(Malcolm Brinded, Chief Executive, Shell Exploration & Production)
21 September 2006
Part One (By a Shell Insider)
There are some important similarities between Sakhalin and the Brent maintenance issues which you may wish to bring to the attention of your readers.
Brinded was advised against the Sakhalin development by his Exploration and Production technical staff on the basis of economic and risk considerations in the 1990’s. Even at $9bn the Sakhalin project was considered marginal, especially given the uncertainties of operating in a frontier environment.
The desperate need to “book” reserves meant that the project had to be approved. So when the “Exploration and Production” group failed to give the answer that Brinded wanted to hear, the project was passed to the “Gas and Power” group who signed up with the Russians on almost exactly the same terms that had already been rejected by the “Exploration and Production” group. The Russians agreed to reimburse the $9bn estimated cost. Shell are now asking the Russians to reimburse more than twice the cost stipulated in the contract, and Shell are crying “foul” when the Russians refuse to do so.
The “Exploration and Production” group were right in their assessment, and Brinded was wrong. The Russians are saying that at $20bn the Sakhalin project is sub-economic. This is exactly what Brinded was told by his Exploration and Production staff ten years ago. Brinded should now take responsibility for the results.
Brinded was advised by his Exploration and Production technical staff that the Brent platform needed maintenance work, but chose to ignore the advice as it would have meant a reduction in oil production while the required repairs were carried out.
The “Exploration and Production” group were right in their assessment, and Brinded was wrong. And people have died as a result. Brinded should now take responsibility for the results.
Part 2 (By John Donovan)
The advice which Brinded received in respect of the Brent Bravo platform was from Bill Campbell in his then capacity as Group Auditor for the Royal Dutch Shell Group. After Mr Campbell had carried out an inspection of the safety regime on the platform, he warned Brinded that safety documents had been falsified and repairs bodged. His advice was ignored and two workers subsequently lost their lives. A Fatal Accident Inquiry found that the deaths were avoidable. Shell admitted responsibility for the deaths and paid a £900,000 fine imposed by HSE.
Brinded held senior positions in Shell Expro for a number of years. I had some dealings with him in 1999 when I brought directly to his attention irrefutable documentary evidence of a scam perpetrated by Shell management on companies bidding for a major Shell contract. Brinded chose to ignore the evidence. Many honest companies who thought they were participating in a fair tendering process were cheated. The Shell manager who masterminded the scam had a long track record of stealing intellectual property on behalf of Shell management. To my astonishment, he claimed and received backing from the highest levels of Shell. I invited Brinded to dissociate himself from endorsement of such underhand activity. Brinded turned his usual blind eye. That was when I realised that Brinded is dishonest and incompetent. However, such flaws appear to have been perceived as an asset by his fellow Shell executives and Brinded continued his rise to the top of Shell management.
Brinded took over as head of Shell Exploration and Production in March 2004 after Walter van de Vijver was forced to resign as a consequence of the hydrocarbon reserves fraud. It was essential at that point to restore trust and stability by not saying anything that might end up causing further damage to Shell’s credibility. Brinded was supposed to be a safe pair of hands. However, his credibility (and Shell’s) evaporated each time he was forced to announce further downgrades despite assurances he had publicly given to Shell shareholders. Nearly a third of Shell’s booked reserves vanished.
A few days ago the following comment was posted on our “Live Chat” facility:
“If they do not fire Brinded now, they will never fire anyone for incompetence and/or lying.”
I entirely share that view.