By Sylvia Pfeifer,
Last Updated: 12:13am BST 01/04/2007

Some of BP’s largest shareholders have expressed grave misgivings over the role of the British oil giant in the controversial auction of the remaining assets of Yukos, the bankrupt Russian oil group, last week.

At least two of BP’s top 20 shareholders are understood to be planning to raise the issue with the company in the next few weeks. They fear that BP’s reputation has suffered after TNK-BP, its Russian joint venture, took part in the auction of a stake in Rosneft, the state-controlled oil group, which belonged to Yukos.

TNK-BP abandoned its bid for the 9.44 per cent stake after less than 10 minutes, leaving just Rosneft in the running. Its swift departure fuelled speculation that it took part only to legitimise the process and curry favour with the Kremlin in a bid to safeguard its assets in the country. BP strenuously denies this.

“The expectation of TNK-BP was that it would export good corporate governance. But if nobody in the investor community puts up their hand and asks if this was the right thing to do, what would happen?” asked one shareholder.

News that BP would take part in the auction emerged just hours before Lord Browne, its chief executive, and his successor, Tony Hayward, met President Putin 10 days ago. Since TNK-BP was formed in August 2003, Russia has become a vital source of oil and gas revenues for the oil group. Last year BP’s share of TNK-BP’s output was 60 per cent higher than its total US production.

But fears have mounted in recent months that some of its assets could be seized by the Russian government, which has tightened its grip on the energy sector. Royal Dutch Shell, BP’s rival, was last year forced to surrender control of Sakhalin, its field in Siberia, to the state-owned Gazprom. Similarly, analysts fear that TNK-BP could be stripped of its licence to develop the Kovykta gas field in eastern Siberia, an important source of future production.

One top 10 shareholder said investors’ concerns over BP’s involvement in Russia were one reason for the company’s poorly performing share price, which has fallen from 723p to 552p in the past 12 months.

“[The auction] was not BP’s finest hour but I can see why they did it,” he said. “Our view is that it is part of the realpolitik of getting involved in Russia.”

This is not the first time investors have raised concerns over Western companies’ exposure to Russia. Last year F&C Asset Management, one of Britain’s biggest investors, threatened publicly to boycott the London listing of Rosneft, which had previously acquired Yukos’s main production unit at another controversial auction. F&C said the offering raised serious questions of corporate governance and legal risk. BP came under fire at the time for buying a 1 per cent stake in Rosneft.

A spokesman for BP said: “It was a TNK-BP decision [to take part in the auction] that was based on a genuine interest in the assets that were on offer.”

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/04/01/cnbp01.xml

Sunday 1 April 2007

You could almost feel sorry for Tony Hayward, BP’s chief executive in waiting. Before even starting the job he was catapulted into a diplomatic dilemma this month that makes Tony Blair’s efforts to negotiate with Tehran look like a walk in the desert.

The intimidating venue was the Kremlin, where Hayward was introduced to president Putin by BP’s outgoing chief executive Lord Browne. Four years ago when Browne first took BP into Russia with an audacious bid for TNK, the balance of power looked rather more even: Russia desperately needed Western industry expertise to kick-start its moribund energy sector. Political cover from Downing Street promised BP a fair crack at the whip.

But since then relations have turned sour. The violent seizure of national oil assets at Yukos was followed by the dismissal of Shell from similar joint ventures in Sakhalin. Now BP desperately needs to stay on the right side of Putin if it is to avoid being squeezed out in similarly brutal fashion.

In the circumstances, Browne and Hayward could be forgiven for wanting to be helpful, but TNK-BP’s role in the auction of some of those Yukos assets appears to have overstepped in the mark. By pulling out almost as soon as the auction started, to make way for a rival bidder backed by the Russian state, the suspicion left is that this was an exercise in legitimising the auction process rather than a serious desire to push BP even deeper up to its neck in Russia.

Given how uncomfortable many institutional shareholders felt when Yukos assets were re-sold in London during last year’s flotation of Rosneft, it is no wonder some are uncomfortable to see BP playing its own role in the distasteful affair now.

The other thing that has changed since Lord Browne first went to Russia is BP’s reputation as a paragon of corporate virtue. In the wake of the damning US safety investigations, the last thing Hayward needs is to be portrayed as a Kremlin stooge.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/04/01/ccom01.xml

April 1, 2007

A British oil worker was kidnapped from an offshore drilling rig in Nigeria yesterday, officials and industry sources said.

“We can confirm there was an incident in the early hours of this morning in which a British national was taken hostage,” a spokeswoman for Britain’s Foreign Office in London said. “We are in touch with the Nigerian authorities to try to secure a swift and peaceful resolution.”

She confirmed the kidnapped person was an oil worker but said his name was not being released.

“An expat was kidnapped from the Bulford Dolphin rig,” said an industry source, without giving any further details.

The rig is situated about 40 miles (65 km) off the coast of the lawless Niger Delta, Nigeria’s oil heartland where kidnappings of foreign workers for ransom or to press political demands are common.

Six Britons, one American and a Canadian were kidnapped from Bulford Dolphin on June 2 last year in a night raid by gunmen in speedboats. They were released two days later.

The Bulford Dolphin rig is owned by the Norwegian oilfield services group Fred Olsen Energy ASA and leased to Nigerian firm Peak Petroleum, which operates it in partnership with Equator Exploration.

The facility is an exploration rig that will not produce crude for years.

The Niger Delta, which accounts for all of Nigeria’s approximately 2.5 million barrels per day (bpd) in crude exports, has been hit by a wave of abductions and attacks on oil facilities since late 2005.

Oil production has been down by 500,000 bpd since February last year because of a series of raids on Royal Dutch Shell oilfields that month by a rebel group, the Movement for the Emancipation of the Niger Delta (MEND). A MEND spokesman said the group was not involved in the latest abduction.

MEND has taken hostages to press its demands for greater local control of oil revenues, but numerous other “freelance” kidnappers have seized foreigners to extract hefty ransoms from companies or local authorities.

Analysts say the violence in the delta is rooted in poverty and a collapse in basic public services due to endemic corruption in government.

Millions of villagers with no access to clean water, electricity or roads resent the multi-billion dollar oil industry and its web of pipelines criss-crossing their lands.

Nigeria is the world’s eighth biggest exporter of crude oil.

By Tom Ashby
Reuters
Saturday, March 31, 2007; 10:05 AM

LAGOS (Reuters) - Gunmen in two speedboats abducted a British oil worker in a pre-dawn raid on a drilling rig 40 miles off the coast of Nigeria on Saturday, officials and industry sources said.

The gunmen first targeted a support vessel moored to the Bulford Dolphin rig, overpowered the crew, then climbed on to the rig and seized the Briton, a security expert working for a Western oil major said.

The Foreign Office in London confirmed the abduction.

“We can confirm there was an incident in the early hours of this morning in which a British national was taken hostage,” a spokeswoman said. “We are in touch with the Nigerian authorities to try to secure a swift and peaceful resolution.”

The security expert said the kidnappers came from a coastal community in the Niger Delta that has had disputes with the operators of the rig in the past.

Such disputes are common in the delta, where villagers neglected by corrupt governments expect oil companies to provide jobs and basic public services such as electricity, roads or clean water.

Kidnappings of foreign workers for ransom or to press political demands are common in the lawless delta, which accounts for all of Nigeria’s roughly 2.5 million barrels per day (bpd) in crude oil production.

Six Britons, one American and a Canadian were kidnapped from Bulford Dolphin on June 2 last year in another night raid by gunmen in speedboats. They were released two days later.

The rig is owned by the Norwegian oilfield services group Fred Olsen Energy ASA and leased to Nigerian firm Peak Petroleum, which operates it in partnership with Equator Exploration.

The latest attack did not affect production as the facility is an exploration rig that will not produce crude for years.

Nigeria is the world’s eighth biggest exporter of crude oil but the Niger Delta has been hit by a wave of abductions and attacks on oil facilities since late 2005.

Oil production has been down by 500,000 bpd since February last year because of a series of raids on Royal Dutch Shell oilfields that month by a rebel group, the Movement for the Emancipation of the Niger Delta (MEND). A MEND spokesman said the group was not involved in the latest abduction.

MEND has taken hostages to press its demands for greater local control of oil revenues, but numerous other “freelance” kidnappers have seized foreigners to extract hefty ransoms from companies or local authorities.

Violence in the delta is rooted in poverty and frustration at the lack of benefits for local communities from five decades of oil extraction that has polluted the air and water.

Millions of villagers with no access to clean water, electricity or roads resent the multi-billion dollar oil industry and its web of pipelines criss-crossing their lands.

(Additional reporting by Adrian Croft in London)

Week of April 01, 2007: Vol. 12, No. 13 
Oil Patch Insider

Shell is said to be scouting commercial office space in Alaska on the lookout for at least 35,000 square feet to house a substantially expanded in-state exploration team.

The Houston, Texas-based company currently maintains a small office in Anchorage, but has become increasingly busy with Alaska projects offshore the North Slope and in the Bristol Bay area.

Shell officials are eyeing the Anchorage market and hoping to negotiate a lease for one of at least three suitable locations, according to one knowledgeable Petroleum News source.

If the company is unable to find a good fit for its needs, Shell officials have said they will consider building their own offices, said the source, who asked not to be identified.

“The important thing is that they have committed to bring enough people to Alaska to fill 35,000 square feet. This will be quite a boost to the area,” he said.

—Rose Ragsdale

Week of April 01, 2007: Vol. 12, No. 13 

Shell Exploration & Production Co. was awarded the 2006 National Ocean Industries Association Safety in Seas Award on March 29, recognizing the company’s “outstanding contribution to the safety of life offshore for energy workers,” NOIA said in a statement.

Shell received the award for its “exceptional efforts” to recover the Mars tension leg platform and pipeline in the Gulf of Mexico after Hurricane Katrina.

A panel of judges from the U.S. Coast Guard, the U.S. Minerals Management Service and the National Academy of Science’s Marine Board selected the company.

“Shell’s achievement is exemplary in successfully integrating safety and training together in a large scale recovery effort. We applaud the fact that the Coast Guard, the MMS and the National Academy of Sciences continue to recognize our industry’s achievement and we congratulate Shell for their valuable contribution to the enhancement of offshore safety and responsible environmental stewardship,” said NOIA President Tom Fry.

The award, now in its 28th year, recognizes excellence among those who, by their actions, design or influence, have contributed to improving the safety of life offshore.

More than 1 million man hours without an injury

The recovery of the Mars platform and its infrastructure, which was done ahead of schedule, included organizing an on-site multi-national workforce of more than 500 people per day, communicating in three languages, working around the clock and recording more than one-million man-hours without a recordable injury, NOIA said.
The association said there were several “first time technical innovations” in the recovery project, including:

• Lift of the damaged and toppled 1,000-ton Mars drilling rig, a fully engineered single lift executed without personnel injury or further damage to the platform.

• Mooring and bridge connection of a North Sea semisubmersible “Flotel” — a floating hotel — adjacent to the platform in deep water to accommodate the large construction crew.

• Fully on-bottom repair of the 18-inch and 14-inch export pipelines in 2,700 feet of water using special oil containment devices and procedures as well as remote operating vehicles and a specially engineered pipeline repair kit.

During the Mars recovery project several health, safety and technical achievements were also recorded, including:

• Health, safety and environment training orientations for over 1,300 personnel.

• Daily management and weekly safety staff meetings, including management walk-through audits and job-site environmental audits.

• A behavior-based safety management process, with more than 2,600 behavior based observations conducted, tracked, trended and discussed during safety meetings. These observations identified 365 potentially unsafe conditions that were corrected during the course of the project.

By ANDREA R. MIHAILESCU
UPI Energy Correspondent

Russian natural gas giant Gazprom is short of time to join the oil and gas project Sakhalin-2 by the end of March, ITAR-TASS reported Friday.

Gazprom had hoped to complete the deal by March 31.

“Sakhalin-2 is a very large project, and a great amount of details that need to be agreed upon is present here, and this is very difficult technically,” Maxim Shub, Shell spokesman, told ITAR-TASS.

Shub said that intense talks on the completion of the deal were carried on, but a snag was a huge amount of documents to be coordinated.

“We hope to complete these talks this year,” Shub said, adding that “large groups of experts on both sides, including at the level of the leadership” participate in the talks.

Gazprom, Shell, Mitsui and Mitsubishi signed on Dec. 21, 2006, a protocol on the Russian company’s joining Sakhalin Energy in the capacity of a leading shareholder.

Under conditions of the protocol, Gazprom is to purchase 50 percent of shares plus one share in Sakhalin Energy.

In order to complete the deal, each of Sakhalin Energy’s shareholders will reduce its stake by 50 percent with a proportional distribution of payments.

After completion of the transfer, Shell will have 27.5 percent of shares, Mitsui 12.5 percent and Mitsubishi 10 percent.

EXTRACT: The location of Shell’s headquarters in the Netherlands away from the world’s top financial centre may be emulated by Barclays/ABN Amro if those two banks merge, showing that we favour cutting our nose to spite our prospects.

THE ARTICLE

By Martin Simons
Published: March 31 2007 03:00 | Last updated: March 31 2007 03:00

From Mr Martin W. Simons.

Sir, Lombard’s comment in support of the impending takeover of E Wood Holdings by 3M (”A history lesson”, March 23) should be questioned. The agreed takeover of this specialist high-performance coatings company follows recent US takeovers of Tor Coatings and Farrow and Ball, a decorative paint company. These three have comfortably the highest operating margins among their UK peers.

Following these takeovers, only ICI, among the top 15 largest UK paint companies by sales, is UK owned. Some in the City would also like to see this historic company fall into foreign ownership.

The avalanche of disposals of large and small UK companies provides further opportunities for companies to adjust transfer prices and corporate charges or gain tax advantages, irrespective of the rate of corporation tax, at the expense of the exchequer and private people, many of whom are your readers.

The location of Shell’s headquarters in the Netherlands away from the world’s top financial centre may be emulated by Barclays/ABN Amro if those two banks merge, showing that we favour cutting our nose to spite our prospects.

Perhaps the FT will belatedly see the light of day if it is acquired by a German, Indian or US conglomerate or a private venture fund.

Martin E. Simons,

London SW15 6HJ

Bandar Seri Begawan - Brunei Shell Petroleum Company Sdn Bhd (BSP) has added another workhorse in support of the oil and gas industry.

Last Monday saw the successful launching of the “MV Belait Aishah” in Port Kiang, Malaysia. The vessel is a Well Service Support/Offshore Maintenance Vessel (WSS/OM Vessel) and it is the very first WSS/OM Vessel to be locally owned, registered, flagged and operated in Brunei Darussalam.

The Belait Aishah is the latest third generation Workboat and will be entering service with BSP in May 2007.

The occasion can be considered another milestone in the continued progress of Brunei Darussalam’s oil and gas service industry fully supporting BSP’s local business development programme.

This further demonstrates the ability of local companies to advance to the forefront of the technologically and financially demanding offshore marine sector supporting the petroleum industry. Bank Islam Brunei Darussalam is also a key supporter providing important banking services and facilities towards the successful build.

Launching the vessel were the guest of honour, Bank Islam Brunei Darussalam Bhd’s Managing Director, Awang Haji Muhammad Syaipuddin bin Haji Abdullab, the Marine Superintendent of Brunei Shell Petroleum Sdn Bhd, Captain Embran bin Hj Momin, and the Managing Director of Belait Shipping Company Sdn Bhd, Pg Hj Hassan bin Pg Zahari.

Other attendees witnessing the event included senior management from BIBD, BSP, BSC, the builders Muhibbah Marine Engineering Sdn Bhd, international oil and gas services companies as well as vendors.

The vessel was launched following a “Doa Selamat” read by Ustaz Ridwan who also called the “Azan” during the launch. When the tidal conditions were right at around 6 pm, the vessel supports were removed and the vessel slid effortlessly on its rails into the water with its horns blaring.

The event was indeed a momentous occasion for all involved in the hard work and support of its construction.

By SHAI OSTER
March 30, 2007 4:53 a.m.

BEIJING — In one of the biggest deals of its kind, U.S. oil giant Exxon Mobil Corp. Friday signed a deal with Saudi Aramco and China Petroleum and Chemical Corp., better known as Sinopec, to expand an oil refinery in China’s rich southern province of Fujian and add on a vast chemicals facility for completion by 2009.

With China still tightly regulating fuel prices, big oil is increasingly looking at the country’s surging demand for chemicals.

Exxon Mobil and Saudi Aramco will each own 25% of the roughly $5 billion project, with the rest held by Sinopec and the local government. The investors will more than triple the existing oil refinery at Quanzhou to a capacity of 240,000 barrels of fuel a day. The deal has been under negotiation since 2001. Key approvals were only handed down earlier this year. Aramco will provide oil for the project.

“When you look at price controls, refining is a difficult business in China,” Steve Simon, Exxon Mobil’s senior vice president and director in charge of downstream refinery and chemicals, said in an interview. Instead, the new venture will rely initially on its integration with a vast chemicals facility to tap into China’s quickly growing market for chemicals, where prices aren’t regulated. The new project will convert oil into the feedstock for plastics, paints, fibers and other basic chemicals essential to China’s surging manufacturing sector.

Mr. Simon said that by 2015, about half of global chemical demand will come from Asia, with China accounting for one-fourth. Royal Dutch Shell, BASF AG, and BP PLC are among the major players already investing in petrochemicals in China.

The signing Friday at the Great Hall of the People, China’s equivalent to Capitol Hill, also marks Exxon’s first big foray into retail gasoline marketing in China. A separate contract was signed by Sinopec, Exxon and Saudi Aramco for a retail joint venture to manage and operate around 750 filling stations and a network of terminals in Fujian. Royal Dutch Shell and Total SA have already established limited regional networks.

As China grows richer, its middle class is buying cars. Even as the growth in demand for fuel in Japan, Europe and the U.S. tapers off, Exxon expects China’s fuel demand to grow at pace of 4.3% over the next five years, creating an attractive market, Mr. Simon said. But China’s refiners have been operating at a loss because of government fuel-price controls. China fears raising fuel prices could spark inflation or lead to social unrest among its poor farmers.

Mr. Simon said he was confident the government would be moving to relax price controls, something officials have said, but had no indication of any timetable when that could happen.

Write to Shai Oster at shai.oster@dowjones.com