Posts from ‘May, 2011’

The recent WikiLeaks revelations have exposed the high level of influence, infiltration and intelligence-gathering that global oil companies have in resource-rich nations in Africa, specifically Shell’s role in Nigeria. Shell gained information on all aspects of Nigeria’s oil business.

Leaked US diplomatic cables from last year, carried by a number of international newspapers and magazines, show that Royal Dutch Shell – among the major oil producers in Nigeria – have infiltrated key Nigerian ministries and have been using links to US officials to gain information on rival oil companies in the country, and the movements and objectives of militants in the Niger Delta region.

Shell’s level of penetration into the governmental structure of Nigeria – one of the world’s largest oil exporters – have given the company access to politicians and decision-makers at the highest level, providing it with insider knowledge of all movements and negotiations within those ministries.

According to Dr. Heinz Jockers, a Nigeria expert and a member of the EU Election Observation Mission to Nigeria, Shell has personnel in the finance, interior, national planning, defense, environment, energy and foreign affairs ministries as well as influence over a number of presidential advisers, parliamentarians, governors, and high-ranked tribal rulers.

High level infiltration in major ministeries and oil-producing states

“Shell operatives – although they are unofficially employed by the company – have infiltrated the majority of the most important ministries in the Nigerian government,” Jockers told Deutsche Welle. “They will of course also have their people in the ministries of the main oil-producing states.”

Jockers said that the main aim of the Shell operatives would be to gain information on everything which could in one way or the other affect the company’s business. “Areas of interest for these people would be the position of other competitors, be it companies or countries; their offers regarding oil deals in Nigeria, the pricing scale for oil in the country, and the level of governmental support for security,” he said.

The leaked cables show that Shell had obtained information that Nigeria had invited bids for oil concessions from China and was concerned at the possibility of increased competition from the People’s Republic. They also show that Shell executives requested confirmation from US officials on Russian gas giant Gazprom’s interest in Nigeria after information was obtained from ministerial channels.

Jockers added that the practice of infiltration was so widespread that it is highly likely that other large companies have embedded personnel in governmental offices as this was the only way that advantages in business could be gained in Nigeria. “These could include: Julius Berger, Chevron, Hochtief, Siemens, Peugeot, Haliburton, and Mercedes,” he said.

“You have to remember: Nigeria is a chaotic and highly corrupt country. To do business there, you have to play the game.”

Shell contacted US officials over Delta militant threat

Ann Pickard, Shell’s top executive in Nigeria, was also revealed to have spoken to US officials in 2008 about the threat of militants in the Niger Delta which had, at its peak in 2006, shut down a quarter of Nigeria’s oil output. An amnesty in 2009 ended the acts of sabotage being carried out on vulnerable pipelines and platforms, such as Shell’s Soku gas facility which had been the target of militant rocket attacks at the height of the so-called Oil War.

“Shell had been the main target of attacks by militants since the early 1990s,” Heinrich Bergstresser, a Nigeria expert at the German Institute of Global and Area Studies (GIGA) in Hamburg, told Deutsche Welle.

“The sabotages and attacks on Shell’s installations, among others, were and are executed not just by militants but also orchestrated by complicit agents within the oil companies. They benefit from the attacks because these people are very often also in charge of managing the payment of compensation which offers the opportunity to keep certain amounts of the payment for themselves.”

The cable dispatches from 2008 showed that Shell’s Pickard had contacted the US consulate in Lagos with an offer to share “intelligence” on militant activity in exchange for information on a shipment of surface-to-air missiles which had allegedly been destined for Nigerian militant groups in the Delta region.

Cables hint at Shell’s involvement with local godfathers

he cables describe how Pickard was also unconvinced that a certain governor in the Delta region “lacked the connections among Rivers state militant leaders to successfully coopt them as the governors in Delta and Bayelsa states have done with militants in their states,” and that she believed the clash between the military and militants was “a proxy war for ongoing disputes” between rival governors.

This section of the cable transcripts hints at the possibility that Shell has been attempting to use its influence to control local leaders, a comlicated and dangerous practice according to Heinrich Bergstresser.

“Shell is playing with fire if it has or had any connection with the governors and militants,” he said. “On the one hand, the oil companies cannot control the governors but on the other hand they can try to persuade them to act in favor of the companies and in their own interest. I am sure that they are paying certain amounts to the governors but that does not guarantee anything.”

Bergstresser added that very often the oil companies find themselves caught between a rock and a hard place. “The militias have emancipated themselves from their political Godfathers and have started their own business of attacks and kidnappings so the oil companies find themselves sandwiched between profit-making, being threatened by militias, and keeping very close relationships with the federal government.”

Author: Nick Amies
Editor:  Rob Mudge

13 December 2010

AP Photo Caption: Playing both sides in the Delta is a dangerous game

SOURCE ARTICLE

INTERLAKEN, Switzerland May 20 (Reuters) – Oil major Royal Dutch Shell (RDSa.L: Quote) expects the approval process for an exploratory drilling programme for Arctic waters off Alaska to take some time, Chief Executive Peter Voser said on Friday.

“We plan to drill up to 10 wells in 2012 and 2013. We are in the process for applying for the so-called permits, but this is going to take some time,” Voser said on the sidelines of the Swiss Economic Forum in Interlaken, Switzerland.

Voser reiterated that he did not expect drilling to start before 2012.

Shell has been trying to revive its Arctic exploration programme after strong opposition from local and environmental groups stymied previous drilling plans in the area.

Voser declined to comment on the BP (BP.L: Quote)’s collapsed deal with Rosneft (ROSN.MM: Quote).

(Reporting by Caroline Copley; editing by Keiron Henderson)

© Thomson Reuters 2011 All rights reserved

SOURCE ARTICLE

Shell’s plan to divest from its OML 40 has been engulfed in a scandal after it emerged that one of the prospective buyers of the oil lease, Vertex has petitioned the Petroleum minister, alleging irregularities in the sale process.

The company is alleging a complete lack of transparency by the Anglo Dutch oil giant which may have side tracked its own laid down procedure.

In the letter to the minister titled, “Urgent request for ministerial intervention – OML 40 divestment,” Vertex said, “the structure of the current divestment was hinged on a firm and final bid. However, the process was switched into selective auction in which some bidders were unaware of the changing rules.

“For example, while bidders for OMLs 30, 34 and 42 received letters asking them to formally submit new bids after the first round of bidding, such a request was not made on OML 40. However, our competitor, Elcrest, was allowed to submit a new bid slightly higher than the original bid from Vertex.”

According to the petition, “At the time they sent in new bids, the bid prices had been leaked and newspapers were publishing the numbers. When the issue of our competitor changing their bid came to light, we wrote a letter to Shell, however, there was no response on the issue of change in bid price.”

The company also alleged in the petition to the minister that, “It is widely known that proper due-diligence with regards to corruption and money laundering issues was not done on some of the principals in the buying entities or deliberately ignored.”

Vertex then called for the minister’s “kind intervention in this matter and to amongst other things, protect this indigenous company (Vertex) from injustice, consistent with current FGN policy, recent and pending legislation and demonstrate Nigeria’s commitment to transparency and best practices. This will restore the much needed investor confidence that this otherwise flawed process has eroded and continues to erode.”

Shell commenced the latest round of its divestment programme in Nigeria with clear objectives of maximising the commercial offer on each of the blocks and encouraging local participation in the industry.

Investigations have revealed that the bid request Shell put out on all the blocks earmarked for divestment in the on-going programme was defined as a firm and final bid. However, a multi-stage auction process was later introduced to ensure maximum bid price from all the participants. In the case of OML 40, this multi-stage auction process was not communicated officially as was done for OMLs 30, 34, 42 Business Day learnt.

Elcrest which had earlier been reported in the press to have put in a lower bid and up-staged by Vertex Energy was surreptitiously allowed to top up its bid a little above the winning bid. The key evidence of this change in bid is the difference in the total value of the 10 percent escrowed by Elcrest for the initial bid and the final amount escrowed for the SPA. Strangely, the opportunity to change the bid price was not communicated to Vertex in the clarification letter sent by Shell to bid participants.

Industry sources reveal that while Shell and the other sellers were initially disposed to selling the asset to Vertex Energy based on strong Nigerian ownership, competitive bid price, technical depth and ability to finance the deal, political pressures were mounted by certain individuals close to the corridors of power to tilt the balance in favour of Elcrest.

Further evidence in support of this view was a statement attributed to Henry Simon, Shell Group Chief Finance Officer where he stated, “Nothing of that magnitude can happen in Nigeria without political support.”

This has been interpreted as a subtle endorsement of players who are good at playing an opaque system, rather than those who operate with strong business principles and corporate governance.

There are assertions that these individuals close to the corridors of power promised to resolve some pressing commercial issues faced by Shell in return for favourable consideration with regards to the bid for OML 40.

It is also apparent that in coming to a decision on signing the SPA, Shell and its co-sellers deliberately ignored the many controversies around some of the parties as well ELAND.

The Starcrest CEO, Emeka Offor and ELAND’s CEO Les Blair have had a long history of working together.

A recent case was around OPL 291, which was linked to the suspension of a DPR director. According to publicly available information, the block was awarded to Starcrest under questionable circumstances. Starcrest immediately sold most of its interest to Addax. At this point in time, Les Blair was head of business development at Addax.

One of the parties has also been involved in major controversies some of which were recently highlighted by a national newspaper. This included the raid by FBI on one of is companies in Houston in 2006, assertions of money laundry and immigration issues in the UK and recently, non-performance on some key strategic contracts.

One of his companies was awarded a contract in 2006 to build a 106 km pipeline to transport gas from Addax offshore platform to Calabar’s Nigerian Independent Power Plant (NIPP) for about $250 million. While the company has received over 80 percent of the contract value, only 8km of the 106km pipeline has been built. As a result, the Calabar NIPP slated for 2011 commissioning is unlikely to get gas.

On the other hand, the Vertex Energy team consists of tested Nigerian oil and gas and business professionals with over 200 years of experience and track-record of delivery. With strong Niger Delta representation, the company is devising unique approaches to working with communities to attain sustainable and mutually beneficial relationships.

Vertex promoters also include individuals with a track record of significant contribution to Nigeria’s development, including: building the first deepwater business in Nigeria; sanctioning Nigeria’s first LNG business; playing a key role in launching a major African Independent Oil and Gas company; building one of the most successful professional services firms in Nigeria; and helping to midwife one of the country’s most successful telecommunications company in Nigeria.

Armed with such an impressive record, oil and gas industry analysts say they are alarmed at how a process that threw up a properly set up, and properly funded Nigerian company as winner, would get subverted in favour of another company.

SOURCE ARTICLE

Thursday, May 19, 2011

May 19 (Bloomberg) — Royal Dutch Shell Plc, Europe’s largest oil company, said a $19 billion investment in Qatar may prove that abundant natural gas coaxed from shale rocks across the U.S. could be converted into diesel and jet fuel.

Shell, which is completing the world’s largest gas-to- liquids plant in Qatar, could use the technology on a smaller scale in the U.S. if capital costs can be reduced, Marvin Odum, head of Shell in the Americas, said in an interview in London. The technology uses catalysts to turn natural gas into jet fuel, diesel and other liquids.

The development of shale fields made the U.S. the world’s largest gas producer in 2009 and caused a slump in prices. Today’s price of $4.18 is equivalent to about $24 a barrel of crude. Oil is trading at about $100 a barrel in New York.

U.S. gas producers are examining different ways to benefit from the arbitrage between oil and gas prices. In the nearer term, compressed and liquefied gas is likely to play a greater role as a transportation fuel, Odum said. Exports of liquefied natural gas by ship is possible from North America, more likely from Canada than the U.S., where there are political obstacles to exports, he said.

Shell expects to produce the equivalent of 400,000 barrels of gas in the Americas in 2015, double the figure in 2009, as it invests $40 billion in the region, The Hague-based company said last year.

Shale gas may account for 47 percent of total U.S. production in 2035, up from 16 percent in 2009, according to the Energy Information Administration.

Qatar Production

Shell’s Pearl GTL plant in Qatar will start production this year and make enough diesel to fuel 160,000 cars a day when it reaches full output. It will also make kerosene and base oils.

BG Group Plc, a U.K.-based producer that has U.S. shale fields, agrees that gas-to-liquids may have a future in North America.

We expect producers to find ways to benefit from “the huge differential between the cost of oil and the cost of gas,” Chief Executive Officer Frank Chapman said last week. That may help to reduce petroleum imports to the nation with the help of “middle distillate synthesis from gas.”

The U.S. government is examining at least nine proposals to allow exports of LNG produced from domestic gas. BG and Southern Union Co. were the latest to seek permission from the Department of Energy. Companies would like to supply the fuel to Asia or Europe where prices are higher.

“There are many other proponents talking about not only exporting gas, but finding other uses for it in the U.S.,” such as chemicals and fertilizers, Chapman said. The gap between oil and gas prices will narrow over time and it “will be good for owners of substantial gas reserves.”

–Editors: Will Kennedy, Stephen Cunningham.