By John Donovan
The oil giant Shell has made a disconcerting start to the new year with uncertainty over how many Shell jobs are being cut, who will take over from Shell CEO Jeroen van der Veer when he retires in June 2009, safety issues on North Sea platforms and why Shell has decided not to reveal with its financial results the volume of its proven reserves. In the latter connection, there are still ongoing repercussions from the last time controversy over Shell reserves machinations turned into a full blown scandal.
The website royaldutchshellplc.com of which the author of this article is co-owner has played a prominent role in highlighting all of these issues within the mainstream media and in the process has caused considerable embarrassment to Shell senior management, including Mr Van der Veer.
THE END OF SECURE EMPLOYMENT AT SHELL
Over the Christmas/New Year period, numerous newspapers, including the Financial Times, The Sunday Telegraph and The Wall Street Journal, reported on the news that Shell plans to cut thousands of jobs, including over 3,000 IT employees who are being shipped (some might say press ganged) to outsourcing companies. The articles mentioned that a high level Shell email containing information about the job cuts was leaked to royaldutchshellplc.com by a Shell insider.
CRITICAL SAFETY PROBLEMS ON SHELL NORTH SEA PLATFORMS
Shell is using similar dubious tactics against its North Sea platform workers who earlier this week turned to the same website to make their plight more widely known.
We provided the documents which resulted in the Channel 4 TV news item broadcast at 7pm this evening and published our article to coincide with the Channel 4 News report. The initiative was made in conjunction with Mr Bill Campbell, the former Group Auditor of Shell International Petroleum Company, a man of the very highest integrity.
SHELL PEAK OIL PANIC
On 25 January The Times newspaper published an article under the headline: “Shell chief fears oil shortage in seven years”. Royaldutchshellplc.com was described in the article as “an independent website that monitors the company.” The article acknowledged that the website had supplied a leaked email from Jeroen van der Veer containing the important revelation that Shell anticipates “Peak oil”, in terms of oil which is relatively easy to extract, will occur in 2015 – just 7 years from now.
We also supplied to The Times related correspondence with Michiel Brandjes, the Company Secretary of Royal Dutch Shell Plc who kindly confirmed to us that the email was authentic. The Times scoop was quickly picked up by other publications, including U.S. News & World Report.
Consequently we were able to pre-empt the plans of Jeroen van der Veer to make what was presumably meant to be a show-stealing “Peak Oil in 7 years” declaration at the meeting of political and business leaders at the Davos World Economic Forum. I doubt that he was amused.
The related revelation in The Daily Telegraph on 29 January under the headline “Shell sparks fear over oil reserves” injected even more uncertainty as far as investors are concerned and Shell’s share price declined accordingly.
Shell announced over a year ago that it had downgraded its reserves by at least 400,000 barrels following the Gazprom takeover (See below)
From page 21 of Shell’s FORM 20-F submission to the SEC for the fiscal year ended December 31, 2006
For the fiscal year ended December 31, 2006In December 2006, Shell signed a protocol with Gazprom, which results in a reduction in Shell’s 55% interest in Sakhalin II, in Russia, to a 27.5% interest. At the end of 2006, Sakhalin II was recorded in Shell’s reserves on a fully consolidated basis, with net reserves of 0.8 billion barrel of oil equivalent (boe), consisting of approximately 1.5 billion boe for Group companies, partly offset by 0.7 billion boe attributable to minority interests. On successful completion of this transaction, Shell’s net share of these reserves would be reduced by approximately 0.4 billion boe and the remaining reserves of approximately 0.4 billion boe on a 2006 basis would be reclassified to Group share of equity accounted investments. This transaction is expected to close in 2007 and to reduce Shell’s reserves from 2007.
JP Morgan has recently calculated that the Sakhalin transaction will in fact reduce Shell’s reserves by 1.1 billion. Extract from Hemscott article on 25 Jan 2008 – “Shell overvalued”
The reserve replacement data, when it comes, will be affected by the deconsolidation of the Sakhalin field in Russia, where Shell has cut its ownership to 27.5% to appease the Kremlin. This will remove 1.1bn barrels of oil equivalent from the company’s proved reserves, equivalent to nearly a year of group worldwide production, JP Morgan said.
The Wall Street Journal quoted the same figure of 1.1 billion in an article published earlier today: THE WALL STREET JOURNAL: “Shell’s Reserve Dilemma”
The financial loss is staggering bearing in mind the cost of nearly $100 per barrel of oil. In view of dwindling reserves, as forecast by Shell, the cost could easily climb to over $200 or more per barrel. Indeed, an ABC News article published on 30 January 2008 quoted Dr Jim Buckee, recently retired president and CEO of Talisman Energy as forecasting: “the cost of a barrel of oil could reach as high as $200 by the third or fourth quarters of this year.”
The website royaldutchshellplc.com also played a key role in the Sakhalin-2 debacle.
Oleg Mitvol, the Deputy head of the Russian Environmental Agency confirmed in interviews with the news media that the evidence on which he intended to bring a multi-billion dollar action against Shell came solely from “John Donovan of the anti-Shell website royaldutchshellplc.com” (we have copies of the interviews and the comments made by him about our involvement).
Contact with Mitvol occurred after we had initially written directly to President Putin. Mitvol called in Russian Special Services to verify the authenticity of the Shell internal documents we supplied from insider sources. The information was passed to the Russian authorities before the poisoning of Alexander Litvinenko in London and the subsequent increasingly hard line attitude adopted by the Putin regime towards western countries and in particular, the UK.
We later supplied the FT with the now infamous leaked David Greer motivational memo which resulted in his subsequent “resignation” as Deputy Chief Executive of Sakhalin Energy Investment Company.
THE RESERVES FRAUD
The repercussions of the Shell reserves fraud continue, as was accurately reported with our help in the Daily Telegraph yesterday: “Lawyers close in on Shell chiefs”
Shell recently agreed to pay $27 million to the US lawyers acting for the American Retirement Funds who have brought a class action against Shell (see pdf file below). The $27 million is merely to cover legal fees in respect of a claim brought by the US lawyers on behalf on a Non US purchaser of Shell shares, Mr Peter M Woods (a UK shareholder who we found and supplied). In return for the $27 million payment, the Non U.S. claim is being dropped from the US action. This means that a settlement Shell had agreed in Europe for around $400 million including legal fees can now proceed for approval by the Dutch courts. The original U.S. action, solely on behalf of U.S. Shell stockholders, is proceeding separately. Shell has already paid $150 million in fines imposed by the U.S. and UK financial regulators.
pdf file: $27 million payment approved by U.S. Court 14 January 2008
No doubt investors seeking a safe, reliable and trustworthy company in which to buy shares will take into account the turbulence and uncertainty continuing to surround Shell and its inept senior management. The so-called “new” management described in some press articles, includes unscrupulous individuals such as Malcolm Brinded, tainted by past and current debacles and scandals. Brinded has blood on his hands from the Brent Bravo “Touch Fuck All” scandal.
Uninspired inept Shell executives have continued to prosper solely because of high profits generated by high oil prices. However, even the “obscene” profits cannot hide the truth that Shell has been unable to replenish its dwindling reserves and that the problem is only getting worse.