Identifier
Created
Classification
Origin
06LAGOS1030
2006-07-26 17:54:00
CONFIDENTIAL
Consulate Lagos
Cable title:  

SHELL AIMS FOR A YEAR-END PRODUCTION START FOR

Tags:  EPET PGOV ASEC PTER PINR NI 
pdf how-to read a cable
VZCZCXRO2060
RR RUEHDE RUEHPA
DE RUEHOS #1030/01 2071754
ZNY CCCCC ZZH
R 261754Z JUL 06
FM AMCONSUL LAGOS
TO RUEHC/SECSTATE WASHDC 7682
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHHH/OPEC COLLECTIVE
RUEHUJA/AMEMBASSY ABUJA 7631
RUEHLO/AMEMBASSY LONDON 0668
RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC
RUEAHLC/HOMELAND SECURITY CENTER WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEFDIA/DIA WASHINGTON DC
RUFOADA/JAC MOLESWORTH AFB UK
RUEATRS/DEPT OF TREASURY WASHDC
RUEKJCS/SECDEF WASHINGTON DC
C O N F I D E N T I A L SECTION 01 OF 03 LAGOS 001030 

SIPDIS

SIPDIS

STATE PASS DOE FOR DAS GPERSON AND CGAY
STATE PASS TRANSPORTATION FOR MARAD

E.O. 12958: DECL: 07/27/2016
TAGS: EPET PGOV ASEC PTER PINR NI
SUBJECT: SHELL AIMS FOR A YEAR-END PRODUCTION START FOR
FORCADOS, WESTERN DELTA

REF: A. LAGOS 1020


B. LAGOS 1001

C. ABUJA 971

D. LAGOS 430

E. LAGOS 249

Classified By: Consul General Brian L. Browne for Reasons 1.4 (D & E)

---------
Summary
---------

C O N F I D E N T I A L SECTION 01 OF 03 LAGOS 001030

SIPDIS

SIPDIS

STATE PASS DOE FOR DAS GPERSON AND CGAY
STATE PASS TRANSPORTATION FOR MARAD

E.O. 12958: DECL: 07/27/2016
TAGS: EPET PGOV ASEC PTER PINR NI
SUBJECT: SHELL AIMS FOR A YEAR-END PRODUCTION START FOR
FORCADOS, WESTERN DELTA

REF: A. LAGOS 1020


B. LAGOS 1001

C. ABUJA 971

D. LAGOS 430

E. LAGOS 249

Classified By: Consul General Brian L. Browne for Reasons 1.4 (D & E)

--------------
Summary
--------------


1. (C) In a recent meeting with the Consul General, Shell
Exploration and Production Executive Vice-President Ann
Pickard, Shell's ranking executive in Nigeria, said Shell was
negotiating re-entry and new global Memorandums of
Understanding (MOUs) with communities in the Forcados area,
which was shut down by militant activity in February. Shell
hoped to re-start operations and exports from these areas by
the end of the year, but Pickard admitted this was "very
ambitious". Meanwhile, Pickard has launched both a
comprehensive re-organization of the Shell Petroleum
Development Company (SPDC) and Shell's security apparatus.
Among the changes, Pickard wants to make sure that her staff
in Lagos was fed more security information from their people
on the ground in the Delta. Shell security will now report
directly to her staff. Finally, Pickard complained that
different departments within the USG had different
perspectives regarding training and assistance for the
Nigerian military and police in the Delta. Although buffeted
and feeling the heat of incessant Nigerian demands for
military assistance, neither Shell nor other oil companies
could afford to "get out in front of the USG" on these very
delicate assistance issues, she contended.

-------------- --------------
Shell Hopes to Re-Start Western Operations by
End of the Year, but Grants Target is Ambitious
-------------- --------------


2. (SBU) In a recent meeting with the Consul General,
Shell,s Ann Pickard said Shell was moving to re-enter its
western operations region, vacated in the wake of the
February attacks by the Movement for the Emancipation of the

Niger Delta (MEND) (reftels D and E). Shell,s first task
was to conduct environmental assessments, followed by full
technical assessments of damaged facilities. To date, Shell
has conducted limited day trips and unmanned overflights, but
has made no complete estimate of the damage. Shell would
then develop a rehabilitation plan, but joint venture partner
and national oil company Nigerian National Petroleum
Corporation would have to fund its majority stake in
rehabilitating the facilities. Pickard noted Shell hoped to
re-start operations in the west by the end of the year, but
granted this schedule was "very ambitious." Repair of the
Forcados Export Terminal's Crude Loading Platform (CLP) was
key to recouping approximately 500,00 barrel/day of the
Forcados Light blend exports, but other facilities would also
need extensive repair and servicing after sitting idle and
unguarded for months.

-------------- --------------
Anecdotes Suggest Extensive Environmental Damage
-------------- --------------


3. (SBU) Anecdotal evidence from industry personnel
suggests environmental damage from the early 2006 attacks may
well be extensive, as Shell was forced to hurriedly abandon
facilities under violent attack. In conversations with
industry executives who have flown over the Forcados and
nearby rivers, they note huge visible oil slicks. If history
proves any guide, oil bunkerers have likely penetrated
abandoned Shell facilities to tap wellheads and pipelines,
leading to additional environmental damage. Extensive
environmental damage could delay Shell,s plans to re-start
production and complicate relations with local communities.

LAGOS 00001030 002 OF 003




-------------- --------------
Shell Negotiating Re-entry and Global Memorandum of
Understanding with Western Region Communities
-------------- --------------


4. (C) Pickard noted Shell was carefully negotiating with
local communities about restarting its operations around
Forcados. She reported they were close to agreement and had
not heard rumblings from the militants (reftel A). She
observed that Shell was now compelled to re-negotiate
re-entry with "MEND characters". She described these
interlocutors as a small group of ideologues joined in a
marriage of convenience with militant and criminal elements
operating in the creeks. Pickard stated Shell would only
re-enter an area once the local community invited them back,
but communities were hurting economically after
Shell,s abrupt departure and many were eager for its return.



5. (C) Taking a cue from Chevron, Shell was moving to a
"global Memorandum of Understanding (MOU)," negotiating
standardized agreements with communities in increasing
concentric circles around key Shell facilities. In the past,
it executed ad hoc, vastly different agreements with
different communities, depending on the importance of the
community and the avarice or sagacity of its leaders. The
Global MOUs would emphasize a consistent approach and package
of benefits for communities in a region, rather than allowing
one host community significant benefits, to the exclusion of
others. Pickard asserted Shell faced a more difficult task
negotiating agreements than other companies, because of the
sheer breadth of its operations. Where Chevron negotiated
with two major ethnic groups, Shell negotiated with literally
dozens, she added. Nonetheless, Pickard appeared committed
to the new global MOU approach.

-------------- --
SPDC, Shell Security Due for Overhaul;
Shell Security to Report Directly to Pickard
-------------- --


6. (C) Discussing Shell Nigeria's internal operation,
Pickard outlined two serious re-organization efforts. First,
she planned a large-scale re-organization of the Shell
Petroleum Development Company (SPDC),Shell,s flagship
joint-venture company, responsible for most Shell production
in Nigeria. However, SPDC has not been meeting Shell's
international performance benchmarks, and Pickard saw the
deficit as being a fillip for substantial organizational
reform.


7. (C) Pickard also discussed challenges in managing
Shell,s security apparatus. She acknowledged some
frustration in dealing with Shell security staff, saying the
staff on the ground were well-connected, but somehow much of
that valuable informative was not reaching her. Pickard
pointedly said she was re-organizing Shell security for
"performance reasons," placing four well-trusted and
direct-report expatriates in charge, to ensure that pertinent
information gathered on the ground finds its way to her desk.


--------------
All Ijaw Discussions Shadow Obasanjo,s
Public Delta Commission
--------------


8. (C) Pickard briefly discussed President Obasanjo,s
social and economic development commission for the Delta
headed by Chief Albert Horsfall (reftels B and C). She
related Shell Country Chair Basil Omiyi is heavily involved
in this process. She noted after complaints, President
Obasanjo had altered the formal commission to reflect a
majority Ijaw and South-South membership, but there is aso

LAGOS 00001030 003 OF 003


parallel track of shadow discussions with Ijaw leaders. She
added Malcolm Brinded, Shell,s worldwide Executive Director
of Exploration and Production, serves on an advisory council
for President Obasanjo on Delta issues.

--------------
Shell Needs to Talk Over Militants,
Heads Directly to Communities
--------------


9. (C) Pickard explained the need for Shell to talk "over
the militants' heads" directly to Niger Delta communities.
For now, Pickard assessed the militants were successful
because they operated in communities sympathetic to their
cause. If a coalition of oil companies, the GON, state
governments, and development partners could launch a few
successful programs and build credibility, they could begin
to place a wedge between the militants and the people of the
Niger Delta. The coalition could then begin to strip away
the militants' public support and their comfortable operating
environment.

-------------- -
Oil Companies need a Consistent USG Message
on the Delta, Military and Police Assistance
-------------- -


10. (C) Pickard stated the USG did not yet speak with one
voice regarding potential commitment to security assistance
for the GON in the Delta. Pickard explained when Shell
executives attend meetings for the Gulf of Guinea Security
Initiative in London and Washington, they do not hear a
consistent message from USG agencies regarding our
willingness to assist with training and assistance for the
Nigerian military and police. She added assistance from the
Coast Guard would be particularly useful. Absent clearer
political signals from the USG, she noted all oil companies
would remain noncommittal. This was putting them in hot
water with the GON, which is constantly importuning for funds
to improve their military and police capabilities. Pickard
expressed hope the USG and HMG might eventually cooperate on
programs for development of the Nigerian military and police.

--------------
Comment
--------------


11. (C) Pickard knows the company faces a uphill road in
its efforts to restart Forcados and associated operations.
For Shell to succeed, much will have to go right within the
constellation of Niger Delta politicians and militants, and
very little wrong. However, given the volatility of the
militant groups and the increased excitement due to elected
politicians, a betting person would not place his wager on
the Delta being quiescent indefinitely. We would not count
on a permanent return to international oil markets of
Nigeria's missing 500,000 barrels of Forcados Light for some
time to come. Despite Shell's best efforts to negotiate
itself back into the area, this might not be something Shell
can do alone. This could well be dependent on the need for a
deal, even informal, between the GON and the militants. Such
a deal would almost inherently encompass much more than is
within Shell's purview to give.

BROWNE