NIGERIA: SEN. NELSON MEETS WITH OIL EXECS

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001263

SIPDIS

SIPDIS

DOE FOR CAROLYN GAY

E.O. 12958: DECL: 06/17/2017
TAGS: ECON ENGR EPET PREL PGOV PTER NI
SUBJECT: NIGERIA: SEN. NELSON MEETS WITH OIL EXECS

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Classified By: Ambassador John Campbell for reasons 1.4 (b & d).


1. (C) SUMMARY. During Senator Nelson's June 1 meeting with
John Chaplin, Managing Director of ExxonMobil in Nigeria (EM)
and Anne Pickard, Regional Executive Vice President for Shell
Exploration and Production in Africa, the executives lamented
that criminal gangs have slowed oil production and recent
state elections worsened the political climate. They
maintained, however, that Nigeria holds major potential in
oil and gas production. Also present was the Ambassador and
EconOff. END SUMMARY.

OIL EXECS SEE PROGRESS
--------------


2. (C) In a June 1 meeting with oil executives, Senator
Nelson asked how the major oil companies see the situation in
the Niger Delta unfolding. EM's Chaplin and Shell's Pickard
agreed that the current period is a "honeymoon of sorts" in
the Niger Delta. (COMMENT: Although 16 hostages were taken
over the weekend, recent attacks were not focused on
destroying oil production infrastructure. END COMMENT)
Chaplin noted that the oil production infrastructure in the
Niger Delta is fragile and that several well-placed rocket
propelled grenades could bring all oil production to a halt.
Both concurred that recent violence has moved from attacking
infrastructure to criminals seeking money for hostages.
Pickard reported that expats are evaluated by kidnappers on
potential-for-payment scale, with hostages from the U.S. or
western Europe garnering the highest ransoms and Russian,
Indian and Asians the least. Pickard said the last amount
she knows that was paid for a hostage was $120,000.

LOCAL ELECTIONS FAIL TO ADDRESS PROBLEMS
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3. (C) Regarding the elections, both concurred that the state
elections were more important and volatile compared to the
presidential election. Chaplin commented that the governors
in the oil-producing states were worse than before and
Pickard particularly singled out the new Delta state
governor, Emmanuel Uduaghan. Chaplin commented that oil
bunkering is a major problem and that the Navy, Army, state
governors and others must be complicit for it to occur
because of its scale and level of sophistication.


4. (C) Pickard opined that the core problem in the Niger
Delta was not lack of resources but fiscal integrity to carry
out development. She said improving primary education or
health care will not be addressed because of the corruption
associated with the current patronage system. Pickard
complained that the only positive actors in the Niger Delta
were major oil companies, and yet 94-95% of the profits go to
the GON. She estimated that if a barrel of oil is selling at
$60, Shell recoups a $1.60 profit in Nigeria, with the
remainder going into GON pockets. Regarding Shell's
production, Pickard stated that 600,000 barrels per day are
shut-in and another 40,000-60,000 are siphoned by oil
bunkerers.

OIL COMPANIES SEEK TRANSPARENCY
--------------


5. (SBU) Pickard reported that Shell and others have
advocated in the National Assembly for bills that established
transparent mechanisms in the federal and state governments.
They have also sought greater transparency of decision-making
in the Niger Delta Development Commission and pushed for
additional government spending for social and economic
development. Chaplin and Pickard encouraged the Senator to
have the U.S. also advocate for more transparency in the
energy sector.

MILITARY NOT AN OPTION
--------------


6. (C) When asked about whether the Nigerian military was a
good option in the Niger Delta to stop the violence, Chaplin
answered that the military was not an option that ExxonMobil
hoped for. He believed that the military would aggravate the
problem by antagonizing local communities. Chaplin said the

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Army is weak, outgunned and outclassed and the Navy is
"amateurish with broken boats and no fuel." He did believe
that a strong coast guard would be a valuable asset, if it
existed.

CHINA, INDIA AND OTHERS OFFERING TEMPTING GIFTS
-------------- --


7. (C) Chaplin and Pickard both lamented the increased
competition from the Chinese, Indians, Koreans and others.
Chaplin said the Chinese and Indians try to sway the GON with
package deals, including railroads, and other infrastructure
projects. In addition, these countries are not afraid to pay
special fees/bribes to conclude deals. In the long run, he
speculated, these special packages will collapse as they have
done in the past. He said the Chinese and Koreans already
have experienced poor relations with local communities
because of their methods.

NIGERIA HOLDS VAST UNTAPPED OIL AND GAS RESOURCES
-------------- --------------


8. (C) In response to Senator Nelson's question regarding the
future of oil and gas production, Pickard said that the
potential in Nigeria and the Gulf of Guinea is huge. She
stated that Shell considers the region the most immature
deepwater area in the world. Chaplin estimated that there is
as much potential as that in the Gulf of Mexico and gas
reserves could be the largest in the world.


9. (U) Senator Nelson cleared this cable.
CAMPBELL