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ShellNews.net: The inside story of Shell’s Sakhalin II debacle

Oleg Mitvol (file photo) (ITAR-TASS) November 13, 2006 — Oleg Mitvol, the deputy head of Russia’s Rosprirodnadzor environmental agency

HOW MY INTERVENTION IN THE SAKHALIN ENERGY PROJECT COST SHELL ITS MAJORITY STAKE, MANY $BILLIONS, AND ITS DEPUTY CHAIRMAN

Introduction

Published below is a statement received from Mr Keith Ruddock, General Counsel Exploration and Production, Shell International B.V. It relates to the article herein: “The insider story of Shell’s Sakhalin II debacle”.

The email correspondence with Shell on this matter commenced with Shell International Petroleum Company General Counsel, Richard Wiseman, on 30 December 2006.

We subsequently issued the following invitation: –

“The offer is to let Shell have advance sight of the comprehensive article currently being drafted with the active involvement of senior Shell/Sakhalin insiders. We would carefully consider any comments made by Shell and, as always, would happily publish with the article, on an unedited basis, any comments/rebuttal made by Shell in response to the revelations and allegations contained in the article. If you needed a few days to discuss matters with the persons named in the article before responding, that would not be a problem.”

Shell accepted the offer on 1 January 2007 and on 5 January supplied their response, which as promised, we have published unedited.  Consequently, Shell had the opportunity to issue an injunction to prevent publication on the grounds that the allegations made in the article are unfounded. It chose not to do so.

The response from Shell…

05 January 2007

Dear Mr Donovan

We disagree fundamentally with the factual basis and interpretation of much of the material you have produced but believe that no useful purpose would be achieved by engaging in a detailed rebuttal.

Regards
Keith Ruddock
General Counsel Exploration and Production
Shell International B.V.

The Article: The inside story of Shell’s Sakhalin II debacle

The Sakhalin II project in Russia is the world’s largest combined oil and natural gas project.  It is being developed by Sakhalin Energy, a company in which Shell was the majority shareholder.

Shortly before Christmas, following a long campaign by the Russian government prominently reported in the global business news media, Shell surrendered its majority holding and became a minority shareholder along with the other founding partners, Mitsui and Mitsubishi. Like Shell, each sold 50% of their holding to Gazprom at less than market value.

A few days later, the Russian government leaked the news that the founding partners had entered into what was supposed to have been a secret protocol with Gazprom which made the proposed deal even more of a multibillion dollar humiliation for Shell and the Japanese companies.

Under the provisionally agreed terms, Shell ends up as a junior partner in a state run project controlled by a ruthless Russian government led by the former KGB Colonel, President Putin. He has been personally involved since his public roasting of Royal Dutch Shell CEO Jeroen van der Veer (during a state visit to The Netherlands in November 2005) over the proposed doubling of the project budget to $20 billion.

http://www.shellnews.net/week44/reutersputin2november2005.htm

Shell executives had pretended that they knew nothing about the huge project budget increase when agreeing a swap deal in principle with Gazprom earlier in the year. A matter of days later Shell sprung the astonishing news on Gazprom that the Sakhalin II budget had increased by $10 BILLION. It was a breathtaking blunder to try to pull a fast one on the Russians who are the recognised grandmasters in game strategy.

http://www.shellnews.net/week28/shellnewssakhalin2debacle.htm

Shell will now have to be satisfied with whatever crumbs are thrown in its direction. Even more worrying to Shell, despite the inking of the provisional deal, the final terms are still being negotiated, so the revelations of deception and cover-up in this article may provide more ammunition for Putin to punish Shell management for its mendacity and incompetence.

Putin attended the signing ceremony in Moscow at which Shell CEO, Jeroen van der Veer, bizarrely thanked him for his support. Bearing in mind the allegations made by US Vice President Cheney that Russia is using energy as “an instrument of intimidation and blackmail”, the humiliatingly submissive stance adopted by Van der Veer would appear analogous to a mugger’s victim expressing thanks for being coshed and robbed.

Perhaps the entirely unsubstantiated allegations that Putin was responsible for ordering the murder of prominent opponents during the period in which the Sakhalin II deal has been negotiated, rattled Mr Van der Veer somewhat. It was not an ideal backdrop, as far as Shell was concerned, for negotiations already being conducted in a tense atmosphere, with world leaders making their objections known about the hardball tactics allegedly being used against Sakhalin Energy.

Our Role

A threatened claim against Sakhalin Energy for $30 billion by the Russian environmental agency, Rosprirodnadzor, plus the possibility of criminal proceedings, rests on evidence we supplied to its deputy head, Oleg Mitvol, the now notorious so called “Kremlin attack dog”. There are grounds to suggest that Mitvol works directly for Putin.

My son John and I jointly own and operate a website under the domain name of royaldutchshellplc.com: the dotcom domain name for Royal Dutch Shell Plc.  It has been described by Mitvol as an “anti-Shell” website.  Mr Mitvol has publicly acknowledged our significant role in the momentous events which have unfolded. The reasons for our opposition to the current Shell management are set out below in the section entitled “Background Information”.

Our website, with its “Live Chat” facility, has effectively replaced the Tell Shell Forum on Shell’s own portal website as a venue for Shell employees to discuss concerns with other Shell employees on an anonymous basis if they wish.  “Tell Shell” was “suspended” over a year ago after Shell General Counsel Richard Wiseman admitted to me in an email that contrary to claims previously made by Shell management, including John Hofmeister, of a censorship free forum for open and lively debate, postings had in fact been secretly censored.

As a result of our website activities, we have been contacted by numerous Shell “insiders”, some of whom have revealed scandalous conduct by Shell executives. One example is the Brent Bravo scandal in which Shell received a record breaking fine for Health and Safety violations as a result of the tragic but preventable deaths of Shell North Sea workers. According to Shell International Group Auditor, Bill Campbell (now retired), Shell Executive, Malcolm Brinded, was involved in a related cover-up.

http://royaldutchshellplc.com/2006/08/09/shellnewsnet-when-is-shell-going-to-sue-former-shell-international-group-auditor-bill-campbell-for-defamation/

As a result of contact made by insiders working on Sakhalin II, it soon became apparent that things were also going badly amiss on what Jeroen van der Veer has always described as “an elephant project”.  He may now agree with the modified description we have regularly applied: a white elephant project.

Leaked Shell internal documents have regularly fallen into our hands. This included email correspondence about Sakhalin II between two senior Shell managers, Engel van Spronsen, in his then capacity as Technical Director of Sakhalin Energy, and Hans Bouman, a natural-gas field manager; both are now retired.

http://royaldutchshellplc.com/2006/10/23/shellnewsnet-the-hans-bouman-engel-van-spronsen-sakhalin-emails/

We are in the fortunate position of having access to Shell insiders who can provide us with expert analysis of information supplied and did so in respect of the above extraordinary email correspondence.

Concern was expressed in the emails, that the design for oil and gas wells on Russia’s Sakhalin Island does not properly address seismic risks.  After studying the relevant emails, the relevant Shell insider, who is calm and cautious by nature, warned us of a potential environmental calamity on a scale never before witnessed by humanity (our description).

A quote from the Shell insider warning: –

“You have no idea how significant the comments in those emails might be – to a petroleum engineer, they conjure up the worst of possible scenarios – uncontrollable blowouts in a frozen, pristine, ecologically sensitive environment, and the potential for the entire contents of the Sakhalin oil and gas fields to be released at the seabed. The Exxon Valdez would, quite literally, be a drop in the ocean by comparison.”

The warning went on to link Sakhalin II issues with the Shell reserves fraud in 2004.

We passed on these misgivings about the Sakhalin II project directly to President Putin in November 2005.

http://www.shellnews.net/week46/shellnewsputinwarning25november2005.htm

We later sent information to Oleg Mitvol and subsequently obtained his private fax number from his secretary to get information directly on to his desk. However, since we had never succeeded in speaking to Mitvol, we had no idea whether any of the information we had passed on from Shell insiders had been of any interest. The first clue that our activities had been noticed was when a message from “The Ministry of Natural Resources of The Russian Federation” was posted on our “Live Chat” forum in October 2006:

http://royaldutchshellplc.com/2006/10/06/shellnewsnet-did-our-whistleblower-email-to-oleg-mitvol-precipitate-the-sakhalin-ii-crisis/

We were subsequently surprised to read an article in a petroleum magazine which contained a question and answer interview with Oleg Mitvol. He indicated that his threatened $10 billion claim against Shell for alleged environmental damage (later upped to $30 billion) rested on evidence supplied by my son. The following is an extract:

What documents are these? Where are they from?

Mitvol: “I have email correspondence between executives in Sakhalin Energy management from 2002. I received these letters from John Donovan, owner of the anti-Shell website www.royaldutchshellplc.com. I received them on 19 October and forwarded them to Sakhalin Energy with a request for an official reply. But I have not received any reply so far. I presume that they are in shock.”

How could you prove that these documents are genuine?

Mitvol: “They appear genuine and we have special services working to prove this. Once they have been verified, we will have enough evidence to take Sakhalin Energy to court. If we win, the Sakhalin 2 consortium should pay compensation for all the environmental damages which will come to over $10bn as well as compensation to the state for loss of revenues caused by the additional delays.”

Link to full article:

http://royaldutchshellplc.com/2006/11/19/argus-eyescom-mitvol-turns-up-the-heat-i-received-these-letters-from-john-donovan-owner-of-the-anti-shell-website-wwwroyaldutchshellplccom/

Further confirmation was contained in an Interfax news agency report published by “Johnson’s Russia List”

“On October 19, Rosprirodnadzor deputy chief Oleg Mitvol sent a letter to Sakhalin Energy CEO Ian Craig, asking him either to confirm or deny information contained in confidential e-mails from Shell natural gas field manager Hans Bouman to Engel Van Spronsen, then Sakhalin Energy technical director in 2002. Copies of the e-mails were forwarded to Rosprirodnadzor from John Donovan, a Shell shareholder and the owner of a website providing news on Shell.”

http://www.cdi.org/russia/johnson/2006-256-22.cfm

We are now in direct correspondence with Mark Stephens, a senior partner in the London law firm Finers Stephens Innocent, appointed by the Russian authorities in relation to the Sakhalin II project. We will shortly be supplying Mr Stephens with highly sensitive confidential information received from Shell insiders which may well provide additional grounds for the Russian authorities to further punish Shell. The information we are receiving is truly astonishing.

As we have previously acknowledged, we have no illusions about the Sakhalin II high-stakes poker game which has been in progress. We have supplied information and Shell internal documents in the probably forlorn hope that some good will come of it in terms of the environment and in particular the endangered Gray Whale population.  From recent comments attributed to Putin, it seems as if the environmental issues may indeed be swept to one side. We also wanted to expose the continuing hypocrisy of a Shell management which claims to work within an ethical code pledging honesty, integrity and openness in all of its dealings.  The reality of corruption, fraud, cover-up, intimidation of employees and admitted use of undercover agents, confirms that the ethical code is purely for PR purposes as per the multi-million dollar “Profits & Principles” global campaign.  It should have been “Profits & No Principles”.

Spying activity

Oleg Mitvol has confirmed that he called in Russian “special services” to check on the authenticity of the leaked Spronsen/Bouman emails. This probably explains the Lloyds List news story:

http://royaldutchshellplc.com/2006/11/30/lloyds-list-i-spy-with-my-little-russian-secret-services-infiltrating-sakhalin-energy/

According to reports received from Shell insiders, Shell “spooks” have also been engaged in a hunt to track down the sources of leaks documents and information.

Shell in alliance with distasteful regimes

It is ironic that Shell is now in bed with what many people rightly or wrongly consider to be a very distasteful Russian government.  In any event, this is unlikely to concern Shell management as it has worked alongside corrupt Nigerian regimes for decades in plundering Nigerian national resources (and polluting the environment to a horrific extent). Time will tell whether President Putin has acted in the Russian national interest or for other motives.

Shell Nigerian Corruption:

http://www.shellnews.net/2004%20Documents/peaceandsecurity/peaceandsecurityinthenigerdeltawebpage.htm

Sakhalin II corruption:

http://www.shellnews.net/WEEK%202%202006/shellnewsnet-bribery-and-corruption-at-shell-14-january-2006.htm

Inside the Evil Empire:

A Shell insider who worked on the Sakhalin project has recently shared some insights with us about the mechanics of how Shell got the project costs so massively wrong. To protect anonymity some information has been changed without affecting the accuracy of the basic revelations made about the project.

From what we have learned, the company’s senior managers – both locally in Sakhalin and elsewhere – were aware of cost overruns far earlier than they have yet admitted and actively tried to suppress the true costs becoming common knowledge, even threatening employees to preserve the vow of omerta inside the project.

The individual concerned is a long serving Shell manager who was working in a project role in Sakhalin and had regular access to monthly cost reports. He was recruited for the Sakhalin project based on his previous experiences with other Shell developments, but rapidly found that this project was run along very different lines. Although he left the project towards the end of last year he still retains contact with other Expat and Russian national staff.

Specific allegations include:

From mid 2003 (when he first arrived on the island) the cost increases were common knowledge amongst the Expat community – Shell management has consistently claimed that they only became aware of this later. In fact when David Greer joined the project he immediately instigated a cost review, thinking that he could rapidly raise project costs and leave the blame with Steve McVeigh. He could then deliver for slightly less and justify a sizeable bonus for himself. Amusingly, Shell’s management is so incompetent they can’t even fudge numbers effectively!

The contingency for the project was absolutely minimal 5% – the official explanation for this was that they could afford a low contingency because the likelihood of problems was easily managed by the expertise of the management team. In practice, industry norms for a project of this nature would be around 12.5% – 15% and often as high as 20% to reflect potential problems with operating in Russia with uncertainty over the cost of materials such as steel and delays due to extreme weather conditions. Additionally, for the early part of the project there was no effort made to hedge against losses on currency exchange, leading to significant avoidable cost increases, although there was very significant risk present and recognisable since much of the project contracts were based on US$ pricing and many materials – i.e. steel – are in high demand on the world market and thus command a premium.

Shell clearly had not learned from their problems with the Kashagan project where they made the same mistakes, and ended up shifting the blame on Togrul Tosun, one of the senior managers in charge. In the late 1990s he was already predicting sizeable cost overruns for the Sakhalin project as he was convinced that Shell’s controls were totally inadequate for the situation they found themselves in. His reward was to carry the blame for Kashagan (one of Shell’s earlier disastrous Russian developments) in order to shield the men above him from justifiable censure.

One cost report which our insider received showed the true cost as being nearly $13 billion – this was in mid 2003 when the reported cost was still only $9.6 billion. At this point he approached various senior managers in Sakhalin Energy to discuss his concerns. Steve McVeigh refused to discuss this with him at all, and the Finance Director (Mike Taylor) asked him not to discuss this further but told him this would be sorted out soon. A lack of apparent action led to him asking again both Mike Taylor and other senior finance staff who never gave any clear explanation, but advised him not to rock the boat.

At the end of 2003 he was asked to follow up on issues arising from an audit of one of the component parts of the project. This was in respect of infrastructure on Sakhalin Island to facilitate the overall project. Although a relatively small portion of the overall budget, the cost and scheduling problems associated could be seen as typical for a project in this geography. The infrastructure costs were uniformly at least 15% above forecast, often as much as 30% above, and some were more than double the original estimates – plus nothing had been completed on time: more worryingly still there was no process to provide control over changes to scope or cost of the work, although many changes were being made on the hoof. Some of the work was also delivered to a substandard quality thereby requiring remedial work, consuming both additional time and money. Given that these elements of the project were the smallest and simplest of the works needed to deliver the overall project on time, it was abundantly clear that the cost estimates for the overall project were even more inaccurate than he had previously feared. One cost estimate at the time showed costs around $14.5 billion – numbers still rapidly rising as the reality of technical specification needed to operate in Sakhalin’s harsh climate overtook the optimistic wishful thinking behind the original $9.6 billion cost presented to and approved by the development partners.

The potential of demonstrable negligence being a primary root cause of environmental damage would open Shell up still further to the attacks of Rosprirodnadzor and increase the prospect of sizeable damages.

The audit report also highlighted some significant breaches of normal contractual practice – for example the man charged with delivery of the infrastructure (David Meehan) worked for one of Shell’s contractors: as such he was able to ensure a steady flow of work to his own company and the audit report pointed to evidence that not all of this work was ever tendered competitively. Additionally, one of his sub-ordinates (Rogier Kamerbeek who worked directly for Shell) was responsible for monitoring the contract. In effect he was able to write an open cheque for work to his own company with none of the appropriate checks and balances in place. He discussed these issues with David Meehan who quite angrily told him the audit was over with. He got a similar non-response from finance, and saw no evidence of effort to follow up on the audit findings. Follow up conversations with Taylor and Meehan made it very plain that his career would be threatened if he did not desist this line of questioning.

Similar things had occurred in Shell Expro during the period when Malcolm Brinded had been MD, when a shortage of staff meant that contract staff were approving budgets and making contract awards to other contractors – and for material items, not just restocking the stationery cupboard! To compound matters, conversations with other Shell engineers reveal that even before formal investment approval it was accepted that costs were largely inaccurate and would need to be revised upwards after approval was gained. The thinking was that potentially critical flaws in design and specification would only become apparent once drilling and production had started, by which time the original engineering team would have made their killing from Sakhalin and have either moved on or retired.

The accounting for the infrastructure project was in the hands of a small group of young, inexperienced and unqualified Russians. The original project structure had called for these to be given oversight and support by an experienced expatriate accountant but this role was removed in late 2003 as part of a “cost saving” exercise. It seems evident that a project costing well in excess of $10 billion (which was the stated cost of the project, even if the true cost was much higher) required strong cost control, and reducing the finance staff monitoring it would only weaken the control: it was also clear that reducing the staffing would make it easier for problems to remain undiscovered and unreported, and make it less likely that questions would be asked of senior management. The expatriate oversight role was never fully replaced.

During 2004 he undertook another audit, working as part of a team, included for his technical expertise to evaluate project scope. It became very clear that that the original scope for the contract let (i.e. the scope underpinning the cost included in the original $9.6 billion cost) was utterly inadequate for the stated purpose. Shortly after the contract had been agreed, and after Shell had received formal Investment Approval based on the stated development cost of $9.6 billion, the existing scope was totally revised which resulted in a near doubling of cost. An examination of the documents exchanged with the supplier made it very clear that this approach had been discussed and agreed between Shell’s project manager and the contractor several months before Investment Approval had been granted. It seems clear that this unorthodox approach was designed solely to ensure that the contractor would be guaranteed profitable work, whilst permitting the Project Manager to report a lower cost than was actually the case until too late to withhold the contract. The chain of emails seeking explanations for this behaviour included David Greer, Mike Taylor and Campbell Wyper – recently installed as the Head of Contracts Purchasing at the express request of Malcolm Brinded. In spite of the seniority of these individuals, no satisfactory explanation was ever received.

Malcolm Brinded and Jeroen van der Veer have consistently stated that they were surprised to learn about the cost increases and passed on this info to the Russian authorities immediately once they were aware. News of the growing costs broke in the UK press in July 2005 – after the first suggestion of Gazprom becoming involved with the project. In fact, Brinded had known of the rapidly escalating costs for at least two months at this point – he was informed in May 2005 that the costs would be at least $15.5 billion and his response was to ask for all details before he could respond – ensuring a lengthy delay whilst all numbers were cross checked – in reality this meant he took no action to address the problem. So he knew, but by asking for a detailed written report (which could not be produced rapidly) he gained time and deniability – although he certainly knew the costs were substantially greater than reported to date. This ability to manipulate perceived reality is one reason Brinded has risen so high and clung on for so long.

Since Jeroen van der Veer stated that he told Gazprom immediately he was informed, it therefore raises two possibilities – either he is lying through his teeth, or his own senior management (Brinded and his EP Leadership Team) were deliberately withholding information from him. Either possibility speaks of a company in crisis. Jeroen’s comment is eerily similar of his limp response to the reserves scandal where he denied culpability by saying he didn’t know or understand – whereas in fact, at that level of seniority, his job is to know. He is either negligent or dishonest and neither characteristic is desirable in the leader of a publicly quoted company.

Background Information

By way of background information, my son and I have been involved in litigation with Shell intermittently for the last 12 years. This was after previously acting as marketing consultants to the Royal Dutch Shell Group on an international basis for over a decade commencing in the early 1980’s. We have lost count of the High Court actions and other cases, including the proceedings Shell International Petroleum brought against me in 2005 in respect of Shell related internet domain names, including royaldutchshellplc.com. Shell has never won a case against us. All settlement sums received from Shell have been ploughed back by us into further litigation against Shell after further causes of action became apparent.

I am four months away from being 90 years old. Despite this fact, Shell currently has an application before the High Court of Malaya demanding my appearance for cross examination in respect of a defamation case brought collectively by EIGHT Royal Dutch Shell companies against an unemployed former Shell production geologist, Dr John Huong, who blew the whistle on the Shell reserves fraud.  He recorded in a Shell internal document his moral reservations about giving false information to Shell shareholders about hydrocarbon reserves volumes. Shell is seeking his imprisonment for alleged contempt of court in respect of postings made on our website. The deluge of draconian proceedings against Dr Huong, who worked almost 30 years for Shell, is all in respect of alleged defamatory postings under his name on our websites.

The penny dropped for us about Shell senior management when we wrote to Malcolm Brinded several years ago after uncovering a conspiracy by Shell managers to deceive and cheat participants in a major contract tender:

http://royaldutchshellplc.com/2006/12/17/shellnewsnet-another-leaked-email-from-jeroen-van-der-veer/

Brinded ignored the evidence, and our invitation to withdraw support for the mastermind of the deception. Instead Shell was cornered into admitting using undercover agents against us in respect of related litigation.  One agent was caught red-handed opening private mail. He used fake credentials and documents during his mission on behalf of Shell.  We have also publicised Shell’s admitted use of undercover agents from a firm of private spies closely associated with Shell senior directors.

http://www.shellnews.net/2004%20Documents/sundaytimes/sundaytimesspied8april.htm

It would therefore be fair to say that there is a certain amount of residual acrimony between us and what we consider to be an incompetent ethically flawed Shell management.

INFORMATION ADDED MAY 2020

The Guardian: Kremlin attack dog vows to take on Shell in the battle of Sakhalin (Wed 4 Oct 2006) pfd version

The Independent: Where next for Shell after Sakhalin-2 seizure debacle? pdf

The Guardian: 92-year-old’s website leaves oil giant Shell-shocked (Mon 26 Oct 2009) pdf

Johnson’s Russia List Sakhalin-2/Shell/Mitvol/Donovan Article: 13 November 2006

Petroleum Argus FSU Energy: Sakhalin-2/Mitvol/Donovan/Shell Article: 27 October 2006

Nikkei BP (Japan): Gripe sites are becoming more powerful: 12 November 2007

Royal Dutch Shell 2007 Annuals Accounts and Form 20-F (INCLUDES SAKHALIN II Losses)

Our intervention in Sakhalin2 cost Shell many billions of dollars. See “How Chris Finlayson bungled the Mother of all Projects: Sakhalin II.”

The same article contains information and links about another Sakhalin2 matter resulting in a further humiliation for Shell. The Financial Times published another front-page story based on a Shell internal emailed leaked to me, which I had passed to the newspaper.

Because of the content, the Deputy Chairman of Sakhalin Energy Investment Company, Mr David Greer, was exposed as being a plagiarist and was forced to resign. Greer lost his job as Project Director and as a Royal Dutch Shell Managing Director. See: ’Pipeliners All! Shell’s memo to Sakhalin: Financial Times 5 June 2007

Shell internal emails

Sakhalin Evidence

SAKHALIN2: How many billions of dollars did Shell lose in Russian annexation?

How Chris Finlayson bungled the Mother of all Projects: Sakhalin II

Russian Official Criticizes Shell’s Efforts On Environment

Boston Globe: The Russian power play on oil, natural gas reserves: 23 August 2008

(In one of the most blatant instances, Shell Oil was forced to yield control of its operations off Sakhalin Island in exchange for a payment of $7.4 billion from state-dominated Gazprom. Most outside analysts estimate that Shell’s share was worth $15 billion to $17 billion.)

The Observer: Shell comes under fire for role in Sakhalin audit: 31 August 2008

BusinessGreen.com: Shell accused of manipulating environmental report: 1 September 2008

Environmental Leader: Shell Criticized for Manipulating Environmental Audit Report: 2 September 2008

Ethical Corporation: Shell’s Sakhalin influence: October 2008

DAVID GREER AFFAIR

ft.com: ‘Pipeliners All!’ Shell’s memo to Sakhalin: Published: June 5 2007 22:29 | Last updated: June 6 2007 13:07

As if laying pipelines across Sakhalin Island, described by Chekhov as “hell”, were not enough, the engineers battling the elements there have to put up with their boss’s motivational memos.

In a leaked email from David Greer, the deputy chief executive of Sakhalin Energy Investment Company, the consortium running the Sakhalin 2 project, he reveals that he despises cowards and urges his staff to “Lead me, follow me, or get out of my way”.

Much of the memo appears to have been drawn from a speech by General George S. Patton to US troops ahead of the D-Day invasion, when he said: “When you were kids, you all admired the champion marble player; the fastest runner; the big league ball players; the toughest boxers. Americans love a winner and will not tolerate a loser. Americans despise cowards. Americans play to win – all the time.”

The Patton link was noted in a posting to an FT.com forum by Mark Bisset.

Sakhalin 2 has had a troubled history, hit by rising costs and concerns about its environmental impact.

In a deal completed in April, Royal Dutch Shell and its Japanese partners were forced to allow Gazprom, Russia’s state-controlled gas company, to buy a majority stake.

Mr Greer’s e-mail reveals the pressure the company is under to hit its schedule of delivering its first shipments of liquefied natural gas by the second half of next year and the unusual management techniques he is using.

“Pipeliners All! Many thanks to all of you for your contributions to this week’s Bi-Annual Challenge … and what a Challenge it is going to be for all of us!” the e-mail begins, cheerily enough.

“From the outset, I want to assure you that, despite the mutterings on the day and the challenges ahead, I have total faith in you and our collective ability to complete the task ahead of us.”

After the good news, though, the mood darkens. “However, some of the comments and body language witnessed at the Bi-annual Challenge meeting do suggest that PDP is running the risk of becoming a team that doesn’t want to fight and lacks confidence in its own ability. Surely, this is not the case? Pipeliners and Engineers love to fight and win, traditionally. All real engineers love the sting and clash of challenge.”

After more appeals to the pride of “real frontier professionals” comes the inspirational bit. “When everyone of you were kids, I am sure that you all admired the champion marble player, the fastest runner, the toughest boxer, the big league football players. Personally, I, like most others, love winning. I despise cowards and play to win all of the time. This is what I expect of each and everyone of you…”

“Strive to be proud and confident in yourselves, be proud of your tremendous pipeline achievements to date and lift up your level of personal and team energy to show everyone that you are a winning team capable to achieving this year’s goals. If you can crack this angle, I am very confident you can crack the job, with ease.

“So Lead me, Follow me or Get out of my way; Success is how we bounce when we are on the bottom.”

The memo was leaked to the website www.royaldutchshellplc.com, which has long been a thorn in Shell’s side.

Shell confirmed the e-mail was genuine but was reluctant to discuss it further.

Copyright The Financial Times Limited 2010.

Shell shakedown: Fortune’s Abrahm Lustgarten reports how the world’s second-largest oil company lost control of its $22 billion project on Russia’s Sakhalin Island. February 1 2007: 12:10 PM EST

Extracts

The news was stunning, even if rumors had been flying: Shell (Charts) was halving its ownership in the $22 billion project, cutting its stake from 55% to 27.5%, and Gazprom, the Russian gas giant, was stepping in, buying Shell’s share plus half the stakes owned by Japanese partners Mitsui and Mitsubishi, for just $7.5 billion – the equivalent, says a Shell spokesman, of “paying to enter on the ground floor, as if they were a shareholder at the beginning.” The foreign companies also agreed to absorb $3.6 billion of the project’s mounting cost overruns.

That Shell and its partners were victims of an unscrupulous campaign by the Russians to win leverage at the negotiating table is certainly true. The company’s loss of its controlling interest in what chief executive Jeroen van der Veer called a “key part of Shell’s upstream strategy,” amounting to an estimated 5 percent of its global reserves, is largely a story about the high risks of frontier international energy projects. But it is also a tale of how Shell misplayed a strong hand and, after 12 years of work, lost untold billions of dollars in future earnings.

WWF Evidence submitted in 2008 to House of Commons Select Committee quoting from a John Donovan Sakhalin II article published on royaldutchshellplc.com

(1): The UNITED KINGDOM PARLIAMENT Hansard Archives Research Uncorrected Evidence: 20 June 2008

(2): Memorandum submitted by WWF to inquiry by House of Commons Select Committee: Quotes Sakhalin II corruption allegations from royaldutchshellplc.com article: 20 June 2008

(3): House of Commons Environmental Audit – Minutes of Evidence ordered by the House of Commons to be printed 14 October 2008 (RELATED LINK IS IMMEDIATELY BELOW)

(4) www.parliament.uk: Evidence submitted by WWF to Select Committee on Environmental Audit: Evidence submitted 20 June 2008: (SAKHALIN II BACKGROUND INFORMATION: — Allegations have been made by a whistleblower of inappropriate relationships between SEIC management and its contractors, in particular Starstroi and its subcontractor SU4.[22])

Backup webpages 1, 2, 3, 4

SEPARATE PAGE

Financial Times article by Ed Crooks published by The Financial Times on 11 June 2007 under the headline: “Energy Filter: Stirring words on Sakhalin“ described royaldutchshellplc.com as “an anti-Shell website run by a father and son partnership that has been a long-running thorn in the company’s side.”

Prospect Magazine published an article on its website on 12 September 2007 under the headline: “Shell’s Colchester Headache“ described the website as “essential reading for anyone who covers Shell and the energy sector more broadly.”

 

Nikkei BP (the top circulation Japanese business magazine) published an article by Ryo Kuroki on 13 November 2007 under the headline: “Gripe sites are becoming more powerful

Extract

The fate of Sakhalin 2 was changed by two British men

There is a case where gripe site affected Japanese companies business. Sakhalin 2, which is an oil and gas development project in the Sakhalin Island by Royal Dutch Shell, Japan’s Mitsui and Mitsubishi, had to surrender majority interest to Gazprom due to pressure from the Russian government regarding the violation of environmental regulations (formal transfer of shares took place April this year). However, it is not well known in Japan that actions of a 90-year-old man and his son who live in a countryside in UK contributed to the above movement.

 

Extracts from a One World Trust newsletter published in July 2007  (The One World Trust is an independent research organisation associated with the UK Houses of Parliament and the United Nations.)

The website Royaldutchshellplc.com is a gripe site established by John Donovan and his father, Alfred, to stream information to the public about the Shell Group, a collection of oil, gas, and petrochemical companies. John Donovan’s use of the website to blow the whistle on Shell’s environmental abuses in the Sakhalin project exhibits the power an individual website can have in holding a global organisation to account.

An appeal by the World Wildlife Fund(WWF) in relation to environmental concerns about the Sakhalin2 project. Part of the WWF appeal published on the Donovan website on 2 February 2006, stated: “If you have a story you would like to tell, then please get in touch with us or Alfred Donovan in confidence, or make your views known to EBRD. This is a crucial time for influencing this project, when it is essential the real story of Sakhalin comes out.” A further appeal on behalf of the WWF was published on our website in March 2006.

The name of this book is not an ego-driven title dreamt up by me, but the headline of an article by an award-winning newspaper journalist, Christoph Giesen published across the EU in ten languages. It was about my unusual relationship with Royal Dutch Shell. Over a decade of spectacular mutual success followed by two decades of hostilities, including sinister episodes of cloak and dagger activity by Shell against my father and me. The article led to a TV documentary feature aired across the EU.

A broadsheet German daily newspaper, Süddeutsche Zeitung published a major article about me on 20 March 2012 under the headline “Konzernfeind No. 1.”

The article by Christoph Giesen told the story of my epic feud with the oil giant Royal Dutch Shell, a former client of the multinational company I co-founded, Don Marketing.

The English translation of the above newspaper headline: Shell’s enemy No.1

It was republished on 27 March 2012 by the European Journal/VOXeurope in ten languages under the headline: “John Donovan, Shell’s nightmare.

A related TV documentary feature filmed in the UK and Russia was subsequently broadcast across Europe by Deutsche Welle (DW) the leading German TV international public broadcasting channel. It included an interview with former Russian Deputy Minister of the Environment, Oleg Mitvol, named in a Guardian newspaper article as a “Kremlin attack dog.” Film footage of President Putin appears in the feature.

A professional translation of the German-language narration is printed below in italics:

John Donovan: A lone fighter against Shell

Next to the London Eye, the Shell Centre stands tall. Its enemy stands at the door.

“You might find that interesting,” says John Donovan. He distributes flyers to inform people about the oil company’s drilling projects.

“Shell destroys communities,” is what the banner says. An older gentleman and a handful of like-minded people are aggravating one of the world’s largest oil giants.

“We are putting Shell in a tough spot. What we’re doing is embarrassing them by distributing those leaflets. But they can’t do anything about it, because what we say is true and we can prove it.”

John uses the flyers in what is mostly a symbolic gesture to the enemy; he leads the real wave of protest on the internet. A long time ago, John secured the internet domain royaldutchshellplc.com. It sounds like the company’s official webpage, but in reality, it shows its dark side.

Millions of people click on the articles and then discover scandalous details about Shell. For example, about what the company is doing in Nigeria. Oil spills are contaminating the Niger Delta. Donovan was able to prove that Shell cooperated with rebels.

The Englishman is holding up a mirror to Shell. “We want Shell to honour its own business principles. The firm made them in 1976 and people are supposed to believe the promises they made in there that Shell will at all times work with honesty, integrity and openness towards its employees, suppliers and the public. However, in our experience, they do not do this; they are a ruthless, mean oil company. “

John Donovan’s revelations cost Shell billions. In 2005, he wrote an email to the Russian President about Shell’s lax safety standards. This is how Putin learned that the oil drilling project in Siberia, Sakhalin II, could be threatened by an environmental catastrophe. The consequences were expensive.  Shell’s reputation in Moscow dropped, as did its profits. The Russians degraded Shell to a minority partner in its joint venture.

“Yes, Mr. Donovan’s documents really helped us,” Russia’s former deputy environmental minister confirms.

“His evidence proved without a doubt that documents had been forged and that problems had deliberately been kept secret.”

It goes without saying that John Donovan doesn’t buy his petrol from Shell. He did, however, do business with them in the past. John ran petrol stations and thought up advertising slogans for the energy giant. “We used to be something like partners,” says John.

The fight started after a bitter disappointment. “One of their managers had stolen one of our ideas and expected that we wouldn’t sue them because Shell is so rich and powerful. But we didn’t want to let things be and we pursued them in the courts and it’s gone on for two decades ever since.”

John experienced how Shell treats people for himself. That was his motivation for scrutinizing the company. The piles of research in his home in Colchester continue to grow, along with all the information provided to him by insiders. It is a full-time job for the early retiree. The files even fill his old refrigerator – a fitting symbol of the cold war against Shell.   

“We found out what Shell really thinks about us because we have read internal correspondence on the topic. It said that they instituted a global spying operation against us. They even recruited people from Pittsburgh who work for the FBI.”

In comparison, John Donovan is open about his actions. He notifies Shell of his protests; anyone can read his website.

One man, who worked for the opponent for 37 years, says that Donovan is annoying. Patrick Biggs thinks that this is a good thing, however.

“When you have that amount of power, you need to be held accountable. My view is that democratic systems don’t hold multinationals like Shell as accountable as they should. So there’s a gap and it’s into that gap that people like John Donovan will come.”

One senior against Shell. And he still has quite a few things up his sleeve. The energy giant will be subjected to John Donovan’s evil eye for a very long time.

TRANSLATION ENDS

An English language version of the German TV documentary segment was then broadcast across Europe by the European Journal under the title: “Shell’s Enemy No. 1

Greenpeace might take issue with the No. 1 ranking bearing in mind that its activities have achieved greater visibility.

However, in terms of financial impact, the confidential Shell internal information that I supplied to the Russian government concerning the Sakhalin2 gas project in Russia, did, in fact, cost Shell billions of dollars, as has been widely reported.

In October 2006, Petroleum Argus FSU Energy published an interview with Mitvol while he was still on the attack against Shell.

EXTRACT FROM ARGUS FSU ENERGY INTERVIEW WITH OLEG MITVOL

Q: Who will take Sakhalin Energy to court?

A: I will take them. I have documents proving that the Sakhalin Energy management was aware that the company violated technical standards, but carried on trying to meet project deadlines and refused to stop work. I am confident of winning my case in Stockholm.

Q: What documents are these? Where are they from?

A: I have email correspondence between executives in Sakhalin Energy management from 2002.

I received these letters from John Donovan, owner of the anti-Shell website www.royaldutchshellplc.com. I received them on 19 October and forwarded them to Sakhalin Energy with a request for an official reply. But I have not received any reply so far. I presume that they are in shock.

Q: How could you prove that these documents are genuine?

A: They appear genuine and we have special services working to prove this. Once they have been verified, we will have enough evidence to take Sakhalin Energy to court. If we win, the Sakhalin 2 consortium should pay compensation for all the environmental damages – which will come to over $10bn – as well as compensation to the state for loss of revenues caused by the additional delays.

Extract ends

Based on the evidence I supplied, Mitvol later threatened to increase the litigation claim to $30 billion.

Shell was soon persuaded to relinquish its majority holding in the world’s then largest energy project, becoming, instead, a minority partner. It was an utter humiliation for Shell with huge financial consequences.

Mitvol was also mentioned in a related multipage article by Derek Brower, editor-at-large of Petroleum Economist. His article was published in Prospect Magazine in February 2007 under the title “Rise of the gripe site

Extracts

IT IS NOT the kind of place you would expect to find at the centre of a global energy war. John Donovan’s office is in a modest house in a suburb of Colchester. No electronic maps of Europe adorn his walls, as they do the walls of Gazprom’s Moscow control room. And nor are there any butlers bringing cups of tea and expensive biscuits, as you find at Shell’s head office on the Thames. There is just Donovan’s 89-year-old father, Alfred, in the room next door. But it is the home of www.royaldutchshellplc.com, a website which can claim to have cost Shell billions of dollars and helped Vladimir Putin score another victory over western energy interests.

Oleg Mitvol – the deputy head of Rosprirodnadzor, who was entrusted with the job of bringing Sakhalin Energy to heel had by last December accumulated sufficient evidence of Shell’s and its partners’ abuses to lay charges against the consortium amounting to $30bn. There were also threats that the licence to develop the project could be removed. With the green gun at its head, Shell allowed Gazprom to take control of the project giving Russia an immediate share of profits and oversight of costs. Taking the role of the humiliated man seriously, Shell’s head Jeroen van der Veer thanked Putin for helping to resolve the conflict.

What most astonished Shell was the detailed inside knowledge Mitvol had accumulated about the company’s abuses. Some in the company suspected industrial espionage.

But it was actually information that the Donovans of Colchester were passing to Mitvol. EXTRACTS END

Mitvol also featured in a Sunday Times half-page article by Danny Fortson published 19 July 2009 under the headline: “Two men and a website mount vendetta against an oil giant

Extract

In 2005, when the Kremlin was building a case against Shell over the Sakhalin gas project, the Donovans provided confidential documents regarding alleged environmental infractions directly to Oleg Mitvol, the minister who led the case. Shell was ultimately forced to sell a stake to the Russians, leading to billions in lost revenue. Mitvol publicly acknowledged the help provided by the Donovans in building his case.

Extract from a related half page article by Russell Hotten published by The Guardian on 26 October 2009 under the headline: “92-year-old’s website leaves oil giant Shell-shocked

Four years ago Shell was embroiled in a bitter dispute with Russia’s environmental regulator over drilling for gas at Sakhalin Island. It was eventually forced to relinquish its majority stake in the project, costing Shell billions in lost revenue. Later, the regulator, Oleg Mitvol, publicly acknowledged the Donovans’ help in getting information about alleged claims of environmental abuses by Shell. Earlier this year the site disclosed plans for thousands of Shell job losses. And now, Donovan says, he is helping US investigators looking into the award of oilfield drilling licenses, providing them with information leaked to his website.

I was, in fact, dealing with a senior agent from the Inspector General’s Office of the US Department of the Interior keen to receive Shell insider information, which I supplied.

In a Shell internal email a few days later, dated 20 March 2007 Shell staff discussed whether to set up “an information security tasking to discover where exactly in Shell their (good) sources are located.”

Amusingly, the same email contained the spectacular endorsement of the website, quoted in the Reuters article, which its author obviously never intended for public consumption.

The following day, in a Shell internal email dated 21 March 2007 marked “Donavan CONFIDENTIAL”, there was confirmation that Shell had undertaken a global spying operation against its own employees in an attempt to discover the identity of employees supplying me with Shell insider information.

The spying plan included monitoring “Shell servers globally to Donovan” and “monitoring web traffic to determine internal traffic to their website. There is history of several former employees taking internal laundry to Donovan also, internal e-mails have appeared on his website.”

The primary objective was to stop Shell “internal laundry” from being aired online.

Shell internal email dated 31 August 2007 said that Shell employees had been instructed not to visit our website. An abbreviation – “D’” – was used instead of our surname in one of the Shell emails.

We also discovered that from 2006 onwards Shell secretly kept and regularly updated “Focal Point” information about our activities. Some of the information in the reports is inaccurate.

We have copies of reports updated in 2006200720082009 and 2010. I have supplied one example from each year.

The “Focal Point” seems to be a person rather than the title of the document. I believe the person was Richard Wiseman.

It is plain from the reports that there was anxiety at Shell about the possibility that I would ask a question at the AGM. A list of possible questions and rehearsals of responses are listed in the Focal Point reports.

Surprising bearing in mind that the last time we asked a question at a Shell AGM was over two decades ago, in 1995. My fathers’ exchange with the then Shell Transport and Trading Company chairman, John Jennings, self-evidently made a long-lasting impact!

Shell even discussed internally the possible impact of my father growing older and what might happen to the website:

In one Shell internal email dated 11 March 2007, someone at Shell expressed the hope that “with AD getting older, his interest might wane… but it looks as though JD is just as determined.”

In 2007 & 2010 Shell secretly considered putting pressure on national newspapers concerning my activities

In February 2007, someone at Shell stated an intention in an internal email dated 2 February 2007, to put pressure on The Sunday Times to “kill” an article about our intervention in the Sakhalin 2 project (which according to The Sunday Times article cost Shell £11 BILLION).

The entire content of the article was read out to me on a Saturday morning by Steven Swinford, the then Sunday Times journalist and the paper was due to go to press later that day. The article included an interview with a Russian Government minister Oleg Mitvol. I had supplied Mitvol with leaked Shell internal communications. Mr Mitvol made damaging comments about Shell management during the interview.

By coincidence or otherwise, the article was duly killed. Shortly thereafter The Sunday Times published a colour Shell/Ferrari advertorial.

On 27 July 2010, Shell discussed in internal emails the possibility of applying pressure to the Financial Times concerning me and my website.

 

In a Shell internal email a few days later, dated 20 March 2007 Shell staff discussed whether to set up “an information security tasking to discover where exactly in Shell their (good) sources are located.”

Amusingly, the same email contained the spectacular endorsement of the website, quoted in the Reuters article, which its author obviously never intended for public consumption.

The following day, in a Shell internal email dated 21 March 2007 marked “Donavan CONFIDENTIAL”, there was confirmation that Shell had undertaken a global spying operation against its own employees in an attempt to discover the identity of employees supplying me with Shell insider information.

The spying plan included monitoring “Shell servers globally to Donovan” and “monitoring web traffic to determine internal traffic to their website. There is history of several former employees taking internal laundry to Donovan also, internal e-mails have appeared on his website.”

The primary objective was to stop Shell “internal laundry” from being aired online.

Shell internal email dated 31 August 2007 said that Shell employees had been instructed not to visit our website. An abbreviation – “D’” – was used instead of our surname in one of the Shell emails.

We also discovered that from 2006 onwards Shell secretly kept and regularly updated “Focal Point” information about our activities. Some of the information in the reports is inaccurate.

We have copies of reports updated in 2006200720082009 and 2010. I have supplied one example from each year.

The “Focal Point” seems to be a person rather than the title of the document. I believe the person was Richard Wiseman.

It is plain from the reports that there was anxiety at Shell about the possibility that I would ask a question at the AGM. A list of possible questions and rehearsals of responses are listed in the Focal Point reports.

Surprising bearing in mind that the last time we asked a question at a Shell AGM was over two decades ago, in 1995. My fathers’ exchange with the then Shell Transport and Trading Company chairman, John Jennings, self-evidently made a long-lasting impact!

Shell even discussed internally the possible impact of my father growing older and what might happen to the website:

In one Shell internal email dated 11 March 2007, someone at Shell expressed the hope that “with AD getting older, his interest might wane… but it looks as though JD is just as determined.”

In 2007 & 2010 Shell secretly considered putting pressure on national newspapers concerning my activities

In February 2007, someone at Shell stated an intention in an internal email dated 2 February 2007, to put pressure on The Sunday Times to “kill” an article about our intervention in the Sakhalin 2 project (which according to The Sunday Times article cost Shell £11 BILLION).

The entire content of the article was read out to me on a Saturday morning by Steven Swinford, the then Sunday Times journalist and the paper was due to go to press later that day. The article included an interview with a Russian Government minister Oleg Mitvol. I had supplied Mitvol with leaked Shell internal communications. Mr Mitvol made damaging comments about Shell management during the interview.

By coincidence or otherwise, the article was duly killed. Shortly thereafter The Sunday Times published a colour Shell/Ferrari advertorial.

On 27 July 2010, Shell discussed in internal emails the possibility of applying pressure to the Financial Times concerning me and my website.

 

Shell still harboured ambitions to close down the website. The author of a Shell internal email dated 15 July 2009 raised the subject, asking: “are you doing anything to get the website shut down?”

Extracts

John Donovan says he has about a dozen high level executive who regularly feed him inside info ..

For example, he broke Vosers reorg plan’s in May. Is this worrying? are you trying to root out who these people are?

Have you tried to engage with the Donovan,, to try to bring them onside of get them to tone down their anti Shell stance?

He claims to have supplied information directly to Oleg Mitvol sending info after he was given Mitvols personal fax number, that led directly to Shell having to sell down its stake. That obviously has cost the company many billions in lost revenue. One, do you contest those facts? and Two, are you doing anything to get the website shut down?

royaldutchshellplc.com and its sister websites royaldutchshellgroup.com, shellenergy.website, shellnazihistory.com, royaldutchshell.website, johndonovan.website, shellnews.net and shell2004.com are all owned by John Donovan. There is also a Wikipedia article.

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