation to illegal logging by subcontractors, the statement said.

Earlier this week, Sakhalin Energy, the Sakhalin-2 operator, said it had halted some pipeline construction because of environmental concerns. Subcontractors ignored license conditions in a landslide area and prompted the halt, company spokesman Ivan Chernyakhovsky said on Aug. 28.

The Natural Resources Ministry said it had ordered a halt to the construction on Aug. 10. Sakhalin-2, located off Russia’s Pacific coast and operated by Sakhalin Energy, is 55% owned by Shell, 25% by Mitsui Co. and 20% by Mitsubishi Corp. Sakhalin Energy plans to start deliveries of liquefied natural gas from the project in the summer of 2008.

“We’ve only just seen the statement and can’t comment,” said Sarah Smallhorn, a London-based Shell spokeswoman. (Bloomberg)

AFX Europe (Focus)
Published: Aug 31, 2006

LAGOS (AFX) - Nigeria’s two main oil workers unions will begin a three-day warning strike on Sept 13 in protest against a wave of kidnappings and violence in the Niger Delta, a union official said.

The national executive committees of the National Union of Petroleum and Natural Gas Workers (NUPENG) and Petroleum and Natural Gas Senior Staff Association (PENGASSAN) took the decision late yesterday in the southern town of Benin, the labour leader, who attended the meeting, told Agence France-Presse.

“We have given the federal government an ultimatum to stem the violence and address the security situation in the Niger Delta. But if they fail to do so by Wednesday September 13, we will proceed on a three-day warning strike,” he said.

“We will ask our members to quit the region for the three days. Oil production and exports and even, loading of petrol, will be halted for the period of the warning strike,” he said.

He said the unions were also sad that one of its members, a Nigerian employee of Anglo-Dutch oil group Shell, was killed during fighting between militants and troops in the region.

Shell confirmed the death of Nelson Ujeya, who was involved in a security incident o August 20, in a statement on Tuesday.

The Niger Delta has seen an upsurge in violence in recent months with more than 40 foreign oil workers kidnapped but released by separatist fighters seeking greater share of Nigeria’s oil wealth.

Last week, PENGASSAN Presdient Peter Esele threatened to pull oil workers out of the region unless the violence was stopped.

Nigeria, Africa’s biggest oil producer, is the world’s sixth biggest crude exporter with 2.6 mln barrels per day, but 20 pct of that figure is currently lost to unrest in the region.

The Niger Delta is home to Nigeria’s multi-billion-dollar oil and gas resources, but poverty in the region is pervasive and the majority of its inhabitants live on less than one dollar per day. newsdesk@afxnews.com afp/cml

August 31, 2006

SEC drops investigation of Watts
By David Robertson
 
THE world’s leading financial regulators have concluded that nobody is to blame for Shell’s overstatement of its oil reserves, after the US Securities and Exchange Commission (SEC) dropped its investigation of Sir Philip Watts.

Sir Philip, the former executive chairman of Shell, is understood to be considering how to rebuild his reputation, including potential legal action against those who alleged wrongdoing on his part. 
 
The SEC, America’s market regulator, has decided not to take its investigation into Sir Philip any farther, a decision that the Financial Services Authority (FSA) in Britain reached last November. Dutch authorities have also decided to take no action, even though Shell has restated its oil reserves five times since 2004.

From 1998 to 2003, Shell had been claiming oil and gas reserves as “proven” — which carries a strict SEC definition — when it should not have done. Claiming reserves as proven means that a company is all but ready to pump the oil and the oil can be booked as a hard asset.

In January 2004 Shell was forced to restate an initial 3.9 billion barrels of oil, seriously damaging the company’s credibility. The FSA fined Shell £17 million for misleading investors and Shell has also agreed to pay $4 million to the State of California in settlement. The company also made a $120 million settlement with the SEC.

An earlier US Department of Justice investigation ended in June 2005 with no action being taken against Shell. However, even after financial regulators had disciplined the company, they remained intent on finding an individual responsible for the debacle. Both authorities have concluded that no case can be made against Sir Philip. He said yesterday: “I am extremely pleased that the US authorities have closed the investigation. As I have stated from the beginning, I have acted in good faith throughout and I had every reason to believe that all at Shell acted properly and in good faith when disclosing proved reserves.”

Sir Philip was dismissed by Shell in March 2004. He is believed not to have worked since, because he has been busy establishing his legal defence. Friends say that he may seek to initiate legal action against those who accused him of malfeasance. Lawyers representing Sir Philip in the US said yesterday that the SEC’s decision to drop its investigation vindicated their client.

Joseph Goldstein, a lawyer with Mayer, Brown, Rowe & Maw, said in Washington: “This has probably been the closest examination of any one person’s conduct that I have ever seen, and we are very pleased to see the case closed.

“Two of the world’s major regulators have carefully reviewed all the testimony and interviewed dozens of people and concluded there is no case. Sir Philip really deserves his reputation back.”

Sir Philip, who lives in Berkshire, is not clear of trouble. He and two other former executives are named as defendants in a class-action lawsuit that has been filed against Shell in the US.
 
TIMETABLE OF INVESTIGATIONS
 
Jan 2004: Shell cuts oil and gas proven reserves by 20 per cent. Restatements prompt investigations by UK and US authorities. Chairman Sir Philip Watts refuses to step down.

March 2004: Sir Philip dismissed and replaced by Jeroen van der Veer, head of Shell’s Dutch arm. SEC launches inquiry into Shell and Sir Philip’s role.

April 2004: Judy Boynton, chief financial officer, resigns. Shell admits to having known about problem since 2001. Downgrades reserves again. Unveils share buyback to calm investors.

May 2004: Cuts oil reserves again; says that it does not expect to do so again.

July 2004: Shell fined £17 million by FSA, largest penalty it had imposed. Shell also makes $120 million settlement to SEC.

May 2005: Annual report reveals the net present value of the 4.5 billion barrels cut in the first restatement was $6.65 billion when applied to the year 2002. However, the value of the second cut, when applied to the same year, was about $5.4 billion, even though only 1.15 billion barrels were removed.

July 2005: US decides not to take Shell to court for overstating its oil reserves.

August 2006: SEC drops its investigation into Sir Philip.

PENSION FUNDS SEEK REDRESS

Shell and three former directors, including Sir Philip Watts, are being sued by investors in the US District Court for New Jersey. The investors allege that they were misled by Shell when it overstated its oil reserves between 1998 and 2003. The lead plaintiffs are Pennsylvania state retirement funds, and in January they were joined by Dutch, German and Luxembourg pension funds.

http://business.timesonline.co.uk/article/0,,9072-2335870.html

Houston, Aug. 30 (PTI): Shell Technology India (STI) that will deliver high-end technical studies, project management and technical services to companies across the globe will become operational in Bangalore from September this year and plans to go on a massive recruitment drive in the country.

“By the end of 2006 we hope to have 200 engineers and scientists hired locally and envision the workforce growing to over 1,000 in the future,” Paul Hamilton, President, Shell Global Solutions said in his keynote address at the seventh annual Gala of the Indo American Chamber of Commerce of Greater Houston.

“Recruiting is currently focussing on graduates in India and experienced professionals around the world. The new technology centre offers high-end global technical careers for people who see India as their base,” Hamilton said.

Shell Global Solutions, one of the world’s leading providers of cutting-edge consultancy and technology services to the upstream E&P, petrochemical and processing industries has made a range of new investments in India and now leads the integrated oil companies with over USD one billion invested, supporting to the country’s energy needs.

These include an LNG re-gasification terminal in Hazira, a state-of-the-art lubes blending plant in Mumbai, and an LPG import terminal in Papavavin.

“The environment in which we work is changing rapidly, thus creating considerable opportunity. These opportunities exist for the people and economies of Houston and India, fostered by the efforts of the IACCGH and the energies and imaginations of the people within this room,” he said.

Need to Know:

Financial regulators have concluded that nobody is to blame for Shell’s overstatement of its oil reserves after the US Securities and Exchange Commission dropped its investigation of Sir Philip Watts, Shell’s former chairman.

The UK’s Financial Services Authority reached the same conclusion last November.

The Dutch authorities also decided to take no action despite Shell restating its oil reserves five times since 2004. 

By Andrew Hill

Published: August 31 2006 03:00 | Last updated: August 31 2006 03:00

In the midst of Shell’s investigation into its reserves crisis, in April 2004, Lord Oxburgh, then chairman of Shell Transport and Trading, said “human failings, not structural deficiencies” were to blame for the problems.

At the time, it seemed more likely to be a combination of both.

But the US Securities and Exchange Commission’s decision this week not to take action against Sir Philip Watts, Shell’s former chief executive, means that regulators on both sides of the Atlantic have now decided to punish the company rather than any individuals. The Financial Services Authority’s decision to close its investigation into Sir Philip was announced last November.

Sir Philip, not unnaturally, is “extremely pleased” and that at least must be a relief for weary watchdogs.

Even the 2004 FSA notice that imposed a record fine on his former employer had angered him - hasty, unfair and prejudicial, said his lawyers - though it did not mention Sir Philip by name. At least now the pugnacious former oilman will start to put this saga behind him. Investors should do the same.

It may seem unsatisfactory that shareholders alone have paid the price for a scandal that had human fingerprints all over it. But a number of top Shell employees have been punished in kind. Some lost their jobs. The 2004 report into the scandal by a US law firm - which laid bare the open war between Sir Philip and Walter van de Vijver, then head of exploration and production, over the reporting of reserves - was damning enough for their reputations.

The structural deficiencies that Lord Oxburgh seemed unwilling to admit had played a part in the scandal also had to be addressed. It remains to be seen whether uniting the dual holding companies last year to form Royal Dutch Shell has put a complete end to dysfunction. But the management would have resisted even that step had it not been for the close attention and strong pressure of the regulators. Now move on.

Copyright The Financial Times Limited 2006