The Sunday Nation learnt that behind-the-scene consultations between two law firms representing both parties failed to satisfy the employees who accuse Shell Kenya of “glossing over” the matter.

The staff, numbering about 190 or what their lawyers say is 95 per cent of the employees, are seeking full settlement of their dues and the option of not having their contracts bought out by the new owner. They want the talks over their welfare held parallel to those of a buy-out.

Oil Libya Holding Company (Oilibya) is widely reported to have made an offer of Sh160 billion for the downstream African operations of the Anglo-Dutch transnational. The ambitious Libyan firm has in the past bought out Shell in other African jurisdictions.

People familiar with the consultations between law firms Okoth & Kiplagat representing the employees and Hamilton Harrison & Mathews for Shell believe fear of a settlement being replicated elsewhere in Africa is at the heart of the discomfort by Shell. The firm is reported to be negotiating with two other industry operators from Libya and Switzerland.

Demand letter

In a demand letter, Dr Kenneth Kiplagat says the law firm had instructions to move to Industrial Court to block divestiture if it does not accommodate workers’ wishes. A seven-day ultimatum to Shell yielded nothing, paving way for court action. “We have instructions to move to court to protect our clients’ rights. All future communication in this matter should be directed through our office,” said the letter to Kenya Shell last month.

The letter we obtained was also copied to employees of the firm. However, the company is yet to release the names of its clients to Shell, which had demanded their identities. A number of senior managers have previously left quietly under terms that are yet to be made public. Interestingly, Shell says it wants to sell the shares in the Kenyan outfit, meaning the employees’ contracts are theoretically intact.

It has, however, said in correspondence by its lawyers that any employees who do not have roles under the new shareholders will be paid off according to company rules. Shell has also made it clear that it does not wish to talk to its employees through law firms and prefers direct talks.

Shell’s country chairman Jimmy Mugerwa could not be reached for comment about workers’ concerns by the time of going to press as he was reported to be outside Kenya. It is clearly Oilibya the workers have in mind while seeking a settlement. According to Faisal Werfelli, Shell’s legal adviser in Tunisia, Libya Oil Holding Ltd (TAHL) has offered $2 billion for some of Royal Dutch Shell Plc’s downstream business in Africa. Libya Oil was previously known as Tamoil Africa.

Mr Werfelli this month in an interview with Bloomberg News said Alrahila Oil Services of Libya and Vitol Group had also expressed interest in Shell’s assets. TAHL owns Oilibya, which made its debut in Kenya in December 2006 after buying Mobil assets. Shell’s assets have also attracted the attention of Essar of India and Engen of South Africa who are already trading locally.

“Early indications suggest there are a number of potential buyers interested in acquiring the businesses as going concerns, and we will now enter into a round of negotiations,” Shell’s Executive Vice President Xavier le Mintier said in April this year. According to Okoth and Kiplagat Advocates, employees ought to receive reasonable compensation for their contribution to Kenya Shell’s wealth, value and goodwill created over the years.

Dr Kiplagat said the staff recognise and accept Shell is at liberty to sell its local business on a going concern basis, but the transaction would result in rationalisation and redundancies. “The intended divestiture amounts to constructive redundancies (stealth redundancies) by Shell, entitling our clients to activate the necessary and applicable statutory safeguards,” he said.

Affords them

Shell’s employees want an exit offer That affords them an option to transit to the new owner or a buy-out of employment contracts. It is based on the argument that workers had not contemplated their continued future employment could be with another party. It is thought a protracted legal tussle could erupt if the issue between Shell and its employees is not amicably solved.

The workers fear values and attributes of the party would be different from those of Shell. But it is not only employees who are jittery. Retailers, who asked not be named, said they are concerned about impending divestiture as fuel supply is at times not adequate, leading to stock-outs. Transporters are also unable to plan future investment.

Nigeria: Shell to Quit Country This Year

Reports: Shell to exit Africa nations

SENIOR PERSONNEL POSITION CHANGES AT KENYA SHELL LTD

Prior to the oil spill, BP stock had a market value of nearly $200 billion. This has been cut by about HALF as a result on the spill.

On the other hand, the culprit, BP America, represents nearly a quarter of BP’s value, or about $50 billion in round figures. This is the amount that BP stands to lose if the oil spill bankrupts BP America. That also appears to be a reasonably good estimate of BP’s potential liability at this time. The $20 billion, to be put into an escrow account, represents a reasonable “down payment.”

The market decline, of nearly $100 billion, assumes that the cost to BP will be much more than $50 billion. That’s a “worst case” scenario, not “most likely” case. More to the point, it is a “worst case” scenario that probably won’t be realized, even if it occurs.

That’s because BP has the option of offering BP America as a “sacrificial lamb,” if the actual cost of the spill is significantly more than $50 billion, just as home owners may choose to offer the bank the house if its value falls below the mortgage. Put another way, BP has put a 20% down payment on a “house” that could cost up to $100 billion (depending on the size of a randomly determined mortgage), but whose “market” value is more like $50 billion.

Even for an oil company, the stock looks cheap at six times earnings. If you assume that one quarter of these will be used to “defease” the company’s liabilities, the ajdusted P/E ratio is more like eight, which is still cheap.

The trial lawyers could try for a judgment against BP greater than $50 billion, upsetting these calculations. They may even get it–in the United States.

But to get “enforcement,” they’d have to go to Britain. Where BP would have the “home court” advantage. And BP isn’t just “any” British company.

It is Britain’s NATIONAL oil company. More important in Britain than GE, Microsoft (MSFT), Apple (AAPL) or IBM, or all of them put together in the United States. Meaning that a fight against BP in Britain would be a fight against the whole British government. That might end up, if necessary, in the WORLD Court.

My first boss told me, “You can’t sue a sovereign without its consent, or at least, without using processes established by that sovereign.” Such a proceeding would make Dickens’ Jardynce vs. Jardynce (divorce trial) look like a moment in time. It could easily outlive the current U.S. Presidential incumbency (assuming eight years).

So I believe that BP stock will eventually rise about 50% from its current market value, and have more than “doubled up” in the past few days, at prices of about $32.50 an ADR. From here, the stock appears to have 50% upside and 10% downside, an attractive 5 to 1 risk-reward ratio. The “workout” time might be 2-3 years, but for potential capital gains ranging from 15% to 22% per annum, that’s worth it.

And that’s not counting the dividend. I’m assuming that when it is restored early next year, the dividend (formerly $3.36 an ADR) will be three quarters of that, or $2.52. That would represent a yield of nearly 8% on the recent price.

Disclosure: Long BP ADRs

NEWSWEEK ARTICLE

BODO, Nigeria — Big oil spills are no longer news in this vast, tropical land. The Niger Delta, where the wealth underground is out of all proportion with the poverty on the surface, has endured the equivalent of the Exxon Valdez spill every year for 50 years by some estimates. The oil pours out nearly every week, and some swamps are long since lifeless.

Perhaps no place on earth has been as battered by oil, experts say, leaving residents here astonished at the nonstop attention paid to the gusher half a world away in the Gulf of Mexico. It was only a few weeks ago, they say, that a burst pipe belonging to Royal Dutch Shell in the mangroves was finally shut after flowing for two months: now nothing living moves in a black-and-brown world once teeming with shrimp and crab.

Not far away, there is still black crude on Gio Creek from an April spill, and just across the state line in Akwa Ibom the fishermen curse their oil-blackened nets, doubly useless in a barren sea buffeted by a spill from an offshore Exxon Mobil pipe in May that lasted for weeks.

The oil spews from rusted and aging pipes, unchecked by what analysts say is ineffectual or collusive regulation, and abetted by deficient maintenance and sabotage. In the face of this black tide is an infrequent protest — soldiers guarding an Exxon Mobil site beat women who were demonstrating last month, according to witnesses — but mostly resentful resignation.

Small children swim in the polluted estuary here, fishermen take their skiffs out ever farther — “There’s nothing we can catch here,” said Pius Doron, perched anxiously over his boat — and market women trudge through oily streams. “There is Shell oil on my body,” said Hannah Baage, emerging from Gio Creek with a machete to cut the cassava stalks balanced on her head.

That the Gulf of Mexico disaster has transfixed a country and president they so admire is a matter of wonder for people here, living among the palm-fringed estuaries in conditions as abject as any in Nigeria, according to the United Nations. Though their region contributes nearly 80 percent of the government’s revenue, they have hardly benefited from it; life expectancy is the lowest in Nigeria.

“President Obama is worried about that one,” Claytus Kanyie, a local official, said of the gulf spill, standing among dead mangroves in the soft oily muck outside Bodo. “Nobody is worried about this one. The aquatic life of our people is dying off. There used be shrimp. There are no longer any shrimp.”

In the distance, smoke rose from what Mr. Kanyie and environmental activists said was an illegal refining business run by local oil thieves and protected, they said, by Nigerian security forces. The swamp was deserted and quiet, without even bird song; before the spills, Mr. Kanyie said, women from Bodo earned a living gathering mollusks and shellfish among the mangroves.

With new estimates that as many as 2.5 million gallons of oil could be spilling into the Gulf of Mexico each day, the Niger Delta has suddenly become a cautionary tale for the United States.

As many as 546 million gallons of oil spilled into the Niger Delta over the last five decades, or nearly 11 million gallons a year, a team of experts for the Nigerian government and international and local environmental groups concluded in a 2006 report. By comparison, the Exxon Valdez spill in 1989 dumped an estimated 10.8 million gallons of oil into the waters off Alaska.

So the people here cast a jaundiced, if sympathetic, eye at the spill in the gulf. “We’re sorry for them, but it’s what’s been happening to us for 50 years,” said Emman Mbong, an official in Eket.

The spills here are all the more devastating because this ecologically sensitive wetlands region, the source of 10 percent of American oil imports, has most of Africa’s mangroves and, like the Louisiana coast, has fed the interior for generations with its abundance of fish, shellfish, wildlife and crops.

Local environmentalists have been denouncing the spoliation for years, with little effect. “It’s a dead environment,” said Patrick Naagbanton of the Center for Environment, Human Rights and Development in Port Harcourt, the leading city of the oil region.

Though much here has been destroyed, much remains, with large expanses of vibrant green. Environmentalists say that with intensive restoration, the Niger Delta could again be what it once was.

Nigeria produced more than two million barrels of oil a day last year, and in over 50 years thousands of miles of pipes have been laid through the swamps. Shell, the major player, has operations on thousands of square miles of territory, according to Amnesty International. Aging columns of oil-well valves, known as Christmas trees, pop up improbably in clearings among the palm trees. Oil sometimes shoots out of them, even if the wells are defunct.

“The oil was just shooting up in the air, and it goes up in the sky,” said Amstel M. Gbarakpor, youth president in Kegbara Dere, recalling the spill in April at Gio Creek. “It took them three weeks to secure this well.”

How much of the spillage is due to oil thieves or to sabotage linked to the militant movement active in the Niger Delta, and how much stems from poorly maintained and aging pipes, is a matter of fierce dispute among communities, environmentalists and the oil companies.

Caroline Wittgen, a spokeswoman for Shell in Lagos, said, “We don’t discuss individual spills,” but argued that the “vast majority” were caused by sabotage or theft, with only 2 percent due to equipment failure or human error.

“We do not believe that we behave irresponsibly, but we do operate in a unique environment where security and lawlessness are major problems,” Ms. Wittgen said.

Oil companies also contend that they clean up much of what is lost. A spokesman for Exxon Mobil in Lagos, Nigel A. Cookey-Gam, said that the company’s recent offshore spill leaked only about 8,400 gallons and that “this was effectively cleaned up.”

But many experts and local officials say the companies attribute too much to sabotage, to lessen their culpability. Richard Steiner, a consultant on oil spills, concluded in a 2008 report that historically “the pipeline failure rate in Nigeria is many times that found elsewhere in the world,” and he noted that even Shell acknowledged “almost every year” a spill due to a corroded pipeline.

On the beach at Ibeno, the few fishermen were glum. Far out to sea oil had spilled for weeks from the Exxon Mobil pipe. “We can’t see where to fish; oil is in the sea,” Patrick Okoni said.

“We don’t have an international media to cover us, so nobody cares about it,” said Mr. Mbong, in nearby Eket. “Whatever cry we cry is not heard outside of here.”

SOURCE ARTICLE