Thu Jun 17, 2010 7:27am GMT

By Nick Tattersall

LAGOS (Reuters) – Royal Dutch Shell has some $40 billion worth of potential investment in deepwater oil projects in Nigeria on hold amid uncertainty over planned reforms to the energy sector, a senior executive told Reuters.

Mutiu Sunmonu, country chairman for Shell Nigeria, said it was difficult to make commitments without clarity over the terms of the Petroleum Industry Bill (PIB), legislation which will change the fiscal and regulatory framework in the OPEC member.

“Just looking at deepwater alone, we have a portfolio of about $40 billion worth of projects…but we will not be able to make a move on these until we have a landing on the PIB,” he said in an interview at his Lagos home late on Wednesday.

“(That is) potential investment that we are not able to sign off on at this time,” Sunmonu said.

Nigeria says the PIB will make state oil firm NNPC more competitive and transparent, encourage investment, promote local oil company involvement in the industry and increase gas supplies to the dilapidated domestic power sector.

But international oil companies are worried the bill will impose higher taxes and royalties while failing to address key issues of under-funding, corruption and security.

The bill has been repeatedly delayed by revisions and disagreement. It has stalled again in its final stages as President Goodluck Jonathan, who took over last month following the death of late President Umaru Yar’Adua, and new Oil Minister Diezani Allison-Madueke revisit some of the issues.

With elections due by next April at the latest, the new administration has little time to push the bill through, but Sunmonu voiced optimism that differences could be overcome.

“The present government is determined to pass the PIB… I know the minister is planning to have a meeting with captains of industry to further consult with us on how to close the gap.”

Sunmonu also said he had brought to the oil ministry’s attention the need to renew onshore licences which lapsed under the previous administration, saying government had pledged to “dispose of all these legacy issues as quickly as possible.”

NO COMPARISON TO U.S. GULF

Sunmonu said security in the Niger Delta, where three years of militant attacks since early 2006 have prevented Nigeria from pumping much above two thirds of its 3 million barrels per day (bpd) capacity, had greatly improved since an amnesty last year.

But he said bunkering — the theft of industrial quantities of crude oil — had increased.

“I think there is an increase in the level of bunkering in the last few months, there is an upward swing. I always use an estimate of about 100,000 bpd and I don’t think that would be too off the mark,” he said.

The Niger Delta, home to Africa’s biggest oil and gas industry, has suffered decades of pollution from spills which have been left to fester, damaging the air, soil and water.

The U.S. government’s all-out fight to contain the BP oil spill in the Gulf of Mexico is a marked contrast to the situation in the Niger Delta, leading local communities and campaigners to ask why Shell and other international oil firms in Nigeria are not paying compensation.

Sunmonu said the comparison was not fair, noting that between 2000-2007 10,000 barrels a year were spilled on average from Shell operations in the Niger Delta, 70-75 percent of them the result of sabotage or oil thieves drilling into pipelines.

In 2009, just 2 percent of spills were caused by factors within Shell’s control, he said.

“It is incorrect to draw a parallel … The law in Nigeria is very clear. We do not pay compensation for sabotage spills. And I think the intent of the law is correct,” he said.

“If you pay for sabotage spills then you are only fuelling more sabotage and more spills. Where a spill happens as a result of our own error or equipment failure, we do pay compensation.”

The Anglo-Dutch giant says it paid $4 million in compensation last year and cleans up all spills whatever their cause, although communities or armed gangs sometimes deny it access to spill sites.

Sunmonu said he was not concerned by China’s reported ambition to secure 6 billion barrels of Nigerian oil, saying Shell was “not afraid of competition.” Analysts say China is most likely to access Nigerian reserves by snapping up acreage in new licensing rounds rather than buying existing operations. But China has approached the Nigerian government about some blocks held by Western firms.

Sunmonu said he was not aware of any direct approach to Shell by China about buying stakes in Shell Nigeria joint ventures.

© Thomson Reuters 2010 All rights reserved

REUTERS ARTICLE

As BP watches its bill rise quickly for the oil spill, including $20 billion it is setting aside for claims, it could find the tally growing much faster in coming months if the United States Department of Justice files criminal charges against the company.

REUTERS

*Media reports say Delek offers C$150 mln for refinery

*Shell spokesman reiterates that sale process ended June 1

Wed Jun 16, 2010 5:05pm EDT

Alberta, June 16 (Reuters) – Royal Dutch Shell Plc (RDSa.L) is sticking by statements that it is no longer looking for a buyer for its Montreal East oil refinery despite reports that a new offer has emerged.

Radio-Canada and other media in Quebec reported on Wednesday that Delek U.S. Holdings, an arm of Israeli energy, automotive and real estate conglomerate Delek Group (DELKG.TA), had doubled a previous offer for the 130,000 barrel per day plant to C$150 million ($147 million) but no source for the information was given.

Both Delek and Shell declined to comment on the reports. However a Shell spokesman said in an email that a release issued earlier this week, saying the sale process had ended on June 1, remained valid.

Shell announced plans in January to convert the 76-year-old refinery into a fuel terminal but at the request of the Quebec provincial government it gave potential buyers more time to make offers.

It received two expressions of interest just before its deadline but it said neither were adequate.

($1=$1.02 Canadian) (Reporting by Scott Haggett and Janet McGurty; editing by Peter Galloway)

REUTERS

THE WALL STREET JOURNAL

JUNE 16, 2010

By Benoit Faucon

BP’s technical mishaps in the deep waters of the Gulf Mexico have transfixed global opinion and inspired embarrassment for both a U.S. president and a British Prime minister. Yet, in the remote wetlands of Nigeria’s Niger Delta, far from the eyes of the Western public, equipment failure can also cause severe heartburn.

In April last year, a leak on the Trans-Niger pipeline caused a huge column of fire, forcing the operator, a subsidiary of Royal Dutch Shell, to shut down at least 150,000 barrels a day of production.

At the time, Shell said it didn’t know the cause of the fire, as we reported.

Now, one year later, it has been forced to come clean after an internal document surfaced. The giant fire was due to “rusty, damaged and [leaking] pipes,” according to a report by the contractor in charge of the facility.

“After 15 minutes of vehement smoky [oil] spills suddenly burst into flames” and it took eleven hours to put out the fire, he wrote.

With the report now out, Shell has finally acknowledged, in an official email to Dow Jones Newswires, that the accident was due to “an unfortunate result of equipment failure.” Even more surprising, it admits “oil recovery and initial cleanup of affected sites were only completed last month.”

The company insists that almost 98% of the spills volume at its Nigeria facilities is due to sabotage and theft. But one can wonder if this measure reflects the real impact of its operational issues.

For one, the technical fault led to the shutdown of at least 10% of Nigeria’s production for over two weeks. At $50 a barrel at the time, that means the unit lost at least $135 million simply because a rusty, leaky pipe was left unrepaired.

And though much of the oil may have burnt instead of flowing, the impact of the fumes cannot be overlooked. Burning crude generates emissions that in turn induce respiratory diseases in humans and acid rains which are damaging for agriculture.

Shell’s report—conducted jointly with the authorities–says the oil spread into neighboring crops. Unlike in the Gulf of Mexico, incidents in Nigeria start right in peoples’ backyard.

SOURCE ARTICLE

By Aaron Clark

June 16 (Bloomberg) — Delek US Holdings Inc. is one of two companies interested in buying Royal Dutch Shell Plc’s Montreal refinery, the Canadian Broadcasting Corp. reported on its French-language website without identifying a source for the information.

Delek has made an offer of C$150 million ($145.8 million), up from an initial offer of C$75 million, according to the article. Delek operates one refinery in Texas and 1,600 fueling stations on three continents, according to the article.

–Editor: Richard Stubbe.

To contact the reporter on this story: Aaron Clark in New York at aclark27@bloomberg.net

To contact the editor responsible for this story: Dan Stets at dstets@bloomberg.net

SOURCE ARTICLE

June 16 (Bloomberg) — Royal Dutch Shell Plc said it has restored output at its Forcados crude export terminal in Nigeria, which was shut because of disruptions by armed groups in the southern Niger River delta

June 16 (Bloomberg) — Cosan SA Industria & Comercio’s bonds are trading like investment-grade assets on speculation the world’s largest sugar-cane processor will complete a $12 billion joint venture with Royal Dutch Shell Plc.

BP – BARACK PETROLEUM (Headline from The Drudge Report)

THE NEW YORK TIMES

Getty Images: ExxonMobil CEO Rex Tillerson, Chevron CEO John Watson, ConocoPhillips CEO James Mulva, Shell President Marvin Odum, and Lamar McKay, president of BP America, at a House hearing.

THE WALL STREET JOURNAL

By STEPHEN POWER JUNE 15, 2010

WASHINGTON—Senior House Democrats accused all five oil companies attending a congressional hearing Tuesday of relying on “cookie cutter” spill-response plans.

Rep. Edward Markey (D., Mass.) said a review of oil companies’ response plans found that, like BP PLC, three other companies had made references in plans to protecting walruses, “which have not called the Gulf of Mexico home for three million years.” He added that two other plans “are such dead ringers for BP’s that they list a phone number for the same long-dead expert.”

Mr. Markey didn’t identify the companies or the deceased expert. He also said the oil companies had spent an average of $20 million a year on research for safety, accident prevention and oil-spill response plans—an amount he called paltry, compared with the $39 billion they had spent over the past three years to explore for oil and gas.

“The oil companies may think it’s fine to produce carbon copies of their safety plans, but the American people expect and deserve more,” Mr. Markey said.

He called for significantly raising the cap on oil companies’ legal liability for spills and legislation that would mandate safety requirements for companies that drill offshore.

Separately, Rep. Henry Waxman (D., Calif.) presented an excerpt of BP’s spill-response plan that is virtually identical to one filed by Exxon Mobil Corp. He said Exxon Mobil, Chevron Corp. Conoco Phillips and Royal Dutch Shell PLC are “no better prepared to deal with a major oil spill than BP” and said the companies had relied on the same company—the Response Group—to write their plans. The Response Group described those plans to congressional investigators as cookie-cutter plans, Mr. Waxman said.

“When you look at the details, it becomes evident these plans are just paper exercises,” Mr. Waxman said. “BP failed miserably when confronted with a real leak, and Exxon Mobil and the other companies would do no better.”

Republicans who attended the hearing accused Democrats and the Obama administration of inappropriately using the disaster to pass legislation aimed at limiting emissions of heat-trapping gases linked to climate change.

“Anger and frustration do not solve problems,” said Rep. Joe Barton (R., Texas). “We must focus on the real problems: how to mitigate the spill, assist Gulf residents and ensure a disaster like this never happens again.”

In advance of the hearing, top oil-company executives moved to distance their companies from BP.

Exxon Mobil Chief Executive Officer Rex Tillerson called the April 20 explosion and subsequent collapse of the Deepwater Horizon rig “a dramatic departure from the industry norm in deepwater drilling,” according to testimony prepared for the hearing.

Exxon is eager to know “what went wrong at this well that did not occur at the 14,000 other deepwater wells that have been successfully drilled around the world,” Mr. Tillerson said.

Chevron Chairman and Chief Executive John S. Watson said in prepared remarks that he believes an independent investigation of the accident “will show that this tragedy was preventable.”

Chevron’s drilling and well-control practices in deep water “are safe and environmentally sound,” he said. He urged lawmakers not to use this incident as the basis for scaling back or shutting down “the many positive benefits of offshore development in the Gulf of Mexico and elsewhere.”

The Obama Administration has put a six month halt on new deep-water drilling and has stopped drilling in waters shallower than 500 feet until new safety and environmental rules are in place. Oil-industry executives have said the delay in publishing final shallow-water rules is putting thousands of jobs at risk.

A representative of Royal Dutch Shell, Marvin Odum, said in his prepared remarks that the company remains confident in its drilling expertise and procedures. He predicted that the Obama administration’s decision to halt new deep-water drilling for six months will cost “thousands of jobs and billions in lost wages and spending.”

The executives’ statements raise the pressure on BP, which is already facing criticism from members of Congress over its plans to pay a dividend to shareholders.

On Tuesday, two Democratic senators—Ron Wyden of Oregon and Charles Schumer of New York—expressed outrage over reports that BP is considering setting up an escrow account to pay a dividend in the future. The lawmakers reiterated their demand that the company shelve any payment to shareholders until the cost of the oil spill is fully calculated and sufficient reserves are set aside to meet those costs.

U.S. Rep. Joe Barton (R., Texas) called for Congress to be careful in designing new regulations for offshore oil exploration. But he also scolded the assembled CEOs for relying too heavily on blowout-prevention technology that is supposed to stop a runaway well before a major spill occurs.

“You can’t have a contingency plan that says ‘cross your fingers and hope the blowout preventer works,’ ” Mr. Barton said. “We need more than a cookie-cutter contingency plan.”

Write to Stephen Power at stephen.power@wsj.com

WSJ ARTICLE