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WikiLeaks: Royal Dutch Shell machinations over Iran sanctions

Latest leaked diplomatic cable from U.S. Embassy in The Hague confirms Shell exports oil to Iran, yet pressed for imposing broader UN trade sanctions on Iran and forcing Chinese and Russian firms to comply, so as to “level the playing field”. Shell’s Chinese and Russian partners in various multibillion dollar projects may not be impressed. Cable says Netherlands’ gas reserves are forecast to run out by 2030.

Reference ID: 09THEHAGUE596

Created: 2009-10-02 16:04

Released: 2011-01-22 17:05

Classification: UNCLASSIFIED//FOR OFFICIAL USE ONLY

Origin: Embassy The Hague

VZCZCXRO0249
RR RUEHIK
DE RUEHTC #0596/01 2751600
ZNR UUUUU ZZH
R 021600Z OCT 09
FM AMEMBASSY THE HAGUE
TO RUEHC/SECSTATE WASHDC 3320
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RHEBAAA/DEPT OF ENERGY WASHDC

UNCLAS SECTION 01 OF 04 THE HAGUE 000596

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET PREL NL
SUBJECT: NETHERLANDS: SCENESETTER FOR SPECIAL ENVOY
MORNINGSTAR,S VISIT TO THE HAGUE, OCTOBER 7-9, 2009

THE HAGUE 00000596 001.2 OF 004

1. (SBU) SUMMARY: Post warmly welcomes you to The Hague to
convene the 2009 Regional Energy Officers Conference. During
your stay, you will also meet the Foreign Minister, Economic
Affairs Minister, Royal Dutch Shell's Executive Director
responsible for Russia/Central Asia, and address Dutch energy
industry and policy leaders at the Netherlands' premier think
tank. No high-level U.S. official has discussed energy
security in the Netherlands (the world's fifth-largest
natural gas exporter) in several years. The Dutch
fundamentally share our commitment to enhancing Europe's
energy security through diverse sources and supply routes.
However, we would like the Dutch to take on a more prominent
role within the EU to achieve these objectives and avoid
backsliding into narrow commercial diplomacy. END SUMMARY.

---------------------
DUTCH ENERGY OVERVIEW
---------------------

2. (U) The Netherlands' energy position is unique within the
EU. It is the world's seventh largest gas producer and the
EU's largest net exporter of gas by a wide margin. The
Netherlands produces about 14 percent of the natural gas
consumed in Europe and has observer status at the recently
formed Gas Exporting Countries Forum. Since its discovery in
1959, the giant Groningen field has helped underwrite the
Dutch welfare state. (Note: Royal Dutch Shell and ExxonMobil
are 50/50 partners in Nederlandse Aardolie Maatschappij
(NAM), the country's largest gas producer and 60 percent
shareholder of the Groningen field; the Dutch state operator
EBN owns the remainder. End note.) The Dutch economy runs
on natural gas -- it accounts for 45 percent of primary
energy supply and 58 percent of electricity production.

3. (U) The Netherlands' gas reserves are forecast to run out
by 2030, forcing the Dutch to rethink their energy policy.
To remain a regional energy player after its own resources
are depleted, the Dutch government is patiently cultivating
energy relationships with Russia, Algeria, Kazakhstan, Libya,
Qatar, and Angola as long-term supplier countries. The
Netherlands wants to develop as a natural gas roundabout --
a hub that gathers natural gas from various sources (North
Sea, LNG, Russia) and then distributes it via pipeline to
continental Europe.

4. (U) The Dutch are also pursuing opportunities to develop
gas storage reservoirs. The prevalence of depleted gas
fields means the Netherlands has huge storage potential,
either for natural gas or carbon dioxide (CCS). Abu Dhabi
national energy company TAQA announced in December 2008 it
would lead a consortium developing a USD 1 billion, 4.1
billion cubic meter gas storage facility in Bergermeer (in
conjunction with Gazprom and EBN) to be operational by 2013.
The Dutch oppose EU regulations that would require each EU
member state to have adequate gas storage capacity of its
own. The Dutch want to provide storage service to others in
the region -- for a price.

5. (SBU) The Port of Rotterdam is one of the world's major
centers for crude oil imports, trading, refining, and
petrochemical production. Key oil import sources include
Russia, Saudi Arabia, and Norway. Vitol, Trafigura, and
Shell operate there and export oil to Iran.

6. (U) The Dutch want Rotterdam to become an important
destination for LNG as well. Dutch companies Vopak (liquid
storage) and Gasunie (gas pipelines) are teaming up to build
a 12 billion cubic meter (bcm) per year LNG terminal at the
port, due for completion in 2011. TAQA is planning a
sea-based LNG terminal near Rotterdam. On the other side of
Qsea-based LNG terminal near Rotterdam. On the other side of
the country, energy company Essent (now owned by Germany's
RWE) is developing an LNG terminal with Vopak and Gasunie in
Eemshaven, near the German border.

7. (U) Despite the GONL's enthusiastic support for strict EU
renewable energy targets, the country derives only 2.5
percent of its total energy supply from renewables, mostly
biomass and wind. Grand plans and subsidy schemes abound for
offshore wind parks in the North Sea, but these have not left
the drawing board.

8. (U) The Netherlands has one 485 MW nuclear plant in
Borssele, co-owned by utilities Delta and Essent. Delta
wants to build additional reactors on the same site, but
nuclear energy is a political taboo, and the current
government is reluctant to approve any expansion plans.

9. (U) The Netherlands embraced full ownership unbundling of
its electricity and gas utility companies in order to attract
new investment capital and increae competition. Local
THE HAGUE 00000596 002.2 OF 004
government authorities have retained ownership of regulated
network businesses, but foreign energy giants RWE and
Vattenfall acquired the two largest Dutch energy supply and
production companies -- Essent and Nuon, respectively -- in
2009. The Dutch government was frustrated when Germany and
France succeeded in watering down the EU's unbundling rules
in favor of national champions.

-----------------------
GASUNIE AND NORD STREAM
-----------------------

10. (SBU) Dutch gas pipeline company Gasunie is 100 percent
state-owned, unlike most other European gas infrastructure
companies. The GONL maintains an arms-length relationship
with Gasunie's management, expecting it to operate like a
publicly traded company and earn a reasonable return of
around 7 percent for the government, according to Finance
Minister Wouter Bos.

11. (SBU) Gasunie holds a 9 percent stake in Gazprom's Nord
Stream pipeline. This participation was announced during
Prime Minister Balkenende's November 2007 visit to Russia.
Gasunie CEO Marcel Kramer told post the GONL gave positive
feedback to the deal as a way of retaining a significant
role for the Netherlands in Europe's energy equation. To
burnish Nord Stream's image, Gasunie has tried hard to
portray the project as ambitious but realistic; to
characterize Gazprom as driven by commercial concerns, not
political ones; and to leverage the Dutch reputation as
transparent, trustworthy businesspeople.

12. (SBU) Gasunie has a 60 percent share in the Bacton
Balgzand Line (BBL), operational since 2006, which transports
natural gas from the Netherlands to the UK (although it is
bi-directional). Belgian gas transport company Fluxys and
German energy giant e.ON Ruhrgas each have 20 percent shares.
In exchange for Gasunie's share in Nord Stream, Gazprom
received an option to buy a 9 percent stake in BBL. If
Gazprom exercises this option, the shares will come from
Gasunie, leaving it with a majority 51 percent. According to
Kramer, Gasunie had to explain to Gazprom that BBL meets EU
rules, meaning the shareholders just own and operate the
pipeline but cannot dictate who runs gas through it. Post
has heard that BBL did not reverse flow (i.e., send gas from
UK to continental Europe) during the winter 2009
Russia/Ukraine gas crisis.

13. (U) Gasunie bought BEB Transport -- the gas transport
division of a German Shell/Exxon joint venture -- in November
2007. BEB's pipelines tie into Gasunie's existing network,
linking the Netherlands to northern Germany, Berlin, Denmark,
and the landing points for Norwegian gas.

--------------------------------------------- ---------
MEETING FOREIGN MINISTER AND ECONOMIC AFFAIRS MINISTER
--------------------------------------------- ---------

14. (SBU) Foreign Minister Maxime Verhagen and Economic
Affairs Minister Maria van der Hoeven constitute an active
tag team on energy diplomacy with producer countries as they
pursue the Netherlands' vision of becoming a gas hub.
Verhagen, a career politician, and Van der Hoeven, an
educator before embarking on politics, both belong to the
center-right Christian Democratic Appeal (CDA) party, the
ruling coalition's largest. When you meet Van der Hoeven,
she will have just returned from the Kazakhstan International
Oil and Gas Expo and a September 23-26 visit to the U.S.
where she met with Energy Secretary Chu. A planned meeting
with Commerce Secretary Locke did not happen. Her Ministry
of Economic Affairs (MEA) spans energy, commerce, and trade.
Qof Economic Affairs (MEA) spans energy, commerce, and trade.
In the past year, she has visited Angola (March 2009 to lobby
for future LNG shipments to Rotterdam), Algeria (January 2009
also for LNG supplies), Russia (December 2008 for broad
energy investment), Qatar (October 2008 for LNG), and Saudi
Arabia (October 2008 for broad energy investment). Verhagen
visited Qatar and Saudi Arabia (May 2009) and Algeria
(November 2008) to push for closer economic and energy
cooperation as well as human rights.

15. (SBU) Under Van der Hoeven's lead, the Netherlands'
overarching goals in the energy sector are similar to ours:
maintain open markets, ensure diverse and secure supply
sources, and develop new and clean alternatives to fossil
fuels. As she said in a speech during her recent trip to
Washington, The way to improve energy supply security is to
build and maintain good relations with energy suppliers ...
The solution is a variety of sources and suppliers ... to
stimulate an energy mix for Europe that consists of the whole
palette: fossil fuels, sustainable energy, and nuclear energy
THE HAGUE 00000596 003.2 OF 004
on a way to sustainable energy. The Dutch support the main
points of EU strategic energy policy, especially
interconnections. However, they are reluctant to be Europe's
producer of last resort in the event of a gas crisis as they
plan to draw down their reserves slowly, prolonging the
buffer they enjoy by virtue of their domestic production.

16. (SBU) We expect Verhagen and Van der Hoeven to raise the
following issues:
-- U.S.-EU Energy Council: The Netherlands will want to play
an active role in the proposed UEEC and will be eager to hear
the U.S. vision for this body.
-- Caspian Basin: The Ministers will be interested to discuss
how the United States and the Netherlands can align our
energy strategy in the region. They will also want to
exchange views on the Caspian Development Corporation.
-- Energy Charter Treaty: Russia's decision to withdraw from
the ECT caught the Dutch by surprise. They judge it to be a
self-defeating move but will want to maintain other channels
of EU-Russia dialogue on energy matters.
-- Turkey/Southern Corridor: Minister Verhagen will likely
share the Dutch perspective on Nabucco and relations with
Turkey. (Note: Former Nabucco coordinator and Dutch
Foreign Minister Jozias van Aartsen is now Mayor of The
Hague. End Note.)
-- International Energy Forum: The Dutch have firm advocates
of IEF's producer-consumer dialogue. (Note: IEF Secretary
General Noe van Hulst is a Dutch national and former DG for
energy at MEA. End note.)
-- Russia: The Dutch acknowledge we have some differences
concerning Russia (see below) and will want to discuss them.
-- Iran: The GONL and Shell (see below) are both concerned
about proposed U.S. legislation to impose sanctions on
companies selling refined products to Iran. They think this
will only succeed in giving Chinese and Russian companies
access to Iran's hydrocarbon resources at the expense of U.S.
and European competitors.

17. (SBU) Commercial interests are always central to Dutch
economic relations and nowhere is this more evident than with
Russia. For example, during President Medvedev's June 2009
visit to the Netherlands, he met with representatives from
major Dutch companies including Shell, Phillips, and ING.
According to a well-placed MEA official, Prime Minister
Balkenende hit if off with Gazprom Chairman (and former
Russian PM) Viktor Zubkov during the visit and they agreed
that energy and gas cooperation remains central to their
relationship. The two countries committed to increasing
Russian companies' investment in the Port of Rotterdam, and
Russia's Lukoil acquired a 45 percent stake in a Total
refinery in south Holland. However, the Dutch are defensive
about the clubby atmosphere of these twice-yearly high-level
visits. GONL energy officials have told us bluntly in the
past, Don't lecture us about Russia. They are especially
sensitive to criticism about Nord Stream; MEA took offense at
the September 2008 editorial written by the then U.S.
Ambassador to Sweden raising objections to the pipeline.
Despite close commercial relations with Russia, the GONL
supports the so-called Gazprom clause and would likely try
to block a Russian takeover of a Dutch utility without
reciprocal market access.

-----
SHELL
-----

18. (SBU) As Forbes' number two global corporation (after
GE), Rotal Dutch Shell exerts strong influence on Dutch
foreign economic policy. For example, Simon Smits (MFA's
Director for Economic Cooperation whom you will meet October
Q7) recently returned from a secondment to Shell's government
relations group. Finance Minister Bos also held executive
positions at Shell in the 1990s before turning to politics.
You will meet Matthias Bichsel, Shell's Executive Director
responsible for Russia/Central Asia, on October 9. Large
Dutch dredging and energy infrastracture companies such as
Boskalis, Van Oord, and Fugro also enjoy substantial
political influence.

19. (SBU) Shell tries to keep the U.S. government updated on
the Persian LNG (PLNG) project. Shell is a minority partner
in PLNG and has successfully delayed a final investment
decision for several years. Shell wants to keep a foothold
THE HAGUE 00000596 004.2 OF 004
on the project and not let (yet another) lucrative, long-term
Iranian energy contract go to China, but knows it cannot move
ahead on the project in the current climate. Shell would
welcome another UNSC resolution that levels the playing
field by imposing broader trade sanctions on Iran and
forcing Chinese and Russian firms to comply, thereby reducing
the IOCs' competitive disadvantage.

-----------
CLINGENDAEL
-----------

20. (U) Your participation in the Eurasian Energy Security
roundtable with Minister van der Hoeven at the Clingendael
International Energy Program will send a positive signal
about U.S. willingness to engage with European allies on this
issue. The audience will include Dutch energy executives and
policy makers eager to hear your remarks and ask you
questions about U.S. international energy strategy.
LEVIN

SOURCE CABLE

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