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Pensions anger as even profitable firms cut benefits

The Observer, Sunday 22 January 2012

When even successful companies such as Shell and Unilever are taking an axe to staff retirement packages, is the outlook bleak for everyone?

Unilever, the maker of everything from Pot Noodles to Dove soap, has infuriated its staff by cutting pension payouts – despite being highly profitable. Shell, another household name, has followed suit with plans to cut retirement incomes.

Unilever suffered a wave of strikes which started last week and will continue for the next five days. Much of the anger among employees at its factories and research units is focused on the company’s £6bn operating profit and the pay, bonus and pension top-ups awarded to chief executive Paul Polman. He pocketed £2.8m last year, of which £1.7m was a performance-related bonus. His pension was increased by a company donation of £352,000, according to the 2011 annual report.

For staff, it is a typical them-and-us story of sky-high rewards for directors while shopfloor workers are bullied into accepting reduced standards of living. The changes to pension scheme rules are the flashpoint. However, a closer look at the changes makes it harder to characterise as a poor deal.

In 2008, Unilever made its first move to save costs, but refused to push new staff into the default arrangements adoped by other companies, which rely on stock market investments and put all the risk of generating a retirement income on to the employee. The board said new joiners would receive a pension based on their career-average earnings. It thus maintained the scheme, and effectively guaranteed a maximum cut of only 20% to pension payouts, while rivals were devising schemes for new staff that would mean losses of 60% at least.

Last year Unilever told staff that the costs of providing a pension had soared following a rise in life expectancy, poor investment returns and the threat from more costly regulations. It meant all staff, not just new joiners, needed to move to the new career-average scheme.

Unions are well aware of the rising costs of pension provision. Average life expectancy is 80, up from 72 in the 1970s, according to professor David Leon of the London School of Hygiene and Tropical Medicine’s epidemiology unit. He says it is likely to carry on rising as more people stop smoking and eat healthily, though increasing obesity and diabetes could reverse the effect. According to the Office for National Statistics, between 2004-06 and 2008-10 average life expectancy for women rose by a year to 82.3, while for men it rose by 1.2 years to 78.2.

Poor investment returns are the other side of the equation, after a decade of low interest rates and underperforming stock markets. The index of Britain’s top 100 companies declined 5.5% last year. In fact, growth in most schemes over the past 10 years has been simply a result of employee and employer contributions. Investment gains, such as they are, have struggled to keep pace with inflation.

Firms also face extra regulatory costs because of European Union plans to categorise occupational pension schemes as insurance vehicles. This will mean they must boost their funding position, something they can only do at their own expense.

Unions also know that the biggest losers from the shift away from final-salary benefits are middle managers on higher pay. Those at the top have risen through the ranks to a much higher salary than the one they started on. A career-average scheme takes into account income levels during the early years of a career and can drag down the total.

Then there is the question of Polman’s pension contribution from the company, which amounts to a third of his £1m base salary. It seems a high figure until pension analysts point out that most employees over 50 in a final-salary scheme will enjoy a pension contribution of at least a third of their salary.

One of the main unions in the Unilever battle, Usdaw, supports Tesco’s career-average scheme. And the deal it signed meant all staff foregoing their existing final-salary benefits. Unilever will protect all previous commitments.

Shell, on the other hand, is representative of most FTSE 100 firms. It plans to direct new employees into a stock market-related scheme while retaining a final-salary option for existing employees. This is the traditional solution of finance directors, who have disliked the unlimited liability and rising costs of final-salary pension schemes since the mid-1990s.

The banks were the first to ditch their final-salary commitments. In the stock market crash of 2003, almost all the 7,000 remaining firms with final-salary schemes shut them, though, like Shell, only to new members. This created a two-tier workforce inside many companies, something which unions felt obliged to ignore.

Some workplaces took a stand against the shift to retaining final-salary benefits for existing workers and stock-market plans for new staff but, outside the public sector, these campaigns fizzled out.

The UK now has an ageing group of about 2 million employees working towards retirement with their final-salary benefits intact. Another 16-18 million have some of their working life covered by a final-salary scheme.

But the bulk of contributions for 20 million workers with a pension are in the new stock-market schemes that account for 88% of all current contributions, according to pension advisers Towers Watson.

Final-salary schemes usually guarantee to provide a retirement income after 40 years’ service worth two-thirds of a worker’s final pay cheque. With a stock market-invested pension it is a very different picture. For many people it has meant getting back little more than was put in, despite the stock market having more than doubled its value in 20 years. The result is a pension worth no more than a fifth of final salary.

Fund managers, who are often blamed for siphoning off much of the investment gain in pension schemes to pay their commissions and fees, are unlikely to make much progress in the next few years of recession and lacklustre growth across the developed world. This will only lead to smaller payouts from the new breed of cheaper scheme. In this environment, strikes against businesses such as Unilever that continue to offer generous guarantees could become harder to justify.

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RELATED:  5 Jan 2012: Union attacks Shell as it closes final-salary pension scheme in Britain

Shell’s battle for the heart of Ireland

Anger grows across the world at the real price of ‘frontier oil’

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Far from the Gulf of Mexico, campaigners are accusing energy companies of destroying land and livelihoods in the search for increasingly scarce resources

A woman hurries away from the heat of a gas flare near a flow station belonging to Shell in Warri, Nigeria. Photograph: George Osodi/AP

Richard Wachman and John Stibbs Sunday 20 June 2010

The eyes of the world are on BP after the disaster that left oil spewing into the Gulf of Mexico at the rate of 50,000 gallons a day. But campaigners accuse Big Oil of an appalling track record elsewhere in the world, saying it leaves a trail of devastation in its wake.

From Nigeria to Kazakhstan in Central Asia, and Colombia and Ecuador in South America, the oil majors stand accused of a blatant disregard for local communities and the environments in which they operate.

With demand for energy expected to surge as industrialisation accelerates in China, India and Brazil, critics say oil companies are taking ever-increasing risks to cash in on yet another bonanza.

Two other factors ensure the dash for oil continues apace. One is growing concern in the developed world that, at some point in the next 30 years, demand could outstrip supply. That means governments are under pressure to make it easier for firms to look for oil in inhospitable areas, whether in deep water off the US or in the tar sands of Canada.

Secondly, western governments want to reduce their dependence on unstable regimes in the Middle East, which partly explains the recent US move to lift restrictions on drilling in Alaska.

All this could change if the world made a determined attempt to invest more heavily in renewable energy sources, but international initiatives take time. In the interim, the oil majors face a barrage of criticism from environmental and human rights campaigners in places thousands of miles away from BP’s sunken Deepwater Horizon rig.

Nigeria is a case in point. People who live in the Niger delta have had to withstand huge oil spills for decades. Farmers allege that spills from Shell pipelines have contaminated their land and fishing ponds, and have destroyed their livelihood. They want Shell to clean up the mess and compensate them for lost earnings. Shell argues that the ruptures to its supply lines are, in the main, the result of sabotage, and that any damages claims should be heard in the Nigerian courts.

The Anglo-Dutch oil giant is by far the biggest oil firm operating in the delta – where, in March 2008, it was estimated that at least 2,000 sites required treatment because of oil pollution. Independent oil and environmental experts estimate that between 9m and 13m barrels of oil have been spilt in the delta area during the past 50 years – equivalent to an Exxon Valdez disaster every 12 months.

Kate Allen of Amnesty International says: “The result of oil exploration, extraction and spills is that many people in the Niger Delta have to drink, cook with, and wash in polluted water; they have to eat contaminated fish – if they are lucky enough to still be able to find fish – and farm on spoiled land.”

She adds: “After oil spills, the air reeks of pollutants. Many [people] have been driven into poverty, and because they can’t make Shell accountable for its actions, there is enormous distrust between the group and local people.”

A spokesman for Greenpeace says: “Shell operates in 100 countries, but about 40% of spills are in Nigeria, which is quite incredible. There is evidence of sloppy management.” Shell rejects these charges.

The actions of the Nigerian government are a critical part of this story. Oil is estimated to have earned Nigeria more than $600bn since the 1960s, and the oil and gas sector represents about 80% of government revenues; the government’s reluctance to take a hard line with oil companies is not difficult to understand. The most that local people often ever see of the state are armed soldiers visiting the region to protect oil companies’ assets.

A similar story is unravelling in Colombia, where BP has a presence in the Casanare region. Strikers recently blockaded a plant, 125 miles from the capital Bogotá, for a fortnight, prompting BP officials to say they felt like hostages. The dispute has been rolling on since February over issues including labour, the environment and human rights. Most of these have now been resolved.

Cinep, a Colombian NGO that investigates oil companies, says the strike was not marked by the extremes seen in previous BP disputes. Its representative Fernando Rodríguez says: “Disputes involving BP are characterised by a heavy hand and shows of government force.”

Rodríguez alleges that in a 1995 dispute with BP contractor Servipetrol, the army shot at the civilian population. He claims paramilitaries then persecuted and assassinated community leaders.

BP strongly denies any paramilitary connections. Poly Martinez, a media spokesman for the company, says: “BP has no relation whatsoever with illegal armed groups, irrespective of their motives or inclinations.” BP did acknowledge it had had to deal with officials in elected positions who had turned out to have paramilitary links.

In Kazakhstan, Friends of the Earth is worried about the environmental, social and health effects caused by the development of the Kashagan oilfield. The consortium behind the project includes companies such as ExxonMobil, Shell and Italy’s ENI. Friends of the Earth said thousands of people have already been relocated in the region because of sulphur emissions and other highly poisonous chemicals such as mercaptans, which are present at high levels in northern Caspian oil. All the companies deny they have behaved irresponsibly.

In Ecuador, the Amazon Defense Coalition claims Chevron holds the record for the world’s largest oil-related contamination in the populated Amazon rainforest – an even more sensitive ecosystem than the marshes of Louisiana. The allegations are at the root of a class action lawsuit in Ecuador where the oil giant faces more than $27bn in damages for poisoning an area the size of Rhode Island with 18.5bn gallons of toxic “produced water” – water that emerges from drilling activities. That is more than 474 times the amount of contamination estimated to have been spilled in the Gulf of Mexico, according to claims by representatives of the plaintiffs.

A bigger campaign is building behind the involvement of the oil majors in Canada’s tar sands. The sands are naturally occurring mixtures of sand or clay, water and a dense form of petroleum called bitumen. They are found in large quantities in Canada and Venezuela. Making liquid fuels from oil sands requires energy for steam injection and refining. This process generates two to four times the amount of greenhouse gases per barrel of final product as conventional oil.

A spokesman for FairPensions, the shareholder activist group, says: “Every day the extraction process uses enough natural gas to heat 3.2m Canadian homes for a day. Tar sands are a significant factor in Canada’s failure to meet its Kyoto protocol targets.”

It is also claimed that tar sands development affects the health and human rights of people over wide areas. According to FairPensions, about 11m litres of contaminated water leaks into surrounding rivers and groundwater each day, containing arsenic, mercury and various carcinogens that have been linked to elevated rates of cancer in downstream communities.

Investors have raised the issue at Shell and BP shareholder meetings; some shareholders are worried about the long-term profitability of tar sands, pointing to the very high operating costs.

But the oil companies are “as likely to curtail their hunt for new sources of energy as turkeys voting for Christmas”, says Friends of the Earth. It points out that only last week, Cairn Energy won clearance to drill off Greenland this summer. Greenland is viewed as one of the last great frontier areas in the oil and gas business, and the US Geological Survey estimates that the territory could hold 50bn barrels of oil and gas.

But campaigners point out that the region is under “constant threat of ice floes”, while in Canada, MPs complain that Cairn has had no history of drilling in the Arctic. The company says it has “prepared for every eventuality”.

According to Canadian energy economist Peter Tertzakian: “We are going to the ends of the earth to find the next barrel.” But at what cost? Environmental pressure group Platform says the drive for “frontier oil” comes out of “a political environment whereby concerns over energy security are routinely top of the agenda”. To illustrate its point, Platform points out there has been a quickening in the race for rights to territory in the Arctic, with the Russians two years ago symbolically planting a flag under the North Pole during a submarine expedition.

But the last frontier is perhaps Antarctica. Signatories to the Antarctic Treaty officially refrain from any territorial claims on the continent, but some countries, including Britain, Australia and Russia, have made unofficial claims and produce stamps with maps of Antarctica showing territory purportedly belonging to them.

The worldwide dash for the black stuff underscores Tertzakian’s argument that though we may not soon run out of oil, “new supplies will be increasingly dirty, insecure, expensive and indiscreet”.

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Problems with big oil that won’t go away

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The Deepwater Horizon spill, which is threatening swaths of the Gulf of Mexico’s coast, again raises questions about how rigorously safety and environmental regulations are enforced

Washington, 5am, Tuesday: a tired Tony Hayward, chief executive of BP, was finally patched on to the conference call. At the other end, a dozen journalists sat around a boardroom table at its plush headquarters in St James’s Square, London and leant in towards the squawkbox. BP had just announced a 135% increase in profits for the first quarter, but all that anyone wanted to discuss was the Deepwater Horizon disaster.

A sombre Hayward, who had spent the weekend co-ordinating the operation to contain the slick off the coast of Louisiana, recognised as much when he began the call: “Clearly a good set of results has been overshadowed by events.”

Serious as the disaster was at that stage, he would not have known just how much of an understatement that was. By the end of the week, BP admitted that more than five times as much oil – 5,000 barrels – was leaking from the sunken rig each day and the slick had hit the Louisana coast. BP’s shares had fallen by more than 6%, wiping £12bn off its market value as the environmental – and legal – repercussions hit home.

BP’s safety record is once again under the spotlight, particularly in the US. It was only in 2005 that 15 workers died when its Texas refinery exploded, and a year later a major leak occurred at one its pipelines in Alaska. The disasters hastened the departure of former chief executive Lord Browne. Hayward, who took over three years ago, promised a zero-tolerance approach on safety. Even some industry critics, such as Jake Molloy, general secretary of the Offshore Industry Liaison Committee, a major trade union for offshore workers, report that there has been a noticeable improvement in its approach in the North Sea, for example. The Deepwater Horizon disaster – even though the rig was operated by another company on BP’s behalf – has come as a hammer blow.

The disaster has also focused attention on the industry’s safety record. Companies are struggling to maintain production – and oil reserves – as “conventional” production from mature fields including the North Sea declines. This means the industry has to use new technologies and explore often environmentally sensitive regions. As Manouchehr Takin of the Centre for Global Energy Studies says: “Companies are constantly pushing the technological boundaries, and this can increase the risk [of accidents occurring].”

Not surprisingly, the oil industry – not just BP – is mounting a PR offensive in the US to reassure the public – and politicians – that offshore drilling is safe. The Deepwater Horizon accident comes at a critical time for the industry. After years of lobbying, a month ago Barack Obama agreed to open up new areas to offshore drilling, including in Alaska. Companies including Shell said they planned to start drilling in the region this summer. But this weekend, Obama announced that new no licences would be issued until an investigation into the disaster was completed.

On the face of it, the statistics on the global industry’s safety and environmental record are impressive. The American Petroleum Institute reports the amount of oil spilled in the US in the decade up to 2007 was over two-thirds less than 30 years before. According to BP, it spilt 1.2m litres of oil last year, compared with 4.4m litres in 2005. Shell’s figures show a similar improvement.

On safety too, the official data appears to indicate steady improvement. According to the International Association of Oil and Gas Producers (OGP), in 2008 the total amount of hours lost as a result of injury was the lowest on record. However, it admitted that the fatality rate increased by 4% as the number of severe cases rose, though it said the long-term trend was downwards. Certainly, most executives take environmental and safety performance much more seriously than before, knowing they face huge financial and reputational damage if they fail to do so. As one oil company executive says: “People are generally pretty careful now. They know there are plenty of regulators out there willing to chase them if they screw up.”

But the headline statistics do not tell the whole story. Molloy says that the oil companies often mask the extent of less serious accidents by assigning injured workers to office duties. This way, such incidents do not show up in the key “lost time injury frequency”.

Oil spillages are also not the only indicator of environmental damage caused by the industry. Shell’s figures show a steady increase in the amount of hazardous and non-hazardous waste it creates each year – 1.7m tonnes in total in 2008. This is in large part due to its growing oil sands business in Canada, where vast amounts of energy, water and chemicals are required to process the tar deposits. Even excluding oil sands, Shell is using a quarter more energy to find and produce each barrel of oil than it did a decade ago.

The industry’s performance outside North America is significantly worse, although the official statistics are patchy and those that are published are often of dubious quality. According to the OGP, in 2008 the fatality rate in Africa was about 50% higher than the global average; in South America, it is even higher. Russia is not much better. However, it says that over the past decade the overall trend is again downwards.

But it is highly questionable whether the industry can be relied on to provide accurate statistics, particularly on the environmental impact of its operations. Two years ago, when the Observer visited Fort McMurray, a bustling, Wild West town in Alberta at the heart of Canada’s oil sands boom, George Poitras, a former chief of the Mikisew Cree First Nation, was scathing about the industry’s claims. Oil sands operators clear vast tracts of forest to mine the tar deposits, creating deep scars on pristine land. Companies promise to “reclaim” the land, returning it to its former state by filling in the quarries and reintroducing native flora and fauna.

“Our elders back home laugh when the industry says this,” he says. “Who do they think they are – are they God or the creator? They destroy the boreal forest and they are going to put back the land to as good as it used to be? It’s impossible.”

The industry also claims that the huge toxic ponds created by the projects – made up of a mixture of chemicals and water used to process the tar deposits – are contained and do not pollute local rivers or wildlife.

Poitras disagrees: “We think that the water is poisoning our people and giving us cancer. The fish taste different and are sometimes deformed, with two jaws.” Cancer rates or deformed fish do not show up in oil sands companies’ glossy sustainability reports or figures.

In many cases, governments cannot be relied on to provide independent rigorous oversight. The Albertan government in large part relies part on Ramp, an industry-funded body that monitors the impact of oil sands operations on the aquatic environment and which is mistrusted by most environmentalists.

“It’s all self-monitoring by the industry,” according to Joyce Hildebrand from the campaign group Alberta Wilderness. In Alberta, there are only a dozen officials to make sure that operators comply with environmental regulations in a province bigger than Spain.

Because governments such as Alberta’s want to attract oil companies and taxes, it’s not surprising that many are anxious not to scare them away with tough environmental regulations. But even supposedly tough independent environmental regulators are frequently politically motivated and lack credibility.

In 2007, Shell was forced to dilute its stake in the $20bn Sakhalin II project in Russia’s far east, ostensibly over its environmental record. Rosprirodnadzor, the government environmental regulator, had claimed that Shell and its Japanese partners had broken the law by damaging forests and driving grey whales from their breeding grounds off Sakhalin island. But industry observers said that the claims were a pretext to allow the Kremlin to wrest back control of its natural resources.

Lack of thorough, independent oversight of the oil industry’s environmental impact is worrying. In many cases the damage being done to fragile ecosystems is going unnoticed. Deepwater Horizon notwithstanding, it is true that the oil industry has made significant improvements on its record on safety and oil spills compared with 30 years ago at the time of the Exxon Valdez disaster. But companies cannot be relied on to monitor the more indirect environmental impact of their operations, particularly as they move into increasingly sensitive regions such as Sakhalin and the Arctic.

Greenpeace scientist Paul Horseman says: “Companies are good at publishing glossy reports with nice pictures of smiling people in different countries. But it’s just another public relations exercise with which they try to produce the image that they doing something of value and doing it safely. It’s pure greenwash.”

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Shell and BP face onslaught from tar sands campaigners

Lobbyists bid to turn RBS, BP and Shell annual meetings into green referendums

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Shell accused of abandoning solar power buyers in the developing world

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Row over responsibility for sold-off systems has left Sri Lankan communities unable to replace faulty equipment

Terry Macalister
The Observer, Sunday 3 January 2010

Shell is at the centre of a row over warranties for solar power systems sold to the developing world. Photograph: Leon Neal/AFP/Getty Images

Shell has become embroiled in a major row with the World Bank and green energy companies after allegations that it is unfairly refusing to honour warranties on solar power systems sold to the developing world.

A widespread breakdown of its equipment in Sri Lanka and elsewhere has left the oil firm accused of abandoning a responsibility to impoverished communities while damaging the prospects of the wider renewable power sector in a world desperate to reduce carbon emissions following the Copenhagen climate change summit.

The rural electrification business under which the Shell systems were sold has now itself been passed on – as have most other parts of the group’s solar business – but critics say that Shell, which made profits of $31bn in 2008, has a continuing role in ensuring former customers are not left vulnerable.

“Shell exited solar on a global basis, seemingly without due consideration to how after-sales service and warranty replacements would be provided, thereby damaging the very local solar industries it had earlier helped to create,” said Damian Miller, a former Shell manager who now heads his own solar business, Orb Energy.

“In Sri Lanka, poor customers with average earnings of $1,500-$2,000 a month have bought Shell’s solar systems. The system is equivalent to 30% of their annual income,” he added. “They could only afford a system because they could get a loan from microfinance institutions or other banks. But now there are reports of thousands of Shell’s [branded] solar panels failing in the field and Shell seemingly is not replacing them.”

The World Bank, which provides financing packages to the developing world, said it too was very worried about a situation in which about 700 solar systems appear to have failed and local suppliers risked going out of business.

Anil Cabraal, an energy specialist at the bank’s Washington headquarters, has written to Shell asking for action. “I would like Shell to honour these commitments. We are not talking about millions of dollars here but hundreds of thousands,” he told the Observer.

The company argues that it is being unfairly targeted and is doing all it can to sort out the problem. It points out that its Shell Solar Sri Lanka business has been transferred to a third-party purchaser, Environ Energy, along with all liabilities. The Anglo-Dutch oil group says the bulk of its former solar module manufacturing operation has also been switched to a new owner, Solar World.

“In October 2007, Shell sold Shell Solar Lanka Ltd to Environ Energy Global PTE Ltd. Specifically in order to protect customer interests, the terms of the transaction explicitly covered the management of all past, present and future liabilities, including warranty issues,” said a Shell spokesman in the Hague.

“Environ Energy Global understands that resolution of this issue rests with Environ, but [its] own management team in Sri Lanka continues to approach Shell. We have asked Environ Energy Global to clarify responsibilities with [its] own management team in Sri Lanka.”

The situation has been complicated by the fact that Environ claims Solar World will not replace any modules unless it has the appropriate warranty documents. Environ claims those papers were destroyed by Shell prior to the handover to Solar World, although Shell told the Observer this was not true.

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Peak oil: the summit that dominates the horizon

The big international companies such as BP and ExxonMobil are struggling to find enough new oil to replace their exploited reserves year-on-year and Shell found itself on the end of a major fine for exaggerating its reserves report to the Securities & Exchange Commission in the US.

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Revealed: how Shell won the fight for Libyan gas and oil

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Documents reveal orchestrated campaign by ministers, mandarins and royalty

Terry Macalister

The Observer, Sunday 30 August 2009

Marsa El-Brega was once a tiny Libyan fishing village on the most southerly tip of the Mediterranean – now it is a thriving port handling 300 ocean-going ships a year and, with the help of Shell, is poised to become one of the world’s key energy terminals, capable of exporting huge quantities of gas to Britain.

The Anglo-Dutch oil company is currently upgrading the liquefied natural gas (LNG) from 500,000 tonnes a year to 3.2m and has just drilled the first of a dozen planned wells. These are the fruits of a historic visit in March 2004 by Tony Blair but also part of a closely orchestrated campaign by British ministers and Big Oil as documents seen by the Observer reveal.

At least a dozen meetings – and possible more than double this number – were held in Tripoli and London between major Foreign Office officials and Shell top brass with Libya’s energy on the agenda. David Miliband, Prince Charles and even Lord Kinnock discussed Shell’s business in the region and helped promote the UK’s wider energy agenda.

The Shell deal did not go down well with US rivals who felt barred from contact with Libya. ExxonMobil had particular reason to be miffed because the Texan giant used to run the Marsa el-Brega LNG facility in the 1960s and 1970s.

British oil interests got its second major boost in Libya – already one of the world’s biggest oil and gas producers – when BP won rights for exploration and development work there. Once again that oil deal was signed alongside a second Blair visit, in May 2007.

“With its potentially large resources of gas, favourable geographic location and improving investment climate, Libya has an enormous opportunity to be a source of cleaner energy,” said BP’s group chief executive, Tony Hayward.

More than $900m was to be invested in Libya in onshore and offshore drilling in an area bigger than Kuwait – but total spending there could top $20bn over the next two decades. “It is BP’s single biggest exploration commitment,” added Hayward, whose company seemed to hold such close relations with government it was dubbed Blair Petroleum.

But it is Shell – sometimes seen by critics as a branch of the Foreign Office despite its headquarters in The Hague – that seems to have been given the biggest lift by the British establishment.

Documents released under a Freedom of Information Act request show the scale of the effort to win commercial advantage in Libya. The details raise questions about whether it is possible the Scottish decision to release the Lockerbie bomber Abdelbaset al-Megrahi last week could have been done without the acquiescence of the British government as it insists it was.

At least 11, but possibly as many as 26, meetings took place – many in Tripoli – between Shell executives and high-ranking ministers or mandarins in a period between 2004 and 2007. The Foreign Office has yet to provide details of what exactly was discussed at the meetings, but the request asked for any discussions with Shell on either Libya or Egypt, the latter being of much less political or potential commercial importance to the oil company.

Miliband met Malcolm Brinded, the Shell exploration director, in October 2007 while James Smith, the Shell UK chairman, met Jack Straw when he was foreign secretary in July 2003.

The Prince of Wales attended a reception at the British Embassy on 21 March 2006, putting a bit of royal weight behind the drive to put Britain in pole position as Libya’s 44bn barrels of oil reserves were opened up again to western firms.

The royal family has long been seen as a trump card in the Middle East. Prince Andrew has also visited Libya as a special overseas trade ambassador for Britain but has dropped plans to go there next month following the furore over Megrahi’s release.

The US oil companies used to have a virtual stranglehold on Libya and companies such as Occidental Petroleum grew wealthy there until Libya nationalised overseas oil interests in 1974 and Western sanctions were introduced. Occidental is now back and jostling against Shell and BP to find new oil and gas in a country whose production has plunged from 3.3m barrels a day in the mid-1960s to about half that level now.

It is not just the US that wants access to Libya but also China, Russia and other major powers whose national oil companies are seeking new supplies.

The decline in North Sea reserves and climate change have fed into British determination to improve the country’s energy security and exploit Libyan oil and gas. Marsa el-Brega would provide relatively clean fuel for UK power stations and help avoid dependence on piped gas from countries such as Russia which are deemed willing to use energy as a political weapon.

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Shell Upstream International Executive Director Malcolm Brinded named in Libyan intrigue

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Secret documents uncover UK’s interest in Libyan oil

Negotiations fuel rumours of commercial deal behind Megrahi’s release

Terry Macalister

The Observer, Sunday 30 August 2009

Libya has been courted by Prince Charles, government ministers and Foreign Office mandarins on a dozen or more occasions in pursuit of lucrative oil and gas contracts.

Documents obtained by the Observer show ministers and senior civil servants met Shell to discuss the company’s oil interests in Libya on at least 11 occasions and perhaps as many as 26 times in less than four years.

Foreign secretary David Miliband, the former Labour leader Lord Kinnock and even Prince Charles were involved in the meetings with Shell about its business in Libya or Egypt.

The revelations, showing that the government invested large amounts of political capital in securing North African oil, lend weight to claims that commercial interest lay behind last week’s decision to release the Lockerbie bomber, Abdelbaset al-Megrahi, from jail in Scotland to receive a hero’s welcome in Libya.

Gordon Brown has insisted that Whitehall had no involvement in the release, but critics of the government say the information obtained by the non-governmental organisation, Platform, via a Freedom of Information Act request, raises fresh questions. “These documents show the deep and long-term foreign policy backing provided by the British government to Shell in its efforts to break into Libya. Corporate executives have easy access to the highest level of Whitehall, while democracy advocates and social movements remain shut out on the street,” said Mika Minio-Paluello, a campaigner with Platform.

“Yet again, the Foreign Office has prioritised securing new oil reserves for private corporations over human rights,
the environment or democracy. Foreign policy should represent people’s interests, not corporate interests. As a first step, the government must open its files and disclose the true level of oil influence on government decision-making.”

Shell was one of the first western oil companies to re-enter Libya – one of the world’s biggest potential oil sources – following the end of United Nations sanctions and a commitment from leader Colonel Muammar Gaddafi to turn his back on funding terrorism and pursuing nuclear weapons.

A deal was signed by Shell on 25 March 2004 covering the establishment of a “long-term strategic partnership” between the oil company and the local state-owned energy group. It was penned during a ground-breaking visit by the then prime minister, Tony Blair, and was followed up by meetings during July between Shell and foreign minister Baroness Symons and then the foreign secretary at the time, Jack Straw.

In October, Malcolm Brinded, the head of exploration at Shell who signed the deal to explore for oil and redevelop a gas export terminal in Libya, met another foreign minister, Douglas Alexander, with a particular focus on trade. In February 2005, Kinnock was involved in a reception at which Shell was present and North African oil interests were raised.

Anthony Layden, the British ambassador to Libya, was engaged in a series of meetings during April of the same year with Shell in Tripoli, while in 2006 the Prince of Wales was involved in a meeting at the embassy in the Libyan capital at which Zainul Rahim Mohd Zain, a senior official in the region for Shell, was present. Miliband met with Brinded in October of that year.

Shell said last night it had “no comment” to make on any discussions it had held with British ministers or other government officials about Libya, and the Foreign Office was unable to discuss these meetings.

But a government spokeswoman denied British oil interests played any part in the release of the Lockerbie bomber. She said: “There is no deal – all decisions relating to Megrahi’s case were exclusively for Scottish ministers, the Crown Office in Scotland and the Scottish judicial authorities. No deal has been made between the UK government and Libya in relation to Megrahi and any commercial interests in the country.”

Yesterday Megrahi backed calls for a public inquiry into the atrocity. He said he was determined to clear his name and that an inquiry would help families of the victims know the truth.

Megrahi said he would help Dr Jim Swire, whose 23-year-old daughter Flora died in the disaster and who has frequently called for a full public inquiry, by handing over all the documents in his possession.

SOURCE ARTICLE

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The New York Times: Libya Signs Energy Exploration Deal With Shell

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The Independent: Shell first off blocks in race to cash in on UK’s new friendship

Shell fills its boots in the desert sun

Shell signs landmark heads of agreement to re-enter Libya

Villagers flee Niger Delta fighting as Saro-Wiwa settlement raises hopes

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  • The Observer, Sunday 14 June 2009

Tens of thousands of villagers in the Niger Delta are again picking up the pieces after the most intense violence in the oil-producing region for months, if not years.

Military attacks, targeted at the feared guerrilla army known as the Movement for the Emancipation of the Niger Delta (Mend), came as the 14-year struggle by the families of writer Ken Saro-Wiwa and eight other executed leaders of the Ogoni people of southern Nigeria was finally being resolved.

Royal Dutch Shell agreed to a $15.5m (£9.4m) settlement out of court last week in New York, although it rejected the plaintiffs’ case that Shell had been complicit in Saro-Wiwa’s killing.

In the Delta, the fighting goes on. Witnesses say the raids led to scores of deaths, while up to 10,000 people have been forced to abandon their villages. Women and children are living in makeshift refugee camps afraid to return to their villages. Men are living rough, fearing they will be killed if they enter the camps.

Conditions in the Delta, one of the world’s most important oil-producing regions, are causing concern in the Foreign Office and the White House. Oil production is at half capacity at about 1.6m barrels a day, say analysts. “It is enough to keep the lights on in the presidential palace and pay patronage obligations,” said an oil worker in the delta. Armed gangs siphon huge amounts of oil to sell on the international black market.

human rights observer said: “The opportunity given by the Saro-Wiwa settlement to explore alternatives and the current trouble in the Delta is a wake-up call. There is a risk that things could really spiral down.”

Saro-Wiwa led peaceful protests against the environmental damage caused by oil companies in the Delta. There was worldwide condemnation when, along with eight other activists, he was hanged by the Nigerian military government in 1995.

GUARDIAN ARTICLE