A Tale of Two Oil Slicks

Apr 13th, 2012

by John Donovan.

April 13, 2012

By Alexis Flynn

On Thursday, Royal Dutch Shell announced it was investigating a potential leak in the Gulf of Mexico. On the same day, it reported a more than sevenfold increase in the amount of crude spilled over the last year in Nigeria, one of its major host countries. But only one of these events is believed to be the catalyst for investorfright.

Royal Dutch Shell shares fell around 5% at one stage Thursday after the Anglo-Dutch oil giant said it was taking a closer look at an oil sheen near two of its offshore platforms in the Gulf of Mexico. Later its shares rose and reversed most of the day's losses after the company said the sheen didn't stem from its two nearby platforms, and that the amount of oil was small.

Meanwhile, the company's admission that its facilities in Nigeria spilled some 5,300 tons of crude last year — up from 700 tons the year before — didn't seem to merit a drag on its stock.

While it would be easy to explain the apparent contradiction by pointing to investors unconcerned at the suffering of people thousands of miles away, their rationale in this case — that even one spill in the U.S. could cost billions while many spills in Nigeria probably won't — is hard to fault.

There are many reasons why this is the case. The U.S. is a cohesive, functioning state, while Nigeria is beset by widespread corruption and inefficiency. The U.S. also boasts one of the strictest regulatory regimes in the world when it comes tooffshore drilling, while Nigeria does not.

Shell executives and investors needn't look far to see the consequences of an error in U.S. waters. BP shareholders are still counting the costs of the Deepwater Horizon disaster, when an explosion on a drilling rig leased by the U.K. firm killed 11 and set off the worst offshore oil spill in U.S. history. And with Shell still waiting on drilling permits before it can begin exploration work in Alaska's Beaufort Sea, the company is not in the mood to run afoul of U.S. authorities.

In contrast, the cost of spilling oil in Nigeria may be a stain on the company's reputation but not on its purse strings. Although the company faces a number of lawsuits from local communities, two of which were filed last month in Port Harcourt and London, Shell said in its most recent annual report that although the "various environmental and contractual disputes" it faces in Nigeria "could be seen as material" if taken together, "these matters are not expected to have a material impact on Shell."

Thursday's spill disclosure, contained in Shell's 2011 Sustainability Report (PDF), also showed that the number of onshore Nigeria operational oil spills increased to 63 in 2011, up from 32 the previous year. Operational spills are characterized as those related to equipment failures or accidents. The company attributed the higher number of onshore spills to more pipelines being put back into operation, as an improved security situation allowed its workers easier access to facilities.

Shell's local Nigerian onshore unit, the Shell Petroleum Development Co., says it cleans up "all spills in the Niger Delta when they occur, as fast as possible, no matter what their cause."

A United Nations report last year — funded by Shell — concluded that at least $1 billion would still be needed to clean up the severely polluted Ogoniland region of the Niger Delta in a process that could last up to 30 years. However, activist rights groups Amnesty International and the Centre for Environment, Human Rights and Development have said the lack of an effective regulator to oversee the local oil industry means companies aren't under pressure to act.

The extent to which Nigeria remains Shell's environmental weak link is starkly illustrated in a table at the end of its sustainability report: Of the total volume of oil spilled as a result of operational issues from Shell's global facilities last year, around 87% was in the West African country. A pipeline leak at its Gannet Alpha platform in the U.K. North Sea, the country's worst in the decade, accounted for much of the remaining oil spilled.

The unfortunate reality is that this dynamic is unlikely to change any time soon, certainly not until all Nigerian stakeholders, including the government and regulators, better police the local oil industry. While Shell's impending annual general meeting is expected to feature a host of activists questioning the firm's top management on their oil spill track record, it is unlikely that their top institutional shareholders will be following suit.

Corrections & Amplifications:

Of the total volume of oil spilled as a result of operational issues from Shell's global facilities last year, around 87% was in Nigeria. A previous version of this article incorrectly implied that 87% of all spills occurred in the West African country.

SOURCE

Posted in: Africa, BP, Bribery, Business Principles, Corruption, Environment, Gulf of Mexico, Human Rights, Litigation, Nigeria, Oil, Pollution, Royal Dutch Shell Plc, The Wall Street Journal.
Tagged: BP · Gulf of Mexico · Litigation · Militant Attacks · Niger Delta · Nigeria · Oil Prices · Royal Dutch Shell Plc

← Iran ships 'off radar' as Tehran conceals oil sales

Total Elgin/Franklin toxic blowout →

Iran ships 'off radar' as Tehran conceals oil sales

Apr 13th, 2012

by John Donovan.

By Christopher Johnson and Peg Mackey LONDON | Fri Apr 13, 2012 10:23am EDT

(Reuters) – Iran is concealing the destination of its oil sales by disabling tracking systems aboard its tanker fleet, making it difficult to assess how much crude Tehran is exporting as it seeks to counter Western sanctions aimed at cutting its oil revenues.

Most of Iran's 39-strong fleet of tankers is now "off-radar" after Tehran ordered captains in the National Iranian Tanker Co (NITC) to switch off the black box transponders that are used in theshipping industry to monitor vessel movements, oil industry, trading and shipping sources said.

"Iran, helped by its customers, is trying to obfuscate as much as possible," said a senior executive at a national oil company that has done business with Iran.

And Iran may have countered a reported reduction in its oil sales in March by offering big discounts in the form of free freight, finance and insurance and generous credit terms, the sources said.

Europe's July 1 oil embargo, and U.S. and European financial sanctions against Iran's nuclear program have seen Tehran's oil sales drop to most Western destinations and drawn promises from some Asian buyers that they will cut purchases.

But cheap, covert sales may have curbed or even reversed the reduction in shipments, the sources say.

Discretion is paramount.

Ship captains steering NITC supertankers have switched off recognition systems and customers are keeping business strictly under wraps.

"People are being very secretive right now. They are not talking about this on email, Yahoo or mobile," said the head of a crude oil desk at a top oil trading houses.

A Reuters' survey of the Iranian fleet via the ship tracking system AIS (Automatic Identification System) Live shows only seven of its 25 very large crude carriers are still operating on-board transponders, allowing computers to track vessels.

Only two of NITC's nine smaller Suezmax size tankers now have their tracking systems in operation, shipping sources say.

"NITC oil tankers are going to operate in stealth mode," said a shipping official, who declined to be identified.

Under normal circumstances, tankers would generally not turn off their tracking systems, which were introduced to improve safety at sea and allow marine authorities to locate vessels.

Ships are obliged by international law to have a satellite tracking device on board when travelling at sea. However, a ships' master has the discretion to turn off the device on safety grounds with the permission on the vessel's flag state.

Some tankers turned off their trackers to avoid detection last year during the Libyan civil war in order to trade with the Gaddafi government.

As sanctions make it harder to pay for and ship oil from Iran, it is increasingly difficult to gauge how much is moving out of the country's main terminal at Kharg Island.

Iran's Oil Minister, Rostam Qasemi, has said Tehran's crude exports are steady at last year's rate of 2.2 million barrels per day. But that has been hard to square with tanker tracker data and market intelligence.

Expert opinion is that Iran's visible crude oil sales fell to about 1.9 million bpd in March.

These calculations are backed by some of the best oil industry forecasters in the business including the International Energy Agency and Geneva-based Petrologistics, the respected tanker tracking consultant which monitors global oil shipments.

New estimates for April put Iranian exports down by as much as 500,000 bpd from last year.

The trouble is there is no hard evidence that Iran's oil production has actually fallen or that it is going into storage.

Millions of barrels of Iranian oil that were in storage in Iranian tankers a few weeks ago now seem to have disappeared, ship tracking data shows.

So where is it going? Has it been re-routed, has production been shut in or is the oil being stored somewhere else? Is it all being stored at sea?

"It's the million-dollar question – the billion-dollar question even," a senior executive in Asia at a large oil trading house said.

The hunt is getting more complicated as OPEC's second biggest producer comes up with a range of tactics to avoid scrutiny.

"Some big Asian companies may be taking oil on Iranian ships provided they switch off the transponders," said another European shipping industry source.

A trader in Singapore said Iran has managed to sell all the crude stored on half a dozen vessels floating off Singapore earlier in the year. The buyers were mainly Chinese and South Korean.

Given the lack of visibility of NITC's fleet, it will become increasingly difficult to measure floating storage. Industry sources say parts of the fleet were storing up to 12 million barrels of crude in March. That has now disappeared.

An NITC official, contacted by Reuters, declined to comment. NITC have declined to give press interviews for several weeks.

BIGGER FLEET

Tehran is about to have greater flexibility in disguising the locations for oil sales. NITC will take delivery of the first of 12 new supertankers to be delivered from China in May.

Iran does not have the capacity by itself to ship all of its exports, either chartering more ships or leaving it to importers to hire their own vessels.

It has long been assumed Iran would sell most of the oil shunned by Europe to China, its long-term strategic and commercial ally. But until now there has been scant proof.

India, however, has been buying oil on Iranian ships on extended credit for several months, industry sources say.

"China and India are our lifters of last resort," said an Iranian oil official, who declined to be identified. "And the sanctions are making the situation very good for them."

The senior oil trading executive agreed: "We think China is taking most of the Iranian overhang and is keeping very quiet."

China's imports in April should climb back to contract volumes of around 560,000 bpd after a cut to half that in the first quarter when Chinese refiner Sinopec reduced purchases to negotiate better prices with the National Iranian Oil Company.

If Iran is using its own ships to deliver oil to customers, paying for the freight charges, that would be worth nearly $5 million per voyage. Traders say Iran is sometimes also covering insurance, increasingly difficult to finance on international markets. Insurance runs to millions of dollars per delivery.

Buyers are also demanding, and often getting, much better credit terms from the National Iranian Oil Co (NIOC) than normal – as long as six months to pay for each cargo of 2 million barrels. That could be worth up to $10 million per shipment.

Put it all together and it amounts to as much as 10 percent of the value of each supertanker.

(Additional reporting by Jonathan Saul; Editing by Richard Mably and Giles Elgood)

SOURCE

Posted in: Iran, Oil, Reuters.
Tagged: Iran · Oil

← Royal Dutch Shell is still a client of Hakluyt & Company

A Tale of Two Oil Slicks →

Royal Dutch Shell is still a client of Hakluyt & Company

Apr 13th, 2012

by John Donovan.

By John Donovan

I have received confirmation this afternoon from a reliable source that Shell remains a client of Hakluyt & Company.

Shell's close association with the spy firm, said to be heavily populated by current/former MI6 officers including the former Head of Shell Global Security, Ian Forbes McCredie OBE, stretches back over a decade.

Titled Shell directors were directors and major shareholders in Hakluyt. Sir William Purves was Chairman of Hakluyt & Company Limited. Sir Peter Holmes (now deceased) was President of The Hakluyt Foundation, which supposedly fulfilled an oversight function.

Hakluyt & Company is now a subsidiary of Holdingham Group Limited.

RELATED: Chinese whispers linking Shell with Neil Heywood/Hakluyt

Posted in: Business Principles, GoogleNews, John Donovan, Royal Dutch Shell Plc,Shell Spying.
Tagged: Hakluyt & Company Limited · Royal Dutch Shell Plc

← Chinese whispers linking Shell with Neil Heywood/Hakluyt

Iran ships 'off radar' as Tehran conceals oil sales →