Posts from ‘September, 2007’

By Thomas Elias

It’s one thing for consumer advocates to argue endlessly that oil companies are guilty of long-running collusion in setting prices. There’s plenty of evidence they are correct in that contention – the similarly of prices offered by different companies at the same intersections is one indicator. But no one has yet produced a smoking gun to prove such a conspiracy.

Yet, there’s another form of gas pricing deception for which there is plenty of proof, even including defiant admissions from some oil company executives in congressional testimony.

Take a close look at the pump, any pump, next time you pull into a service station to fill up your tank. Chances are there will be a seal of approval of some type from the county bureau of weights and standards attesting that when this pump says it’s giving you one gallon, it really is.

Trouble is, it often isn’t. And the pumps at ExxonMobil stations are the first to actually admit it.

For gasoline expands as temperatures rise. But the fuel is sold as if the temperature outside is always 60 degrees Fahrenheit, the so-called “industry standard.” This means that whenever the thermometer tops 60, motorists are cheated out of a few cents for each gallon they buy. Add this up over hundreds of thousands of cars and billions of gallons and you end up with oil companies cheating customers across the country out of approximately $2.3 billion dollars yearly. That’s about a $500 million loss each year to California drivers, or about $40 per year per registered vehicle, since year-round California weather (average temperature: 74.6 degrees) is 10 degrees above the national average (64.7). In the hottest weather, the discrepancy can amount to as much as 50 cents per gallon, as gallons are measured by the pump, when the price of a gallon tops $3.
If $40 per year per car for nothing but hot air isn’t a rip-off, it’s hard to see what is.

All that’s needed to fix the problem is temperature-adjusted gas pumps. But there’s been no move by either Gov. Arnold Schwarzenegger or the Legislature to make sure Californians get what they pay for.

Rather, Big Oil is getting what it pays for via campaign donations.

For the politicians seem to be agreeing with oil company executives, who testified this summer that they don’t plan to do anything about temperature adjustments. Shell Oil vice president Hugh Cooley, for one, told a congressional committee that Shell “does not believe that the American consumers are harmed in any way.”

That is, unless 40 bucks a year per car for nothing represents no harm.

Plainly, ExxonMobil, the world’s largest oil company has some concerns about this, perhaps fearing a class action lawsuit with huge punitive damages for knowingly cheating the public.

So ExxonMobil in August became the first oil company to place small, unobtrusive stickers on all its pumps warning that the energy content of a gallon of its fuel will vary by temperature.

But ExxonMobil also has no plans to do anything about this, except print stickers.

“They acknowledge through these stickers that this is a rip-off,” says Jamie Court, president of the California-based Foundation for Consumer and Taxpayer Rights. “It’s like a grocery store posting warnings that a produce scale is broken – but you’ve got to use it anyway.”

Adds Judy Dugan, the foundation’s research director, “(They) owe drivers more than a cheap sticker in tiny print. The companies have funds that they use to help dealers with infrastructure, and which could be used to buy nozzles that adjust fuel volume for higher temperatures.”

But the oil companies are lobbying hard against a new bill by Democratic Sen. Claire McCaskill of Missouri that would require such temperature adjustments nationally.

Meanwhile, oil companies have quietly complied with a year-old Canadian law requiring all gasoline pumps there to be temperature adjusted. Of course, the average temperature in Canada is more than 10 degrees lower than the overall American average and more than 20 degrees lower than California’s.

Plainly, the companies have no problem in Canada, where temperatures don’t boost their profits much. But in America, and especially in California, they are fighting any such regulation.

Which means that even if you’re skeptical about oil companies’ price fixing, there can no longer be any doubt about the fact they are often selling nothing but hot air to California drivers.

tdelias@aol.com

Thomas Elias is a syndicated columnist who covers California issues. He lives in Santa Monica.

The Wall Street Journal: How Economy Could Survive Oil At $100 a Barrel

Compared to 1980, U.S.
Is More Able to Handle
Once-Unthinkable Rise
By PETER FRITSCH and KELLY EVANS
September 29, 2007; Page A1

The world economy has managed, with some indigestion, to swallow the rise of oil prices past $80 a barrel. How well could it survive $100 a barrel?

The answer is quite well — so long as several conditions still hold true. The price rise would probably have to be gradual. Inflation couldn’t get so bad as to force big interest-rate hikes. Oil-rich nations would need to pump their profits back into U.S. and European economies.
 
All of this has happened so far. The happy confluence may continue, though fears remain strong that high energy prices will tip the U.S. into recession.

A host of factors, including tight oil supplies and a weak U.S. dollar, suggest that oil prices have further to rise. Some analysts continue to believe that oil is destined to reach an all-time high, as measured in today’s dollars, of more than $101 a barrel. The record was set in 1980. On Friday in New York, the benchmark crude-oil futures price closed down $1.22, or 1.5%, to finish at $81.66, a little more than $2 off the all-time high, not adjusting for inflation.

High oil prices could lead to ugly consequences if they hit consumers’ pocketbooks — especially in the U.S., where the housing slump is already hurting the economy. Consumer spending has been the primary engine of growth in the U.S. in recent years.

Target Corp. was among the major retailers in the last week cutting sales forecasts. Target expects September sales at stores open at least a year to rise just 1.5% to 2.5%, down from an earlier expectation of 4% to 6% growth.

For all the concern, the world today is better equipped to swallow expensive oil than it was when Jimmy Carter was installing solar panels and a wood-burning stove in the White House.

The main reason has to do with what some call the Wal-Mart effect. For every extra dollar taken from drivers’ pockets at the pump in the form of higher prices in recent years, low-cost exporters from China and elsewhere have put roughly $1.50 back in the form of cheaper retail goods. Even at today’s near-record prices, U.S. households today spend less than 4% of their disposable income at the pump, vs. over 6% in 1980.

Current prices are also a reflection of a strong economy, not an oil embargo or war in the Middle East. Since a market-share war between Saudi Arabia and Venezuela flooded the market with oil and drove prices to below $11 a barrel in 1998, oil prices have risen nearly eight-fold. During that run, the global economy grew roughly 5% each year.

Strong growth in places like China helps take some of the edge off the oil-price blow for U.S. and European companies such as Detroit’s Big Three auto makers. Many emerging markets are hitting a “takeoff” stage, where per-capita income reaches a level that sparks serious auto demand, says Ellen Hughes-Cromwick, Ford Motor Co.’s chief economist. Growth in emerging markets is a “structural development” that is “less sensitive to oil-price changes,” she says.

“There’s a more relaxed attitude now,” said Daniel Yergin, a noted oil historian and chairman of Cambridge Energy Research Associates. At a recent event promoting Alan Greenspan’s new memoir, Mr. Yergin asked the former Fed chief on stage if $80 oil was a concern. “He basically shrugged and said, ‘Not so far,’” Mr. Yergin recalls.

Economists see global growth slowing but still chugging along at a relatively healthy 3% this year and next. High oil prices also mean more money for oil-producing nations such as Russia and Saudi Arabia to invest globally. “If resource owners are now getting a bigger piece of the pie to spend and invest, then $100 oil shouldn’t be a problem” in the absence of a U.S. recession, says independent energy economist Philip Verleger Jr. “And that investment is happening.”

Fundamental Shift

Such sanguine views, while they are far from universal, reflect a fundamental shift in economists’ understanding of how energy prices affect the economy.

Historically, oil prices have doubled or trebled in a matter of weeks because of sudden and sharp supply disruptions, such as those in 1980 following the Iranian revolution and the outbreak of the Iran-Iraq war. That prompted the Fed to raise interest rates sharply in an effort to head off a spiral of inflation.

Current Fed chairman Ben Bernanke has spent a lot of time trying to understand such shocks. In 1997, he analyzed the effects of sharp rise in prices during the oil shocks of 1973-75, 1980-1982 and 1990-91 in the Brookings Papers on Economic Activity. His surprising conclusion: The Fed’s cure for high oil prices was worse than the disease.

“The majority of the impact of an oil price shock on the real economy is attributable to the central bank’s response to the inflationary pressures engendered by the shock,” he wrote. Today, that view is fairly mainstream among central bankers.

Mr. Bernanke’s Fed recently responded to the subprime mortgage crisis by cutting benchmark interest rates for the first time in four years. By implication, the Fed was saying it was more worried about the fallout from credit-market gloom than about the risk of inflation. At a time of record energy prices, that’s a risky but educated bet.

Growing fuel efficiency could also blunt the blow of higher prices. James Barnes, a Union Pacific Corp. spokesman, says the railroad has bought more fuel-efficient locomotives and trained engineers to operate trains in ways that conserve fuel. “From a macro level, we would anticipate that rising oil costs will make us more competitive [with trucks] and potentially drive more business our way,” Mr. Barnes says.

Engine of Growth

In China, the engine of growth on which many are counting, other energy sources can make up for oil. China uses oil for only 21% of its energy needs, with most of the rest coming from coal. Unlike in the U.S., where imported oil goes to fill people’s gasoline tanks, China mainly uses oil in industrial settings, where coal may be an alternative. Greater coal use, however, would also exacerbate China’s already serious pollution problem and speed up emissions of gases that contribute to global warming.

Still, some fear the impact of $100-a-barrel oil would be too powerful for the U.S. to overcome. “If we aren’t already headed for a recession, it could push us in that direction,” says Bill Zollars, chairman and chief executive officer of YRC Worldwide Inc., a large trucking company based in Overland Park, Kan. “With a very fragile economy like we have now, this could be another burden for the consumer and the business community.”

Mr. Zollars says shipment volumes at YRC, which serves many retailers and manufacturers, have dropped to 2003 levels. “We are not seeing the kind of volume we would normally expect” ahead of the Christmas retail season, he adds.

Fall in Demand

Higher oil prices could hit the beleaguered auto and airline industries. Detroit is still digging out from the fall in demand for sport-utility vehicles caused by the climb in gasoline prices. Paul Ballew, General Motors Corp.’s top sales analyst, explained sluggish industry sales earlier this month by citing in part high fuel prices, which he called “effectively a tax on U.S. households.”

For now, most economists expect oil prices will stay high through next year. An unexpected hurricane in the Gulf or a sudden disruption to oil flows from a big producer like Iran or Mexico could push oil to $100, they say.

Demand is chugging along. The Paris-based International Energy Agency sees world oil demand in the fourth quarter rising by 2.8%, or 2.3 million barrels a day from a year ago, to nearly 88 million barrels a day.

Of course, those forecasts could go awry if the U.S. economy tanks and brings Europe and Japan along with it. Then demand would likely ease, and oil prices could fall, perhaps significantly. And then, the world would have something else to worry about.

–Daniel Machalaba, Shai Oster, Susan Carey and Mike Spector contributed to this article.

Write to Peter Fritsch at peter.fritsch@wsj.com and Kelly Evans at kelly.evans@wsj.com

A silky shark closes in on a pilot fish. Pilot fish often swim in front of sharks to feed on scraps

By Gordon Rayner
Last Updated: 12:01am BST 29/09/2007

The subject matter may be familiar, but this stunning image of a shark beautifully captures nature’s infinite ability to surprise and delight us.
 
In pictures: Shell Wildlife Photographer of the Year

The photograph has been highly commended by judges in the Shell Wildlife Photographer of the Year competition. The overall winners will be announced next month before an exhibition of more than 100 of the best entries goes on display at the Natural History Museum in London.

The competition attracted 32,000 entries from 78 countries, including a striking picture of a Californian sea lion taken by 18-year-old Tom Steele, from Bramhall, Cheshire, at a local wildlife park. He said: “I picked a moving animal to give a creative edge. The sea lion emerged swimming on its back. It looks as if its mouth is open, but that’s an illusion.”

The picture of a silky shark closing in on a pilot fish was taken in the Red Sea by Len Deeley, a keen diver, from Godalming in Surrey.

Photograph copyright Shell Wildlife Photographer of the Year.

For slideshow go to…

http://www.telegraph.co.uk/core/Slideshow/slideshowContentFrameFragXL.jhtml;j?xml=/earth/news_galleries/shell/shell.xml&site=
 
http://www.telegraph.co.uk/earth/main.jhtml?xml=/earth/2007/09/29/eashell129.xml

*Shell and famed whistleblower Dr John Huong…

September 29, 2007

LONDON Whether spooked, sinister, watchful or plain comical, wildlife features in all its guises in the prestigious Shell Wildlife Photographer of the Year contest. More than 32,000 pictures have been entered; 49 have been highly commended and 107 will go on display at the London’s Natural History Museum next month. One of the highly commended pictures is of wildebeest stampeding in Tanzania’s Serengeti National Park. It was taken by a Swedish teenager, Liisa Widstrand.

For slide show go to…

http://www.timesonline.co.uk/tol/audio_video/photo_galleries/article2552271.ece

*added by John Donovan

Joint program researches aspects of responding to oil spill in ice-infested waters

Alan Bailey
Vol. 12, No. 39  Week of September 30, 2007

Worldwide interest in the petroleum potential of the Arctic seas has triggered a corresponding focus on the practicalities of responding to an oil spill, were disaster to strike an offshore oil operation. As part of the ramped-up interest in how to deal with an Arctic spill, a joint industry program coordinated by Norwegian research company SINTEF is engaged in a series of research projects covering most aspects of offshore Arctic spill response. The program’s objective is continuing development of tools and technologies for oil spill response in the Arctic and ice-infested waters.

AGIP KCO, Chevron, ConocoPhillips, Shell, Total, BP and Statoil are participating in the program with the expectation that its outcome will improve industry’s ability to protect Arctic environments from oil spills resulting from petroleum exploration, development, production and transportation.

Research results should also help decision making by responsible authorities, SINTEF program documents said.

The program consists of eight project areas, being carried out over a four-year period ending in 2009. They are designed to address key oil spill response issues and scenarios that program participants might have to deal with:

• The fate and behavior of oil spilled in Arctic conditions;

• The in-situ burning of oil in Arctic and ice-infested waters;

• The mechanical recovery of oil in Arctic and ice-infested waters;

• The use of chemical dispersants in Arctic and ice-infested waters;

• Monitoring and remote sensing of oil in or under ice;

• The preparation of a generic oil spill contingency plan;

• Field experiments at Svalbard, Norway, and in offshore ice-infested waters; and

• Program coordination, management, communication and publishing.
Initiated in Halifax

“The program was initiated after a meeting in Halifax (Nova Scotia) where SINTEF and the oil companies agreed to initiate a state-of-the-art study,” program coordinator Stein Sørstrøm told Petroleum News Sept. 13. “This resulted in a request from the companies to work out a plan for how to develop oil spill technology, strategies and knowledge for Arctic and ice covered waters.”

A plan for the program was presented at a workshop in Oslo in April 2006 and the program got under way in September 2006, Sørstrøm said. In addition to industry participants, there are a large number of potential collaborators, including the U.S. Minerals Management Service, Alaska Clean Seas and the Oil Spill Recovery Institute in Cordova. About five people from relevant organizations will ensure that the results of each project include the most up-to-date knowledge, Sørstrøm said.

A major part of the joint industry program consists of adapting existing systems for icy conditions. Equipment vendors have also been developing new concepts for recovering oil from ice-laden water and these concepts will be further tested, Sørstrøm said. In addition to research into the mechanical recovery of oil, the program includes testing of in-situ burning and the use of dispersants, Sørstrøm said.

“The first year has focused on laboratory tests of skimmers, dispersants and burning tests,” Sørstrøm said. “We have also carried out a long-term field experiment at Svalbard studying the weathering properties (of crude oil) as well as a window of opportunity for in-situ burning. Further we have carried out preliminary tests of some remote sensing and oil detecting systems.”

Sørstrøm said that most skimmers have been designed for open-water conditions, rather than for use in ice-laden water.

“Our tests so far have, however, proved that some of these systems may be developed further for operations in ice,” Sørstrøm said.

Adapting and developing systems

Because an oil spill response typically requires a combination of different techniques, the joint industry program is also investigating strategies and tactics for the Arctic, Sørstrøm said. A generic oil spill contingency plan developed in the program will accommodate a range of ice regimes encountered in the circum-polar area of interest.

The program holds two workshops per year, alternating between venues on the European and American continents. These workshops provide program participants with progress updates and also provide an opportunity to discuss oil spill response challenges in the regions where the workshops are held.

The first of these workshops was held in Svalbard in April 2007 and the second will be held in Anchorage on Oct. 15, following the Oct. 10 to 11 International Oil and Ice Workshop (some talks about the joint industry program have been scheduled as part of the international workshop).

See also…

Petroleum News: Shell: proven techniques

http://www.petroleumnews.com/pnads/581959853.shtml

Vol. 12, No. 39  Week of September 30, 2007

Repsol YPF has joined Shell and Eni in a block of 64 leases in the Beaufort Sea off Alaska’s North Slope. It’s the Spanish oil and gas major’s first acquisition in the state.

Shell and Eni exchanged working interests in the contiguous outer continental shelf leases last November. At that time Eni had a 60 percent interest in the acreage and Shell had 40 percent. Repsol picked up its 20 percent interest from Eni.

The exploration block is operated by Shell in the federal waters north of the Oooguruk, Nikaitchuq, Northstar and Kuparuk units, extending east to midway above the Prudhoe Bay unit.

Shell’s spokesman in Alaska, Curtis Smith, told Petroleum News Sept. 21 that the leases are in water depths ranging from 3 to 24 meters.

“The objective of the partnership is to acquire 3-D seismic with a view toward identifying future drill sites,” Smith said.

In its press release Repsol said “exploration activities” could start in 2009-10.

When asked by Petroleum News if Repsol was looking at additional investments in Alaska, Jorge S. O. Milanese referred the question to Repsol’s headquarters in Madrid. Milanese is in upstream business development and is based in The Woodlands, Texas.

Madrid officials had not replied by the time Petroleum News went to press late Sept. 27.

At the Alaska Natural Gas Development Authority board meeting on May 9, ANGDA CEO Harold Heinze said that Repsol had recently established an “upstream position” in Alaska.

In April, Heinze met with Repsol as part of a series of meetings with companies that might have an interest in building a gas pipeline from the North Slope to Lower 48 markets. He was told Repsol had already entered Alaska, but was not given particulars.

In early September, Drue Pearce, the federal coordinator for Alaska gas pipeline projects, said she had heard Repsol was one of several companies that had expressed interest in building a gas pipeline from the North Slope. But Pearce also said she didn’t have any inside information that suggested Repsol was still interested.

An integrated oil and gas company engaged in all aspects of the petroleum business, Repsol has 30,000 employees and is one of the 10 largest private (not government-owned) petroleum companies in the world. It was founded in 1986 and last year had a net income of approximately $1.7 billion.

Although it operates in 30 countries, the bulk of Repsol’s assets are in Spain and Argentina.

According to Dow Jones, in mid-September Repsol signed a $15 billion contract to supply natural gas to Mexico from its Peruvian operations.

—Kay Cashman

http://www.petroleumnews.com/pnads/752097353.shtml

Vol. 12, No. 39  Week of September 30, 2007

Given the amount of research being done on Arctic oil spill response, Petroleum News asked Shell, a participant in the SINTEF Arctic oil spill response joint industry program, to comment on the viability of the techniques and technologies that the company has specified in its oil discharge prevention and contingency plan for its proposed Beaufort Sea drilling program off Alaska.

For example, Shell sees in-situ burning of spilled oil as a particularly valuable part of its arsenal of response tactics. But, has in-situ burning actually been demonstrated to work in Arctic waters or in sea ice?

Absolutely, said Al Allen, Shell’s oil spill response consultant. Allen has amassed 40 years of experience in oil spill response and was at one time the manager of Absorb, the organization that later became Alaska Clean Seas, the North Slope oil spill response cooperative.

There have been dozens of situations where people have burned spilled oil in cold climates, and with ice and snow, Allen said. Some current research focuses on expanding knowledge of the limitations of burning, but the technique has been proven to work, he said.

“I’ve done it several times myself,” Allen said. “… When you see the results at high (recovery) efficiencies, you just come away knowing that this is fact. … I know it works. It can be a very effective tool, especially in cold climates.”

Allen was also involved in some tests of in-situ burning, done in sea ice at the West Dock at Prudhoe Bay, in the late 1970s and early 1980s.

“We did a series of tests over about a three-year period,” Allen said. “The spill sizes would vary from just a few gallons to five to 10 drums at a time.”

Skimmers

And what about recovering oil from ice-laden water using skimmers?

Sea ice tends to trap the oil on water surface, so that the oil becomes concentrated in a limited area, rather than spreading out to form an extremely thin layer over a wide expanse of open water, Allen said. Skimmers work best when the oil is concentrated rather than spread out. But brush skimmers and rope mop skimmers have been thoroughly tested in the recovery of limited pockets of oil.

“Rope mops (for example) — I’ve used them in a lot of actual spills in cold climates and you can get 95 percent (recovery) efficiencies,” Allen said. “… There are many situation where skimming in ice, handled properly, can be very efficient.”

In fact, the effectiveness of a particular skimming operation depends primarily on the knowledge and experience of the skimmer operators, Allen said.

Allen also emphasized that determining a spill response strategy in a particular situation involves evaluating tradeoffs between the likely recovery effectiveness and potential disadvantages in the use of different techniques such as burning or skimming in that situation.

—Alan Bailey

See also…

Petroleum News: Protecting Arctic waters

http://www.petroleumnews.com/pnads/581959853.shtml

Shell is the first company in over three years to openly absorb an entire month’s slate of Dubai crude cargoes, say traders

Published: Saturday, 29 September, 2007, 02:08 AM Doha Time 

SINGAPORE: European major Shell has purchased all available November-loading benchmark Dubai crude cargoes after an unprecedented buying spree on the partials market this month, traders and industry sources said yesterday.

On Thursday, US trader Phibro, declared physical delivery of a Dubai cargo to Shell after selling it 19 partial 25,000-barrel lots – the fourth such declaration.

The major was thought to have purchased a fifth cargo on the spot market, although this could not be confirmed. The Dubai loading programme rarely counts more than four, sometimes five cargoes a month, with Phibro the biggest supplier.

Traders said Shell is the first company in over three years to openly absorb an entire month’s slate of Dubai crude cargoes, and many had thought the broadening of the Middle East benchmark had largely put an end to trading plays.

As Dubai oil production dwindled to below 100,000 barrels per day (bpd), pricing agency Platts moved to allow sellers of Dubai partials – effectively the benchmark for most Middle East crude sold to Asia – to deliver alternative grades instead.

In 2001 it allowed for delivery of Oman, and last year it broadened the benchmark further to allow delivery of Upper Zakum, although in practice this rarely occurs because most refiners say those types of crude are more valuable than Dubai.

This month, however, the value of those grades has fallen below Dubai amid persistent buying interest from Shell, prompting sellers to nominate 8 cargoes of Oman and two of Upper Zakum.

Shell has purchased an unprecedented 7.2mn barrels or 240,000 bpd of Dubai crude oil via partials so far, Platts data shows.

Taking into account the three grades, Shell appears to have bought about 15 of the 50 or so cargoes that load each month, although many refiners in the region have objected that the persistent buying interest has hurt their margins.

Other traders have pointed out that November was always destined to be an exceptionally strong month for Middle East crude due to planned maintenance at three key oilfields in Abu Dhabi, although they say that does not fully explain Dubai’s price premium to the other lower-sulphur crudes.

The Abu Dhabi National Oil Company (Adnoc) said on Sunday that its oil output would be cut by 600,000 bpd over the course of November, and told refiners this week to expect half or zero their usual supply of Um Shaif, Upper Zakum and Lower Zakum.

But some traders say Shell may have excess supplies.

The refiner, which has a refining system of 926,000 bpd East of Suez, is offering to sell Murban crude through a broker at 55 cents to the ADNOC official selling price yesterday, down from a trade at plus $1.30 a barrel a week ago, traders said.

“It’s crazy where that offer is compared to last week, especially considering that the market is tight,” a trader said.

Earlier this week Shell also offered an Upper Zakum cargo into a tender by refiner Taiwan CPC, which traders took as the first indication that the major may have gotten more crude than it bargained for after a month of unabated buying. – Reuters
 
Gulf Times Newspaper, 2007 ©

http://www.gulf-times.com/site/topics/article.asp?cu_no=2&item_no=175487&version=1&template_id=48&parent_id=28

 

Sakhalin-2 will not begin exporting oil and gas from the new terminals until the first half of next year due to construction and commissioning delays on Russia’s largest offshore project.

The Gazprom-led Sakhalin Energy Investment Co. continues to build and commission the oil and gas pipelines that run along the length of the east Russian island, but construction has been more complex than anticipated.

The consortium, which includes Shell, Mitsui and Mitsubishi, has installed two new platforms and built two export terminals and offshore pipelines as part of the Sakhalin II project.

Sakhalin Energy said oil exports from the new terminal in Aniva Bay will not begin until next year, and exports from a new liquefied natural gas plant will follow in the fourth quarter of 2008.

“We continue to make good progress on key milestones. This year we have installed the PA-B platform, completed the offshore pipelines and imported our first LNG cargo for commissioning the plant,” Sakhalin Energy said.

“It is not possible to be precise as to when the start-up of full production will happen. It depends on completion and testing of the facilities. We will start year-round oil shipments in the first half of 2008 and produce LNG in late second half 2008,” the company said.

Published: Sept. 28, 2007 at 2:24 PM

http://www.upi.com/International_Security/Energy/Analysis/2007/09/28/upi_energy_watch/5498/

 

Friday, September 28, 2007
Business and Human Rights

The myth of Corporations’ commitments to Human Rights

“Shell supports the Universal Declaration of Human Rights and believes that business, as an integral part of society, can make an important contribution to furthering these rights”. Shell statement

“Business doesn’t have to choose between profits and principles, Royal Dutch/Shell Group Managing Director Jeroen van der Veer told the Globalisation, Ecology and Economy conference in the Netherlands today.”

“We have to be particularly attentive to our contribution to local economic and social development and to human rights issues.” Christophe de Margerie, Chief Executive Officer: Total

The focus of the attention underway at present on the grotesque abuses of Human Rights in Burma has rightly drawn attention to the part that the Oil company Total plays in shoring up the appalling regime in that benighted country. Total is heavily involved in Burma – especially in a major pipeline project – and you need to be terminally naïve to think that such investment does not give support and comfort to the Burmese dictators. That a multinational oil company thinks that it is acceptable to be active in Burma is deplorable – even more so when you see the self-promoting statements saying that they are “attentive to human rights” as in the recent remarks of the company’s CEO.

If the dark arts of Public Relations are to have any moral underpinning then the contradictions between rhetoric and actions, such as those of Total have to be avoided. There is frankly no point in having your PR Department issue “commitments”, on the one hand, whilst your business managers go their own sweet way in ignoring these so-called assurances on the other. My experience in Shell, and I have little doubt that most oil multinationals are just the same, is that commitments to human rights are not worth anything at all. I could choose many examples to illustrate this assertion (Nigeria the most obvious) and which suggest that when push comes to shove the choice will nearly always be Profit rather than Principles – whatever Mr van der Veer and others might like to say. To be fair it is true that Shell has moved away from involvement in Chad, Cameroon, Peru and elsewhere partly because of concerns about the reputational damage which could have resulted. But these withdrawals are the exception rather than the rule. Back in 1991 EIRIS (Ethical Investment Research Service) stated that Shell was operating in 24 Countries where extra-judicial executions or disappearances had been reported, 44 countries where torture has been reported, 36 Countries where ‘official violence against citizens’ was reported, and 26 countries which were holding prisoners of conscience. Shell continues to operate in most of these countries today. To illustrate the dichotomy between rhetoric and behaviour let me choose two examples of which I have personal experience.

China

Back in the late 1980s I was working in Hong Kong and, increasingly, in China – and part of my job was to try and boost Shell’s brand and to advise on the avoidance of damage to Shell’s reputation. China was beginning to open up to the West and Shell was hungry for a piece of the action. Some of us in Shell felt that China’s pursuit of economic change would be accompanied by a change to the repression that had characterised the country for forty years or more – that the people would be given greater personal freedoms as well as greater wealth (we were wrong, of course). Others simply pursued the money and developed investment and other plans to be part of China’s economic progress. Amongst these was the Chief Executive of the Shell Companies in China and Hong Kong whose mantra was “China is very big” and who was determined to give Shell every chance to succeed – not for him any uncomfortable concerns about human rights! In the spring of 1989 the emerging democracy movement in China was brutally cut down when the tanks entered Tiananmen Square and it seemed for a moment that our Chief Executive’s dreams were likely to be shattered. He went into a sort of denial mode saying that as soon as things calmed down all would be normal again. Within a few months Shell was back at the negotiating table with Chinese officials as if nothing had happened in Beijing in April at all.

In August 1989, in an attempt to suggest that there were likely to be some squally waters ahead for Shell unless we acted with greater care and sensitivity, I wrote a mock newspaper article entitled “Do Tanks go well on Shell”. Here is the text of this mock article:

Do Tanks run well on Shell?

On Friday it emerged that Shell, the Anglo/Dutch multinational that is now the world’s largest energy company, is to invest over one billion US Dollars in a Refinery and Petrochemical complex in Southern China. Although officially only a commitment to a “Feasibility Study” at this stage, informed sources within the industry say that Shell is unlikely to proceed to this study unless they are fairly certain of a positive outcome. Observers of China say that such an outcome can be virtually guaranteed given the PRC Government’s wish to demonstrate to the world that the confidence of western business is returning following the political disruption in China earlier this year.

The Shell Group has had its share of controversy in recent years, not least because of its continued presence in South Africa. Shell’s role in sanction busting in Rhodesia is also not forgotten. Those with longer memories will recall the questionable role played by Henry Deterding (One of Shell’s founding fathers) at the time of the Nazi military build up in the 1930s. Despite this rather ignoble history the announcement of the Refinery plan comes as a surprise. The plan would be the largest foreign investment by far in China. For it to be announced (however much that announcement is covered in caveats) in 1989 seems insensitivity on a grand scale. Shell may believe (as one of their Hong Kong directors said) that “Business is separate from politics”, it is doubtful whether many of the people of Honk Kong would agree. Firstly the announcement of an investment of this size gives a signal to China that no matter what they do to their own citizens the international business world will turn a blind eye. Secondly the investment is unquestionably strategic in nature. By building facilities that will produce a full range of oil and chemical products Shell will play its part in ensuing that the People’s Liberation Army in the South of China does not fall short of the essential products it needs. (The refinery will also produce a wide range of materials that can be used in Chemical warfare, including Naphtha used with such devastating effect by US forces in Vietnam).

For Shell morality and business have always been uneasy bedfellows. Once again it seems that you can be “Sure that Shell” will pursue what it seems to be its commercial objectives and be deaf to public opinion”

This mock article was circulated only to the twelve members of our Hong Kong and China management team and was meant to stimulate thought. In fact a storm broke out and our CEO instructed me personally to get back every copy and to destroy them! It had struck too exposed and vulnerable a nerve and in the CEO’s view even to discuss the possibility that Shell might be criticised for being back in China in a big way just months after the Tiananmen Square massacre was unacceptable. The rest is history. Shell did pursue the project and although it changed radically in format, took far longer than was planned and cost far more construction was completed and commercial operations started last year. The “CSPCL Nanhai” complex at Daya Bay is, according to Shell, the largest single investment ever made by the Shell Group in the petrochemicals sector.

The point about this story is that although back in 1989 Shell did not have any open commitment to Human Rights it did institute such a promise in the 1990s and declare it openly. But notwithstanding this commitment the project went ahead in a country which has been accused of continued human rights abuses on a huge scale. My perhaps mischievous attempt to make us think about what we were doing way back in 1989 had little effect (other than to brand me as a trouble-maker in the eyes of some!). So you can imagine my scepticism when all the human rights commitment hype started to emerge from Shell Centre in the 1990s!

Saudi Arabia

In March 1997 Shell issued a “Statement of General Business Principles” (SGBP) to the world which included the following statement “…to express support for fundamental human rights in line with the legitimate role of business.” The launch of the SGBP was a much hyped event and the responsibility of those working in operating companies around the world was to promulgate them in the public domain. I was working in the Middle East at the time and part of my role was to communicate with “stakeholders” about Shell and try and enhance our reputation. I discussed ways to promote the SGBP with my management colleagues – including the production of local language (mostly Arabic) versions. I was a little way into my task when I received a phone call from the head of Shell’s businesses in Saudi Arabia instructing me not to promulgate Shell’s commitment to Human Rights in that country for fear of upsetting the rulers of this seriously human rights abusing state. “What should we say then?” I asked “That Shell supports human rights – except where it doesn’t because if we did our business prospects might be damaged?” Once again, as you might imagine, I got into a bit of trouble and the SGBP were never circulated at all in Saudi Arabia and a number of other counties where it might have damaged our business. Hypocrisy – of course! Profits before Principles – likewise!

© Paddy Briggs
September 2007

Paddy Briggs worked for Shell for 37 years during the last fifteen of which he was responsible for Brand management in a number of appointments. He was the winner of the “Shell/Economist” writing prize (internal) in 2001. Paddy retired from Shell in 2002 to form the brand consultancy BrandAware â„¢ and to write and speak on brand and reputation matters. He is also active as a director of training courses on brand and reputation management. Paddy is also an active sports journalist and a member of the “Sports Journalists Association” and the “Cricket Writers’ Club”. He has a regular weekly column in the “Bahrain Tribune” and was previously a columnist in the “Khaleej Times” and the “Emirates Evening Post”. In September 2006 he was appointed Sports Editor of “AME Info” the UAE based news and information website. Paddy’s book of light verse “Jumeira Jane” was published in Dubai in 2001 and the first edition print run of 5000 copies was sold out.

For Paddy’s website go to…

http://www.brandaware.co.uk/