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Shell and Cairn Energy announce ‘risky’ drilling plans in Arctic

May 5th, 2011
by John Donovan.
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Explorations off Alaska’s north coast condemned by environmentalists after Deepwater Horizon disaster

Terry Macalister: Thursday 5 May 2011 17.25 BST

The Inupiat people – who have ‘lived off the Arctic waters for thousands of years’ – are threatened by Shell’s plans, says the Alaska Wilderness League. Photograph: Laurent Dick/AP

A new battle between environmentalists and Big Oil over drilling in the Arctic was triggered today when Shell unveiled “risky” plans for the Beaufort Sea while a Cairn Energy rig set sail for Greenland.

Shell, Europe’s largest oil group, has submitted plans to the US government for permission to drill 10 exploration wells in the Beaufort and Chukchi seas off the north coast of Alaska in 2012 and 2013.

Previous plans to start this summer were halted first by the moratorium imposed after the Deepwater Horizon disaster last April and then by a ruling from the Environmental Protection Agency.But Shell said it was now confident that it could offer regulators the reassurances that should enable it to proceed with a programme said to have cost it $2bn to lease the acreage and possibly an additional $4bn in planning.

“Shell was one of the original offshore explorers in Alaska,” said a spokesman at the company’s head office in The Hague. “As in years past, Shell remains committed to employing world-class technology and experience to ensure a safe, environmentally responsible Arctic exploration programme in 2012 – one that has the smallest possible footprint and no negative impact on traditional substance-hunting activities of the people of the North Slope.”

Cairn meanwhile has given the green light to the drill ship, Ocean Rig Corcovado, to leave Aberdeen heading for Nuuk. It is also bringing a separate drilling rig, Leiv Eriksson, through the Mediterranean en route for the far north. Greenpeace has already boarded the rig off the coast of Turkey in protest at the Greenland drilling plans and said it remained totally opposed to what both Cairn and Shell plan to do in the Arctic region.

“The high north is becoming the frontline of the global environmental battleground,” said Ben Ayliffe, senior oil campaigner at Greenpeace. “Shell is gambling with the fragile Alaskan environment a year after the Deepwater Horizon spill, lining up to start dangerous drilling in one of the world’s most pristine natural habitats despite the terrible risks of a spill there.

“As climate change causes the sea ice to retreat, oil companies are rushing in to extract the fossil fuels that caused the melt in the first place. It’s madness – you don’t put out a fire with gasoline. Instead of drilling in the Arctic, we should be extracting oil from the car industry by driving up the efficiency of their vehicles and forcing them to use new clean technologies.”

The Alaska Wilderness League also condemned Shell, saying it was relying on “the same failed technology” used in BP’s devastating spill 12 months ago off the coast of Louisiana, yet the drilling conditions were far worse and the marine environment rich but less understood.

“Despite the risk of a spill that could eclipse the devastation in the Gulf of Mexico, Shell’s proposed scope for 2012 and 2013 is more risky and aggressive than ever,” said Cindy Shogan, the league’s executive director. “The [Inupiat] people who have thrived off the Arctic waters for thousands of years and those who treasure the Arctic’s unique wildlife will continue to demand that the Obama administration not allow Shell to move forward.”

The northerly region has become a new frontier for exploration since global warming caused ice to melt, oil escalated in value to its current $114 a barrel and the US Geological Survey concluded that almost a quarter of the world’s undiscovered oil and gas reserves may lie in the Arctic.

Cairn created excitement last summer when it reported it had found indications of hydrocarbons with a well off Greenland, while BP has signalled its interest by signing up for a controversial deal to explore in the far north of Siberia with Russian group Rosneft. This scheme is being challenged by another of its partners inside TNK-BP. The region has seen wider industrial, political and military interest over the last two years.

SOURCE ARTICLE

Shell Tries to Calm Fears on Drilling in Alaska

May 2nd, 2011
by John Donovan.
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Children play on empty fuel containers outside of Savoonga, Alaska, where Shell executives have met with local residents to address their concerns.

A version of this article appeared in print on May 2, 2011, on page B1 of the New York edition with the headline: Gulf Spill Casts Shadow Over Shell Plans in Alaska.

By

SAVOONGA, Alaska — Shell Oil will present an ambitious proposal to the federal government this week, seeking permission to drill up to 10 exploratory oil wells beneath Alaska’s frigid Arctic waters.

The forbidding ice-clogged region is believed to hold vast reserves of oil, potentially enough to fuel 25 million cars for 35 years. And with production in Alaska’s North Slope in steep decline, the oil industry is eager to tap new offshore wells.

Shell has led the way, working for five years to convince regulators, environmentalists, Native Alaskans and several courts that it could manage the process safely, protect polar bears and other wildlife, safeguard air quality for residents and respond quickly to any spill in the region. But BP’s Deepwater Horizon disaster a year ago put a chill on new offshore drilling.

Shell’s renewed application will pose a test for President Obama, who promised to put safety first after the BP spill. But he has also reiterated his support for offshore drilling amid voter worries about rising gasoline prices.

Environmental groups say a spill in the Arctic’s inaccessible waters could be even more catastrophic than the Gulf of Mexico accident. Republicans, meanwhile, are threatening to excoriate the president for turning his back on energy security if he says no to Shell.

“Americans are reeling from staggering prices at the pump,” said Representative Cory Gardner, a Colorado Republican on the House Energy and Commerce Committee. “So the president has to justify to the American people why we are not replacing Saudi Arabian oil imports with U.S.-produced oil.”

Whatever the administration decides, it will anger somebody. “If the Obama administration approves drilling in the Arctic, it will demonstrate that they have learned nothing from the gulf spill,” said Brendan Cummings, senior counsel at the Center for Biological Diversity, which is suing to stop Shell.

Administration officials say only that they will thoroughly review Shell’s new proposal. “We need to continue to take a cautious approach in the Arctic that is guided by science and the voices of North Slope communities,” said Kendra Barkoff, a spokeswoman for the Interior Department, which oversees most of the process.

The politics extend as far as Alaska’s remotest villages, where support from Native Alaskans, or at least their acquiescence, is essential to win several permits. With that in mind, Pete Slaiby, Shell’s top executive in Alaska, was glad-handing last week in Savoonga, a village on an island in the Bering Sea. He passed out raffle tickets, bought a trinket and congratulated the Yupik hunters for harpooning two bowhead whales.

One hunter waved a copy of the movie “An Inconvenient Truth,” and launched into an attack on oil as a cause for the warming temperatures that are melting the Arctic ice. Other hunters pressed Mr. Slaiby on concerns that the migrating walruses they depend on for food would suffer from the noise if drilling operations began north of here.

Mr. Slaiby said Shell was concerned about climate change too, and promised that the company would take painstaking precautions to protect wildlife. “We won’t be successful here if we deprive people of their subsistence,” he said. “If the oil companies are doing well and the people living around them are not, it’s a recipe for disaster.”

Shell has already spent $3.7 billion on the 10-year offshore leases and preparations for exploration, although the company has yet to drill a single hole. Shell will formally present its new proposal — to drill up to 10 wells over the next two years in remote waters north of Alaska, in the Chukchi and Beaufort seas — in the next few days. If the plan is approved within nine months or so, exploration could begin next year.

Just as in the past, executives realize they need to fight the battle on multiple regulatory and legal fronts. “It’s like holding a bunch of pins in your hand, and trying to make sure not one drops,” said Brian Malnak, Shell’s vice president of government affairs.

Perhaps the toughest hurdle this year will be convincing the government that Shell could protect the Arctic from a devastating spill. An Interior Department agency recently estimated that a “hypothetical” blowout of an oil well in the Chukchi Sea could release 1.4 million barrels of crude over a 39-day period before a relief well could be drilled. A leak of that magnitude would severely test the capacity of the boats, barges, skimmers and a spill containment tanker that Shell plans to deploy around its rigs, although the company promises to add whatever equipment regulators find necessary.

Shell is proposing to use two drill ships, each capable of drilling a relief well for the other in case of the kind of blowout that destroyed the Deepwater Horizon rig. The company is also promising to add more testing and an extra set of shears to its blowout preventers and to keep emergency capping systems near drilling sites to capture any potential leaks.

Alaska once accounted for a third of the nation’s oil production, but its fields are now in steep decline. The decrease in production threatens the continued safe use of the Trans-Alaska Pipeline System, also known as TAPS, which requires a steady flow of oil to avert corrosion and spills.

The Alaskan Arctic potentially holds 27 billion barrels of oil. “If we could open the Arctic to oil exploration,” said Alaska’s governor, Sean Parnell, “we can fill that TAPS line in a way to preserve it for another 50 to 100 years.” Major production from the Arctic would probably be a decade away, however.

Environmentalists contend that the risks of drilling are too great. They warn that hurricane-force winds, high seas, and frigid cold and ice would make cleaning up a spill far more difficult than in the gulf, and they say that oil operations could disturb migration and reproduction of marine mammals.

“We believe there need to be more spill drills, more testing, more inspections of the drill rig and blowout preventer before they begin,” said Marilyn Heiman, director of the United States Arctic Program of the Pew Environment Group.

In his presentation in Savoonga, Mr. Slaiby said Shell and other companies had safely drilled in Alaska’s Arctic waters in the 1980s and 1990s, without a spill or major damage to wildlife. And he noted that the wells Shell intended to drill here were far shallower than BP’s ill-fated Macondo well, making the possibility of a blowout more remote.

“We’ve never told people that what we do doesn’t entail risk,” Mr. Slaiby said, “but the risks are different from the Gulf of Mexico.”

SOURCE ARTICLE

Shell says it paid Nigeria $3.8 bil tax on offshore oil operation in 5 years

Apr 21st, 2011
by John Donovan.
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Lagos (Platts)–21Apr2011/820 am EDT/1220 GMT

Royal Dutch Shell Nigeria says it paid about $3.8 billion in taxes and royalties to the Nigerian government from its offshore and deepwater oil operations between 2006 and 2010.

In a briefing note on the company’s operations in Nigeria in 2010 published Thursday, Shell said its joint venture operations contributed about $31 billion in revenue to Nigeria during the same period.

Shell, however, said its oil production in the West African country, particularly from the onshore fields, continued to decline because of the activities of thieves who damage production facilities.

Barges take stolen oil to tankers waiting offshore for export, Shell said. There is also a massive illegal refining business based on stolen crude oil. All this has reduced the amount of oil SPDC (Shell) is producing, the company said.

“These continue to be challenging times in Nigeria. We are faced with many issues that impact our onshore production and increase our direct costs while impacting on the environment and the livelihoods of the people who live in the oil producing region,” Shell in-country chairman Mutiu Sunmonu said.

In 2009, Shell began selling off its stakes in Niger Delta onshore oil blocks and has sold five to date.

About 100,000 barrels of crude are estimated to be stolen from Nigeria’s Niger Delta every day or 4% of the country’s oil output.

Much of the oil is stolen by heavily armed and well-organized groups who drill into pipelines or hijack barges laden with crude.

Nigerian security agencies in 2010 alone arrested 187 people and seized 20 tankers, 28 barges and 38 other boats used in transporting stolen crude, Shell said.

Shell also said that it had halved gas flaring in its oil fields in the Niger Delta over the past few years to 0.3 Bcf/d from over 0.6 Bcf/d, and that it was collaborating with Nigeria and the World Bank to finally end the flaring, which is a health hazard to nearby communities and contributes to global warming.

–Staff, newsdesk@platts.com

Similar stories appear in Oilgram News. See more information at http://www.platts.com/Products/oilgramnews

Platts Source Article

Natural Gas from Shale Contributes to Global Warming, Researchers Find

Apr 15th, 2011
by John Donovan.
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Natural Gas from Shale Contributes to Global Warming, Researchers Find

ScienceDaily (Apr. 13, 2011) — Natural gas extracted from shale formations has a greater greenhouse gas footprint — in the form of methane emissions — than conventional gas, oil and coal over a 20 year period. This calls into question the logic of its use as a climate-friendly alternative to fossil fuels, according to Robert Howarth and colleagues, from Cornell University in New York.

Their work is published online in Springer’s journal, Climatic Change Letters.

Shale gas has become an increasingly important source of natural gas in the United States over the past decade. Shale gas is extracted by a high-volume hydraulic fracturing (fracking) process. Large volumes of water are forced under pressure into the shale to fracture and re-fracture the rock to boost gas flow. A significant amount of water returns to the surface as flow-back within the first few days to weeks after injection and is accompanied by large quantities of methane.

Howarth and team evaluated the greenhouse gas footprint of natural gas, obtained by high-volume hydraulic fracturing of shale formations, focusing on methane emissions. They analyzed the most recently published data — in particular, the technical background document on greenhouse gas emissions from the oil and gas industry (EPA 2010), as well as a report on natural gas losses on federal lands from the General Accountability Office (GAO 2010).

They calculated that, overall, during the life cycle of an average shale-gas well, between four to eight percent of the total production of the well is emitted to the atmosphere as methane, via routine venting and equipment leaks, as well as with flow-back return fluids during drill out following the fracturing of the shale formations. Routine production and downstream methane emissions are also large, but comparable to those of conventional gas.

Methane is a far more potent greenhouse gas than carbon dioxide, but methane also has a 10-fold shorter residence time in the atmosphere. As a result, its effect on global warming falls more rapidly. Methane dominates the greenhouse gas footprint for shale gas on a 20 year horizon, contributing up to three times more than does direct carbon dioxide emission. At this time scale, the footprint for shale gas is at least 20 percent greater than that for coal, and perhaps twice as great.

Robert Howarth concludes: “The large greenhouse gas footprint of shale gas undercuts the logic of its use as a bridging fuel over coming decades, if the goal is to reduce global warming. The full footprint should be used in planning for alternative energy futures that adequately consider global climate change.”

SOURCE ARTICLE

Shale gas ‘worse than coal’ for climate

Apr 13th, 2011
by John Donovan.
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Gas is a natural by-product of shale rock

12 April 2011 Last updated at 18:10

By Richard Black Environment correspondent, BBC News

The new kid on the energy block, shale gas, may be worse in climate change terms than coal, a study concludes.

Drawn from rock through a controversial “fracking” process, some hail the gas as a “stepping stone” to a low-carbon future and a route to energy security.

But US researchers found that shale gas wells leak substantial amounts of methane, a potent greenhouse gas.

This makes its climate impact worse than conventional gas, they say – and probably worse than coal as well.

“Compared to coal, the footprint of shale gas is at least 20% greater and perhaps more than twice as great on the 20-year horizon, and is comparable over 100 years,” they write in a paper to be published shortly in the journal Climatic Change.

“We have produced the first comprehensive analysis of the greenhouse gas footprint of shale gas,” said lead author Robert Howarth from Cornell University in Ithaca, US.

“We have used the best available data [and] the conclusion is that shale gas may indeed be quite damaging to global warming, quite likely as bad or worse than coal,” he told BBC News.

Short-term fix?

Greenhouse gas emissions from shale gas are predominantly down to two things: carbon dioxide produced when the gas is burned, and methane that leaks out while the well is being exploited.

Figures from the US government and industry indicate that at least a third more methane leaks from shale gas extraction than from conventional wells – and perhaps more than twice as much.

Extracting the gas involves a complex sequence of processes including drilling down and then sideways along a shale bed, cracking the rock with hydraulic pressure or explosions (fracking), placing plugs in the shaft and then “drilling out” these plugs.

Coal, by contrast, is associated with a much smaller methane release during mining; but burning it produces about twice as much CO2 as burning natural gas.

Molecule for molecule, methane is a much more potent greenhouse gas than CO2; but it lasts for a much shorter time in the atmosphere.

Figures from this research team indicate that over a 20-year period, the net warming impact of using shale gas is worse than coal – and, perhaps more surprisingly, that conventional gas may be worse than coal as well.

Over a 100-year timeframe, conventional gas is almost certainly better than coal – but shale gas could be worse.

The precise numbers depend most on leakage rates. Dr Howarth’s group used “best practice” estimates; in the real world, therefore, the leakage and the climate impact could be even worse.

“No-one knows for sure to what extent industry uses best practices; and unfortunately, at least in the US, industry does not want government or the public to know,” he said.

“The Environmental Protection Agency has proposed rules that would require industry to report methane emissions, but several companies have sued the EPA to try to prevent such reporting.”

With greenhouse gas emissions resuming their rise as societies emerge from recession, and with growth in fossil fuel use expanding at a faster absolute rate than renewables, some analysts and even climate campaigners have seized on the option of expanding gas use as a “transitional fuel” on the way from high-carbon coal-burning to low-carbon alternatives.

The new US analysis suggests this may not be a sensible strategy, given that the total carbon footprint appears bigger – especially if the gas comes from shale formations.

Current projections suggest that within 25 years, half of the US natural gas output will come from shale, while many other countries are also pursuing the technology.

The first trial fracking in the UK took place last month, in Lancashire.

Euan Nisbet, a geologist who runs several methane monitoring and research programmes from Royal Holloway, University of London, suggested the detailed balance might vary between geological formations.

“By trying to evaluate the greenhouse gas footprint of shale gas extraction, Howarth and his team are asking important questions about this new bonanza,” he said.

“I suspect the debate on this will be long, and the answers will be different for each shale gas formation; but it is important that we tackle this debate.”

“We also need to be very careful to account fully for the greenhouse footprint of conventional gas piped over long distances, for instance in the import of Asian gas to Europe, or Norwegian gas to the UK. The energy choices are not easy.”

The UK Department for Energy and Climate Change (DECC) is preparing to issue more fracking licences around the country, and a spokesman said it would “closely monitor developments and consider the need for additional research to improve our understanding of the implications for policy”.

Robert Howarth, however, was less equivocal.

“We should not proceed to view shale gas as a ‘transitional fuel’ to be used over the next few decades to replace other fossil fuels, but rather work harder to move towards truly green renewable fuels as quickly as possible, such as wind and solar.”

SOURCE ARTICLE

RELATED CARTOON

Royal Dutch Shell is facing a growing outcry against its plans to conduct hydraulic fracturing in the Karoo. The process of fracking has received bad press in the US. In fact some states have banned it. Shell wants to take this controversial process of mining unconventional gas to the Karoo. (SOURCE)

US navy faces up to a new enemy – climate change

Mar 11th, 2011
by John Donovan.
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10 March 2011 by Jeff Hecht

Climate change could take the US navy into treacherous waters. It will have to raise its game in a thawing Arctic and prepare coastal bases to cope with rising sea levels, concludes a review carried out for the navy by the National Research Council (NRC).

The US Congress may still question the science of climate change, but the Pentagon already thinks a changing climate will be a significant influence on the future security environment. It said as much in last year’s Quadrennial Defence Review Report.

In 2009, chief of naval operations Gary Roughead commissioned the NRC to study the national security implications of climate change for the US navy. The results of that study, published today, conclude that the Arctic is a key challenge for the US – one of five countries with territory inside the Arctic circle.

In 2007, the fabled Northwest Passage along Canada and Alaska opened for the first time as a result of retreating sea ice. It is expected to become navigable – albeit probably still dangerous – by 2030. That will open the region to shipping, tourists and the exploitation of rich natural resources.

Maritime boundaries that determine who controls resources are already in dispute in the area. “The possibility of conflict is low, but it is still real,” says the NRC panel co-chair Antonio Busalacchi at the University of Maryland in College Park. That makes the presence of the US navy or coastguard desirable to support the nation’s interests and protect its citizens in the area.

Cold case

Yet the US has largely ignored the inhospitable Arctic in the two decades since the end of the cold war. “As a nation, we’ve lost some of our experience and edge in cold regions,” says Busalacchi. Special equipment and training are? needed for Arctic operations: for instance, communication links degrade because areas north of the Arctic circle are out of normal range of the satellites in geosynchronous orbit that the navy uses. The US now has just three icebreakers – and two of them are over 30 years old. Of the other four nations with Arctic territory, Russia has 18 icebreakers, Finland and Sweden have seven each, and Canada has six.

To address these problems, the NRC panel urges the navy to build partnerships with other countries operating in the Arctic and to develop new navigation and communications techniques.

The sea-level rises predicted to follow global warming also pose a direct threat to naval facilities, most of which, obviously, lie along coasts. A survey for last year’s quadrennial review found that 56 of the 103 navy bases that responded would be vulnerable to a 1-metre rise in sea level, which the panel considers likely by the end of this century. The report says these facilities are worth about $100 billion, and encourages the navy to identify which are at most risk from storm surges and sea-level rise, take steps to defend them, and develop models to predict future risks.

SOURCE ARTICLE

Climate Change Demands Action Now, Shell’s Chief Executive Says

Jan 17th, 2011
by John Donovan.
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By Ayesha Daya – Jan 17, 2011 4:17 PM GMT+0000

Royal Dutch Shell Plc’s chief said the implementation of climate change agreements made at Cancun last month “won’t happen overnight”, and policymakers must take action now “because the clock is ticking.”

“In the short term, we should focus on areas where we can get the cheapest and quickest carbon dioxide reductions,” Chief Executive Officer Peter Voser said at a renewable energy conference in Abu Dhabi today. “It will take a while for international standards to be implemented, but we are of the opinion that we have to move now.”

Voser offered four ways for policymakers to begin reducing CO2 emissions: energy efficiency, increased use of natural gas, carbon capture and storage projects, and biofuels.

Energy efficiency, such as fuel-efficient vehicles and insulation of buildings, will need government mandates and regulation, he said.

Increased use of natural gas, which would cut emissions by 60-70 percent if it was used in place of coal, will also require government policy to support the switch in fuel type. China has already pledged to obtain 8 percent of its energy consumption from gas by 2020, compared with 4 percent now, he said.

“There’s a revolution in the U.S. now, and also in China with unconventional gas,” Voser said. “So there is ample gas available, and it is cheaper than nuclear power, so it is clearly something in which we can invest.”

Carbon capture and storage projects are yet to be deployed in a big way, and pilot projects require government funding to drive the technology.

Biofuels offer “the only fast transport fuel option” and can be developed in a sustainable way if the correct standards are set, Voser said.

To contact the reporter on this story: Ayesha Daya in Dubai at adaya1@bloomberg.net

To contact the editor responsible for this story: Stephen Voss at sev@bloomberg.net

BLOOMBERG ARTICLE

WikiLeaks: NIGERIA: SHELL BRIEFS AMBASSADOR ON OIL GAS ISSUES

Dec 9th, 2010
by John Donovan.
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Viewing cable 09ABUJA259, C) NIGERIA: SHELL BRIEFS AMBASSADOR ON OIL GAS

Reference ID     Created     Released     Classification     Origin
09ABUJA259     2009-02-10 16:04     2010-12-08 21:09     SECRET//NOFORN     Embassy Abuja

VZCZCXRO7442
OO RUEHPA
DE RUEHUJA #0259/01 0411610
ZNY SSSSS ZZH
O 101610Z FEB 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5253
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHOS/AMCONSUL LAGOS 0802
RHEBAAA/DEPT OF ENERGY WASHDC

S E C R E T SECTION 01 OF 03 ABUJA 000259

NOFORN
SIPDIS

STATE PASS USTR FOR AGAMA
USDOE FOR GEORGE PERSON AND CHAYLOCK

E.O. 12958: DECL: 10/02/2028
TAGS: EPET ENRG ELAB PINR ECON SENV PGOV NI
SUBJECT: (C) NIGERIA: SHELL BRIEFS AMBASSADOR ON OIL GAS ISSUES,
COMMENTS ON PRESIDENT’S HEALTH AND HIGH-LEVEL CORRUPTION

REF: ABUJA 203

Classified By: Ambassador Robin R. Sanders for reasons 1.4. (b
& d).

¶1. (S/NF) SUMMARY: Shell’s regional executive vice president for
Africa Ann Pickard and government relations representative Peter
Francis met with the Ambassador on January 27 in Abuja and provided
an update on problems in the oil and gas sector. Pickard said that
things were going from bad to worse, especially the security
situation. She said that Nigeria now had one of the highest negative
ratings for maritime operations, creating problems for Shell in
hiring oil tankers to load, as tanker operators will work only under
highly selective conditions. Last year there were about 80 piracy
attacks on land and water combined. This year already 15 have been
tallied, which includes 3 for Shell and 3 for Exxon. On corruption,
Pickard said that Nigerian entities control the lifting of many oil
cargoes and there are some “very interesting” people lifting oil.
Oil buyers would pay NNPC GMD Yar’Adua, Chief Economic Advisor Yakubu
and the First Lady Turai Yar’Adua large bribes to lift oil. Pickard
also reported an instance of the Attorney General Aondoakaa allegedly
soliciting a $20 million bribe to sign a document. The International
Oil Companies (IOC) are quite concerned about the “very flawed” new
petroleum sector energy bill. The IOCs will be asking U.S., Dutch,
and U.K. COMs to convey points on the bill to GON policymakers.
Pickard agreed that the President’s health is a guessing game. She
said that in her recent meetings with Yar’Auda he seems alert, though
very drawn in the face, thin, and frail. Her information is that the
President was not in danger of dying soon, but also was unlikely to
ever fully recover from his ailments. (Note: see septel on oil/energy
sector issues for the Ambassador’s meeting with the new Minister of
Petroleum Resources. End Note). END SUMMARY.

¶2. (C) Shell’s regional executive vice president for Africa Ann
Pickard and government relations representative Peter Francis met
with the Ambassador on January 27, 2009 in Abuja and provided an
update on problems in the oil and gas sector. Pickard reported that
Shell’s meeting with Minister of Petroleum Resources Dr. Rilwanu
Lukman scheduled for earlier that day had been cancelled; the third
week in a row where key appointments had fallen through, with the
excuse of being summoned to the Presidential Villa. (Note: Emboffs
have observed that meetings with ministers and senior staff are
indeed often cancelled with the explanation that they have been
summoned to the Presidential Villa, even when the President is out of
town. End note). Econ Counselor and Econoff (notetaker) also
attended the discussion.

- – - – - – - – -
FROM BAD TO WORSE
- – - – - – - – -

¶3. (C) The Ambassador took the opportunity to share with Pickard that
the Mission was in the midst of completing its Strategic Plan and
asked Pickard where she thought Nigeria was headed. Pickard said that
things were going from bad to worse, especially in terms of security.
She said that Nigeria now had the highest negative rating for
maritime security, creating problems for Shell in hiring oil tankers
to load; tankers will work only under highly selective conditions.
She also noted that late on the evening of Saturday January 17,
Nigerian militants attacked and boarded two vessels at a Shell crude
oil loading platform in Bonny and took eight crew members hostage.
Standard procedure on the tanker was followed: the ship went into
immediate lock down; there were no injuries or fatalities from the
boarding. The eight Nigerian crew members who were taken hostage were
later released. The pirates who went through the sections of the
boat to which they were able to gain access, smashing and stealing
computers, electronics, and personal items of the crew members. The
second vessel was a tug boat towing a supply vessel from Bonny to
Calabar. Last year there were about 80 incidents of piracy; this
year already 15 had been tallied, which includes 3 for Shell and 3
for Exxon. GON officials have told Shell to “hire more security.”
The price of doing business in the oil and gas sector in Nigeria
continues to climb she concluded. [Note: The International Maritime
Bureau (IMB), a division of the International Chamber of Commerce -
www icc-ccs org - reports that the waters off the Gulf of Guinea
(Nigeria) remain the second worst, with 40 incidents in 2008 to the
Horn of Africa (Somalia) with 42 recorded incidents. The IMB notes
that in 2009 the Horn of Africa will be more intense as Spring comes
due to the large number of foreign warships in the region on active
patrol to ensure the safety and security of vessels. The same
increased security is not expected for Nigeria in 2009. End Note]

- – - – - – - – - – - – - – - – - – - – - – - – -
SHELL BELIEVES COUP UNLIKELY; CORRUPTION WORSENING
- – - – - – - – - – - – - – - – - – - – - – - – -

ABUJA 00000259 002 OF 003

¶4. (S/NF) The Ambassador asked what Shell’s thoughts were on any
potential for a coup. Pickard answered that there is little
intellectual capital to plan and execute a coup and Shell sees little
potential for one. Pickard then went on to say that corruption in
the oil sector was worsening by the day. The Ambassador asked for a
few examples. Pickard said that Nigerian entities control the
lifting of many oil cargoes and there are some “very interesting”
people lifting oil (People, she said that were not even in the
industry). As an example she said that oil buyers would pay Nigerian
National Petroleum Corporation (NNPC) General Managing Director
Yar’Adua, (Note: not related to President Yar’Adua. End Note) Chief
Economic Advisor Yakubu, and the First Lady Turai Yar’Adua large
bribes, millions of dollars per tanker, to lift oil. The IOCs
control the liquefied petroleum gas (LPG) cargos, so GON actors do
not have the same opportunity for illicit gain. Pickard also said a
former associate of hers (protect) had told her he had been present
when Attorney General Aondoakaa had told a visitor that he would sign
a document only if the visitor paid $2 million immediately and
another $18 million the next day.

- – - – - – -
VERY BAD BILL
- – - – - – -

¶5. (C) Pickard reported that Shell, Exxon-Mobil and Chevron all have
big license review disputes with the GON. Shell has taken its
dispute to court and the court is supporting Shell’s position.
According to her, Shell is stepping back for the moment, however, to
see how the other two majors negotiation fair, but is not taking its
case out of court yet. The IOCs are quite concerned about the “very
flawed” new petroleum sector energy bill. The bill is silent on what
fiscal regimes would be applied. Shell says that the bill could
reduce the corporation’s overall value in Nigeria. GON discussions
around the bill have mentioned the possibility of moving to five-year
licenses and prohibiting exploring both oil and gas from the same
source, which would contradict how oil and gas extraction works in
practice. The bill is silent on joint ventures; it just states that
NNPC will be incorporated. Pickard said the bill was “likely to sail
through.” The IOCs will be asking U.S., Dutch and U.K. COMs to
convey points on the bill to GON policymakers. (Note: Pickard
mentioned that the IOCs will not share company information directly;
they will hire consultants, like McKinsey, to produce common themes
so the messages from the IOCs to be shared with the relevant
Ambassadors are clear and consistent. End note). Pickard lamented
that the expected cycle of petroleum is at least five years for the
first oil to flow, another 10 years of production to begin to break
even. These numbers change when oil is $40 per barrel instead of $100
per barrel. Hence, a five year license would not be an incentive for
investment and development.

- – - – - -
GAS ISSUES
- – - – - -

¶6. (C) The Ambassador said that the Mission was looking at
performance measures for the economy, i.e. the linkage between the
country’s electricity output and gross domestic product (GDP). The
Ambassador shared that the Mission feels strongly that gas for
feedstock is the key to Nigeria’s power production, which is only
about 2,800 average megawatts for a country of 140 million people.
Pickard agreed and added that the U.S. got it wrong on its domestic
natural gas policies, which it took over 20 years to sort out. So it
is not surprising that Nigeria has it wrong at this point. She said
there is not adequate infrastructure for gas. Gathering plants and
pipelines to carry the product to the power plants still have to be
financed and built. The Nigeria Independent Power Projects (NIPP)
were located where there is no gas and no infrastructure. In
addition, the international oil companies were coerced into building
a power plant each, something they have no expertise in, and they are
scrambling to deliver gas to these plants.

- – - – - – - – - – - – - – - – - – - – - -
YAR’AUDA VACATION IS PERHAPS SOMETHING ELSE
- – - – - – - – - – - – - – - – - – - – - -

¶7. (S/NF) Pickard agreed that the President’s health is a guessing
game. She said that in her recent meetings with Yar’Auda he seems
alert but drawn in the face and frail. She reported that a Julius
Berger (protect) contact says that the President was not in danger of
dying soon but has serious ailments from which he will never fully
recover. Pickard shared that Berger provides transportation
including planes for the President and has reportedly flown in
doctors and technicians to attend the President (reftel). She said,
for instance, that her Berger contact confided that they flew the
President from Germany to Saudi in September 2008. Additionally, the
Berger contact thought the President would not return to the Villa

ABUJA 00000259 003 OF 003

offices, as they were moving the President’s personal things out of
the Villa. (Note: What we think this means is that Yar’Adua is
spending most of his time in the presidential residence and not in
the Villa offices. End Note).

- – - – - – - – - – - – - – - – - – - – - -
HOPES THAT OIL NATIONALISM CAN BE TEMPERED
- – - – - – - – - – - – - – - – - – - – - -

¶8. (C) The Ambassador asked how comfortable Shell was with the new
appointment of Dr. Rilwanu Lukman as Minister of Petroleum Resources,
and the appointment of Mohammad Sanusi Barkindo as the new NNPC GMD.
Pickard sees the nationalism card cooling with the removal of former
NNPC GMD Yar’Adua, given that new Minister of Petroleum Lukman is
more “pragmatic” and will hold sway over deputy Minister Ajumogobia.
(Note: Ajumogobia’s technical assistant told EconOff in a meeting on
January 14, 2009 that the State Minister was focusing on Gas, since
before the mass cabinet change he was State Minster of Petroleum,
with a separate State Minster for Gas.) End Note. She said she was
also okay with NNPC chief Barkindo. She has worked with Barkindo
several times over the past few decades, especially when they were
both working climate change. She said Barkindo led Nigeria’s
technical delegation to climate change negotiations that produced the
United Nations Framework Convention on Climate Change (UNFCCC)and the
Kyoto protocol to UNFCCC during while he served on its Bureau at
various times. She indicated that although his undergraduate studies
were in political science, he obtained his MBA from Southeastern
University in Washington DC and did postgraduate work in petroleum
economics and management at Oxford University. Although she also said
terms like nationalistic and Chavez she however said that she thought
he could be steered in the right direction on the petroleum sector.

- – - -
COMMENT
- – - -

¶9. (C) Although Pickard clearly seems frustrated with the way things
are going in the maritime security, oil sector legislation, and
corruption which affects Shell’s bottom line, it was useful to hear
that she has hopes for the new Petroleum Minister and NNPC chief.
Septel on the Ambassador’s meeting with new Petroleum Minister Lukman
will address many of these same issues.

¶10. (U) This cable was coordinated with Consulate Lagos.

SANDERS

Shell says opposes tougher EU carbon cut

Oct 12th, 2010
by John Donovan.
No comments yet

By Gerard Wynn LONDON | Mon Oct 11, 2010 12:35pm EDT

(Reuters) – Anglo-Dutch oil company Royal Dutch Shell (RDSa.L) opposed tougher European Union carbon emissions targets, as proposed by some EU countries, the company’s head of carbon dioxide (CO2) said.

A unilateral EU move to tighten its carbon caps before other countries followed suit would entail “very real business risks,” Graeme Sweeney told Reuters on Monday.

An EU draft document said in April a 30 percent target would be “technically feasible and economically affordable,” especially after recession had cut EU industrial carbon emissions.

And in June, Britain, France, and Sweden’s environment ministers said they supported EU plans to move to a deeper, 30 percent cut by 2020, compared with 1990 levels. But Italy, east European countries, and some business lobbies were opposed, saying it would impose higher costs on industry.

“There are very real business risks that arise from this kind of potential change in policy,” said Sweeney.

“We would not support the unilateral move to 30 percent,” he said, adding Shell favored a floor price in the 27-country bloc’s emissions trading scheme, after plummeting industrial production led to a surplus of carbon emissions permits.

“The depth of the recession was particularly significant, and that creates the case for recalibration. This would probably be best achieved by withdrawing some allowances between 2013 and 2020.”

U.N. climate talks have failed to agree a new climate deal after the present round of the Kyoto Protocol expires in 2012, and made little headway last week in China.

Part of the deadlock is centered around a reluctance by countries to move first, especially before the two biggest emitters — China and the United States. That prompted an EU debate whether the bloc should move unilaterally to kick-start the process.

In February, Shell struck a deal with Brazilian group Cosan (CSAN3.SA) to create a $21 billion-a-year ethanol joint venture, which Sweeney pointed to as evidence the company was committed to low-carbon technologies.

Sugar-based ethanol is widely considered one of the lowest carbon alternative road transport fuels to oil.

Sweeney said Shell supported California’s green law, called AB 32 and aimed at cutting the state’s carbon emissions to 1990 levels by 2020, a move opposed by some oil companies.

On November 2, Californians will vote on a proposal to put the law on hold.

The oil major also did not oppose mooted Environmental Protection Agency regulation of U.S. greenhouse gases, depending on how that was implemented, he said.

(Reporting by Gerard Wynn, Nina Chestney and Daniel Fineren, Editing by Dan Lalor)

SOURCE

Shell CEO Voser claims technology is key to energy security

Jul 27th, 2010
by John Donovan.
No comments yet
LONDON, July 27 (UPI) — The world is facing drastic energy shortages unless investors back technological advancements in all forms of energy, executives said in London.

Peter Voser, the chief executive officer at Royal Dutch Shell, told an audience in London that the global community needed to look for new ways to exploit renewable and fossil fuels.

“Even assuming heroic steps to use energy more efficiently, the world will need to develop all energy types,” he said.

Scientists at Shell said that without new ways to increase energy supplies, the world could face looming energy shortages in the coming decades even as new sources of energy such as Iraqi oil come on stream.

The world, Voser said, would need to replace 40 million barrels of oil in daily production by 2020 to make up for declining reserves. This, he said, was about four times what Saudi Arabia is producing currently.

Renewable resources, meanwhile, could supply 30 percent of the world’s energy needs by 2050.

“I’m convinced that technology will help us double our energy supply, while at the same time tackling the threat of climate change,” he said.

UPI ARTICLE

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