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February 7th, 2006:

Houston Chronicle: County assails Shell Oil over lawsuit to avoid $2 million in taxes

Feb. 7, 2006, 1:20PM

A county official assailed Shell Oil Co. today for its lawsuit to avoid paying $2 million annually in county taxes on its local inventory.

Commissioners Court voted to allow the county attorney's office to seek to intervene in the suit and try to prevent Shell from being granted the tax relief.
“Shell Oil doesn't think they have to pay taxes,” Commissioner Steve Radack said.
Shell has sued the Harris County Appraisal District, looking to revisit a 1993 agreement requiring it to pay county taxes on oil and other inventory in a foreign trade zone at its Deer Park complex.
In 2004, Shell had as much as $300 million in inventory in the zone. That would have resulted in about $1.5 million in county taxes.
Shell owes about $2 million in taxes last year on the inventory, said County Judge Robert Eckels.
Shell officials have said the company wants to reopen a discussion about the terms of its foreign trade zone pact with the county. Company spokesmen were not available today for immediate reaction to Radack's comments.
The trade zone was created in 1993 after the county sponsored Shell's application for it in exchange for the company's commitment to pay county taxes on inventory within the zone. The county's sponsorship was needed to get federal approval for a zone.
As a matter of policy, the county has protected its tax base by declining to sponsor applications for firms that won't agree to pay county taxes on their inventory.
The agreement with Shell was to stay in place as long as the county did not let competing oil firms avoid paying taxes on inventory in foreign trade zones created after Shell's pact, Harris County Appraisal District Chief Appraiser Jim Robinson has said.
Shell argues that a competitor is not paying county taxes on its foreign trade zone inventory.
[email protected] read more

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7th February 2006
James Ross, Senior Legal Adviser
Human Rights Watch HQ
350 Fifth Avenue, 34th floor
New York, NY 10118-3299 USA
Tel: 1-(212) 290-4700, Fax: 1-(212) 736-1300
Dear Mr Ross
I note that your organizations focus is understandably directed mainly towards evil regimes that resort to repression and torture.
It is a fact of life in the 21st century that some multinational companies are as wealthy, powerful and influential as many Countries. Although I know of none that resort to physical torture, I would like to draw your attention to a multinational which is using tactics against a former employee, Dr John Huong, which are so reprehensible that in my humble opinion, they amount to psychological torture.
Dr Huong, a Malaysian national, was an employee of Royal Dutch Shell for 29 years. He is a deeply religious man of the very highest integrity. He is also a humanitarian. For example, in 2003 Dr Huong offered his professional services as a geologist free of payment or compensation, to help in an Iraqi water irrigation project. I have evidence of the relevant email correspondence.
Strangely, his moral convictions actually brought about his downfall at Shell.
Shell supposedly operates within the ethical framework of a STATEMENT OF GENERAL BUSINESS PRINCIPLES (SGBP) pledging honesty, integrity, openness, fairness and respect for people, including its employees, in all of its dealings. These are the standards, values and principles by which Shell has stated that it should be judged.
Dr Huong was proud to work for a multinational which boasted such noble ideals. He believed the stirring rhetoric used by Shell senior management in speeches in which they solemnly promised to uphold the Groups ethical code. He was also impressed by the related fine words and pledges in printed materials circulated to Shell stakeholders.
Reference to the SGBP was even included by Shell in Form 20F Declarations (signed by senior Shell executives) which were submitted to the US Securities & Exchange Commission in respect of Shell’s hydrocarbon reserves position. Shell emphasised to the SEC the reliance that could be placed on the SGBP for “internal controls” and “risk management”.
The purpose of the SGBP was to impress and inspire confidence in the ethical and moral fibre of Shell management.
However, Dr Huong discovered in 1997 and the immediately following years that the SGBP are in fact empty promises – propaganda for use in the circumstances described above and in global advertising campaigns such as “Profits and Principles” or “the triple bottom-line”. The SGBP amounted to nothing more than a confidence trick to encourage the public and financial institutions into investing in Shell.
The years in which Sir Mark Moody-Stuart was Group Chairman of the Royal Dutch Shell Group was a traumatic period for Shell. The Group had hoped to emulate Enron’s success at that time. Mr Paddy Briggs, a Shell veteran of 37 years standing in Shell Marketing and Corporate Communications, has said that Shell adopted “Quasi-ideological values” in response to the then monumental challenges as reflected in the financial performance of Shell.
The Shareholder’s return was so poor that Sir Mark Moody Stuart was reported in the Electronic Telegraph in the following terms: “I'll quit if Shell revamp fails, says chairman after $4bn hit” on Friday, 12th February 1999”. The admission that he had put his job on the line came after massive fourth-quarter post-tax provisions of almost $4.4 billion (£2.7 billion) to cover huge write-offs which had almost wiped out the previous year's profits. Full-year net profits ended at just $350m compared with $7.7 billion following a fourth-quarter loss of $3.7 billion against net income of $1.6 billion in the corresponding period in 1997.” In other words Shell was making huge losses rather than the recent record breaking profits.
That set the scene for what has been described as the biggest investor fraud in history. Under the management of Sir Mark, Shell appointed “value creation teams” who lived up to their description by conjuring up hydrocarbon reserve volumes which did not exist.
In January 2004 news broke of what was initially described as a scandal and then, as more facts emerged, a full blown fraud. Basically the most senior directors of the Royal Dutch Shell Group engaged in a massive fraud to deceive the public and investors about the volume of Shell’s reserves. Emails proved that the seeds were sown in 1997. Internal emails exposed the lies, dishonesty and cover-up mentality at the highest levels of Shell management.
In other words, while Shell’s most senior “fat cat” directors were proclaiming their total commitment to high ethical standards, they were simultaneously cooking the books “to fool the market” by use of outright deception. (Money Telegraph 7th April 2003: “Shell strikes back at 'fat cat' criticism”)
Shell has already paid hundreds of millions of dollars in fines to regulatory bodies such as the US Securities and Exchange Commission and settlements of related class action lawsuits. Other lawsuits are still in progress, as is an investigation by the US Justice Department against individual current and former Shell directors.
Dr Huong was, as far as I am aware, the first Shell employee to blow the whistle internally at Shell (in 1997) about the deliberate fabrication of hydrocarbon reserves. This was at a time when he was Shell’s production geologist for the Kinabalu oil field. I have copies of Shell internal documents which prove that Dr Huong put on record his conscience driven concern that Shell shareholders were deliberately being misled by fabricated figures. He also recorded for posterity in other Shell internal documents, serious breaches of health and safety issues which put employee lives at risk.
His objections to bending his principles by turning a blind eye to wrongdoing proved to be the turning point in Dr Huong’s previously highly successful career with Shell. He was humiliated, victimised, put under intolerable pressure which made him ill and was ultimately sacked, thereby further aggravating stress brought about by Shells actions against him. Prior to the wrongful dismissal, the domestic inquiry heard that his medical record in the care of the company doctor could not even be found. The records had mysteriously disappeared, just like Shell hydrocarbon reserves.
In June 2004 Shell obtained a High Court Injunction and a Restraining Order against Dr Huong in respect of articles posted by me under his name on my website (then known as
Shell lawyers knew that the website was owned by me but pretended in the court documents that the postings were made by Dr Huong on a website known as “Shell Whistleblower No2”. In fact no such site has ever existed. It was a physical impossibility for Dr Huong to post anything directly on my original site which is not a blog site and therefore has no such facility. Furthermore, Shell has been aware for the past 18 months that I jointly co-authored the articles. I amended, edited and added to the content. My son John assisted me in this task.
So there were in fact three people involved. Dr Huong supplied rough drafts in correspondence and my son and I then developed commentaries to include the drafts provided by Dr Huong into news worthy articles and physically posted/published them on my site, which is hosted in North America and registered in New York. Shell has been aware of the true facts since July 2004 but has chosen to vent its fury solely on Dr Huong.
By way of background information concerning our role in these matters, my son and I have been involved in disputes with Shell since 1994. We have successfully sued them in the High Court several times for breach of confidence and breach of contract and twice for libel. We have never lost a case against Shell, despite its admitted use of undercover agents which Shell lawyers used to try to intimidate us. Shell’s actions, including the undercover activity, did however completely undermine the last High Court action. We accepted under duress a compromise settlement in which Shell paid my sons legal costs. He also received a secret payment, completely at variance with the “stalemate” scenario announced in a so called “joint press release”, actually released solely by Shell. It was not the proper settlement to which he was entitled.
In May 2005 Shell issued proceedings against me via The World Intellectual Property Organisation in respect of Shell related domain names including the dotcom name for their $223 billion dollar unified company: ROYAL DUTCH SHELL PLC. Shell management made a monumental blunder (one of many) in neglecting to register the domain name. I won the case with a unanimous verdict in my favour.
With regards to the subject of libel, Shell issued a press release a decade ago accusing my son and I of trying to goad them into issuing libel proceedings against us. As Shell is aware, we have a volume of documents in our possession which provide irrefutable evidence of Shell management misdeeds, including its deeply ingrained culture of cover-up and deceit. This is perhaps the explanation for Shell’s reticence to launch libel proceedings directly against us.
Shell management evidently views Dr Huong as a soft target and took draconian action against him rather than face us once more in the libel courts. The litigation involving Dr Huong has dragged on since June 2004 because Shell has insisted in pursuing its case against him in the High Court of Malaya in Kuala Lumpur which is located some 1300 kilometres from where Dr Huong lives, in Miri, near the High Court of Borneo and the Shell offices where he worked for so many years. That also seems to be an attempt to deny him a level playing field.
Dr Huong has been unemployed throughout this period and has no realistic prospects whatsoever of finding a position as a geologist while the litigation cloud hangs over his head. Hence he is short of funds (to put it mildly) and it is outrageous that a multinational which has in the last few days reported profits of $23 BILLION USD is using its massive financial advantage to further tilt the scales of justice against him.
Given his financial circumstances there is no way that Dr Huong can afford to travel and stay in Kuala Lumpur. Shell is aware of this but is cold-bloodedly using its massive financial muscle against a financially weaker opponent.
Naturally Dr Huong is depressed and distressed at the ruthless way he is being treated after being a hardworking employee for almost three decades. Unlike the directors currently still at the helm of Shell, he is not implicated or tainted by the reserves fraud. Indeed, if he had been listened to, the fraud would probably not have happened.
I enclose some information relevant to this extraordinary matter and hope that Human Rights Watch will be prepared to consider his case.
In this connection I would be grateful if you would use the links below to read up to date information about these matters.
FIRST LINK: An email sent by Dr Huong to the Chief Ethics & Compliance Officer of Shell on 2nd February 2006 Original news stories/royal_dutch_shell_group-shell-news-net-email-to-jyoti-munsiff-2-february-2006.htm
SECOND LINK: A draft Affidavit which my son and I helped Dr Huong to prepare for possible use in his defence at some point. Neither he nor his lawyers have approved the draft but it does accurately set out the background facts, certainly in relation to the matters in which we have been personally involved. I appreciate that you must be busy man but I would be grateful if you would glance through the draft. I promise you that it reveals a truly extraordinary situation. If and when his lawyers review the draft I am sure that it will be shortened considerably. I believe the full version has merit in terms of revealing the overall background situation. Original news stories/royal-dutch-shell-group-draft-affidavit-of-dr-john-huong-7-febuary-2006.htm
You will see from the draft Affidavit that Dr Huong is not the only Malaysian former employee of Shell who is being treated with utter contempt by Shell. They are other cases against Shell. A Judge has already decided a case brought by a group of 399 former Shell employees known as “Team A”. He ruled that Shell made unlawful deductions in breach of the Employees Provident Fund Act 1951 and 1991. The case has dragged on for years and Shell is currently appealing the decision. In the meantime, members of the group are elderly, sick, and dying.
THIRD LINK: Information about the Team A claim.
Viewed against the backdrop of the profits reported last week, Shell’s conduct against its Malaysian employees is obscene. It is also completely at odds with its decidedly more favourable treatment of its employees in Europe and the USA.
Shell management is famed for its arrogance. It seems to think that the Shell Group is so powerful that deceit, intimidation and huge cash flows will allow it to get away with tyrannical behaviour against ordinary individuals, be it Dr Huong, or the “Rossport Five” – the Irishman recently imprisoned for three months at Shell’s behest for campaigning against Shell’s plans to force a local population in County Mayo, Ireland, to accept the laying of an unsafe pipeline across their lands.
Apparently Shell is also completely unconcerned at the unseemly spectacle of a group of EIGHT giant companies collectively suing one unemployed Malaysian for telling the truth. Their lawyers have even threatened Dr Huong with imprisonment.
I hope that your organisation will be able to persuade Shell that such conduct is unbecoming and unacceptable.
Finally, I want to make it clear for the record that I have written to you without the authority of Dr Huong. I have also simultaneously published his draft Affidavit so as to put the entire content into the public domain. I have not obtained permission from Dr Huong in either instance. Dr Huong would naturally have to give a negative response out of fear of reprisals by Shell against himself or his family. However, if you are able to take up the case, I will happily put you into direct contact with him.
Yours sincerely,
Alfred Donovan
Alfred Donovan
Royal Dutch Shell Plc .com
847a Second Avenue, New York City
New York 10017
Email: [email protected]
Telephone: 1 (646) 502-8756
Fax: 1 (646) 349-2605 read more

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment. Shell to Hire 1,000 in India for Research

The Associated Press
Tuesday, February 7, 2006; 9:24 AM
BANGALORE, India — Royal Dutch Shell plc said Tuesday it will hire 1,000 new employees this year and open a technology research center in Bangalore.
The new center _ which follows Shell's two centers in The Netherlands and one in the United States _ would provide technical studies and services related to oil exploration, refining and chemical operations, Shell's Indian head Vikram Singh Mehta said in a statement.
It will open in the second half of 2006, he said adding that Shell also plans to build its own campus in Bangalore by 2009.
Shell, incorporated in the United Kingdom and headquartered in Amsterdam, has already invested $1 billion in India.
India is the world leader in offshore outsourcing software development, technical research, engineering design and back-office operations. It is expected to earn more than $22 billion from such services in the fiscal year ending March.
Bangalore is India's technology hub, accounting for a third of its outsourcing revenues.
On the Net:
Royal Dutch Shell: read more

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

THE WALL STREET JOURNAL: BP's Profit Jumps 22% Despite Output Shortfalls

February 7, 2006 3:51 a.m.
LONDON — BP PLC said the sky-high energy prices and robust refining margins that have buoyed the rest of the oil industry sent fourth-quarter earnings up by 22%, more than making up for poor operational performance at the company's refining and marketing businesses.
BP, the world's second largest publicly traded oil company by market capitalization behind Exxon Mobil Corp., said higher oil and gas prices lifted profitability in its core exploration and production businesses, despite production shortfalls related to the hurricanes last year in the Gulf of Mexico. BP and its peers suffered considerable damage to production platforms and distribution networks as a result of the storms.
The storms also knocked out significant refining capacity in the Gulf Coast, and BP has been hobbled in particular by the delayed re-start of its Texas City refinery. The plant was the site of an explosion last March that killed 15. BP shut down the plant ahead of Hurricane Rita several months later, but has also used the down time to focus on safety issues at the plant.
BP said Tuesday it planned to restart production sometime in the first quarter of this year. BP had warned of significant lost profit because of the plant's shutdown, and said Tuesday that “opportunity” losses related to troubles at Texas City was some $1.8 billion for all of 2005.
BP said net income for the quarter ended Dec. 31 was $3.69 billion, or 17.68 cents a share, up from $3.01 billion, or 13.75 cents a share, a year earlier. BP's revenue rose 22% to $65.9 billion from $54.06 billion. BP's numbers conform to international financial-reporting standards, which differ from U.S. generally accepted accounting principles.
The quarterly results reflected a net charge for special, non-operational items of $553 million, including the mark-down of certain contracts related to new international accounting standards. That compares to a $1.26 billion charge a year ago.
The company's core exploration and production unit posted pre-tax profit some 38% higher than the year earlier, stripping out the change in the value of inventories, despite suffering production disruptions following hurricanes last year in the Gulf of Mexico.
BP said total oil and gas production was down almost 2% in the quarter at 4.02 million barrels of oil equivalent a day from 4.095 million a day a year earlier.
The company said its closely watched reserve-replacement ratio – the rate at which a company finds new reserves of oil and gas to replace the energy it pumps out of the ground each year – was 95% using U.S. Securities and Exchange Commission guidance. Using British accounting guidelines, BP's reserve replacement rate was 100%. Companies typically try to achieve at least 100% reserve replacement to satisfied investors worried about future production growth.
Write to Chip Cummins at [email protected] read more

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

THE WALL STREET JOURNAL: Revenue Sharing Can Aid Our Energy Independence

February 6, 2006; Page A19
In regard to “Presidential Energy” by Ronald Bailey, editorial page, Feb. 2:
For almost 30 years I served in Congress and worked on the issue of offshore oil and gas revenue sharing. There, I saw firsthand the connection with the activities in my state of Louisiana and the ability to provide for a secure domestic energy supply. Little changed over those 30 years with the exception of a less reliable energy marketplace in the world, more dependency on foreign imports, and a less stable infrastructure in Louisiana to protect the production and delivery of our oil and gas supply.
Last week we heard the president's call for alternative energy sources. While we would all agree with him that alternative energy sources are a positive step, we should know that part of the path to achieving energy independence is also shoring up our domestic oil and gas supplies. Just last week, as Shell Oil Co. reopened its New Orleans headquarters in the wake of Hurricanes Katrina and Rita, it announced its support for sharing revenues from offshore production — revenues are to be re-directed to all coastal states, and it's expected others in the industry will join this important cause.
The U.S. Commission on Oceans has concluded that sharing revenues with producing states is a sound business solution for the nation. This is an unbiased, nonpartisan recommendation that all political leaders should follow.
Let's take up the president's challenge, but at the same time remember those states willing to shoulder the responsibility for keeping our nation moving until such time as we have alternative energy supplies.
John Breaux
Former U.S. Senator
State of Louisiana
New Orleans read more

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

Dow Jones Newswires: BP Sees Replenished Reserves 100% On UK Reporting Basis

02-07-06 02:34 AM EST
Edited Press Release
LONDON -(Dow Jones)- BP said Tuesday that it had replenished reserves by 100% on a U.K. reporting basis and 95% under SEC rules which take account of year-end prices, giving it a proven reserve base of over 18bn barrels of oil and gas equivalent at end-2005.
Chief executive, Lord Browne, said that on top of proven reserves, BP also added nearly 2bn new barrels to its non-proven resource base last year, taking it to a total of 41bn barrels, of which the company expects to convert some 11bn barrels into proven reserves by 2010.
Previewing a strategy update to the financial community, Browne said BP had increased oil and gas production by an average of 4.4% a year since 2000 – the fastest growth rate of the supermajors.
Assuming a $40 oil price, output for this year is expected to be between 4.1 million and 4.2 million barrels a day, Browne said.
With more than 20 new projects due on stream in the next three years, and assuming the same level of oil price, the annual rate of increase should continue at some 4% through to 2010, he said.
“Based on our proven track record, we should add an extra 10bn barrels to our resource base from our existing exploration portfolio. It is the quality and magnitude of this resource that underpins our expectation of continued strong growth in output beyond 2010.”
Dividends and share buybacks combined totalled some $19bn for 2005 and Browne said BP's dividend policy remained unchanged, as did its target to return to shareholders all free cash flows in excess of investment and dividend needs.
“Between 2003 and 2005 we distributed a total of $40bn to our shareholders, some $19bn in dividends and $21bn in share buybacks”, Browne said.
“Our estimates, looking forward, have to be based on assumptions about the oil price, refining margins and so on. But under the same set of conditions as we actually experienced between 2003 and 2005, with the Brent oil price at about $ 41 a barrel, the amount of expected future cash distribution between 2006 and 2008 would be about $50bn. At an oil price of $60 a barrel, this could rise to around $65bn”, he said.
Browne said that for the past five years BP had reinvested at a proportionally higher level than its peers. From 2003 to 2005, the reinvestment rate was 65% of operating cash flow, compared with 54% on average for the peer group.
Expected capital spend for this year is some $15bn, rising to some $16bn in 2008. The upstream business expects to invest around $11bn in 2006, versus $10bn last year. TNK-BP capex is expected to rise from $1.8bn to $2.5bn.
A planned doubling of refinery investment to $1.5bn a year for the next three years would improve margins, operating flexibility and the reliability of plant.
The Texas City refinery is scheduled to re-start production this quarter after a four-month shutdown, Brown said.
The adverse impact of the closure is estimated at between $600 million and $ 800 million for the first quarter of this year, depending on the actual start-up date and prevailing margins, but this will diminish through the year as output rebuilds.
Elsewhere in the downstream business new cost-efficiency programmes, including a 10% reduction in unit cash costs in marketing, are aimed at delivering savings of some $500 million by 2008.
The group's end-year gearing stood at the unusually low level of 17% as a result of the $8.5bn proceeds from the sale of Innovene but would return to the target range of between 20 and 30%.
Browne said he envisaged divestments of around $3bn a year on an ongoing basis as BP continued to upgrade its portfolio.
He said he expected the world economy to grow at around 3% in 2006, the same rate as last year, with global oil demand remaining robust.
“OPEC's market share is likely to remain largely intact along with its ability to deliver its price objectives. The vulnerability to a significant supply disruption is also expected to remain high”, Browne said.
He said: “We have considerable momentum going forward and our strong incumbent resource and asset base underpins our distinctive growth prospects. Our focus is on translating this strong environment and growth into delivery of cash which we intend to return to our shareholders.”
(END) Dow Jones Newswires read more

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

Daily Telegraph: It's gush hour for the oil companies

Today, BP announces another set of enormous profits. Happily for the oil giant, rival Shell's record £12.9 billion take last week is bound to overshadow BP's fortunes, as the Oscars did the Baftas before they switched dates.
In the past, BP has announced first – so what has changed? We haven't, swears BP.
Nor have we, says Shell.
If you say so.

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

The Guardian: Toxic legacy poses a giant problem

Officials ponder what to do with huge quantity of contaminated water
Ian Sample, science correspondent
Tuesday February 7, 2006
In a corner of Maple Cross sewage treatment works near Rickmansworth in Hertfordshire lies a 12m-litre problem that fails to go away. It is the forgotten legacy of the inferno at Buncefield oil depot in December – six giant settlement tanks full of spent firefighting foam, black water and a long list of toxic contamination.
It took 500 tankers five weeks to bring here the dirty mixture, known to environmental officers as “firewater”. During the 60-hour battle to contain the blaze, the foam and water used by 650 firefighters collected behind a protective bund, a wall designed to contain the spill if an oil tank on site ruptured its contents. For now, the firewater is safe, held in 20 metre-deep concrete tanks beyond the cesspools and pipes that criss-cross the 50-acre site.
“During the firefight we knew we needed to get it off site, because the bund was filling up like a bath with the taps full on,” said Colin Chiverton, who heads the team dealing with the foam for the Environment Agency. “But what to do with it next is uncharted territory.”
When the first tankers arrived at Maple Cross little was known about the firewater's toxicity. The blaze was so large that 16 forces from around the country were brought in to tackle it, bringing what foam they could lay their hands on. Scientists puzzling over what to do knew they were dealing with a host of toxic chemicals used to make the specialised oil fire foams. But also lurking in the liquid was a host of toxic substances released by the fire itself.
Scientists at the Environment Agency and Thames Water, which owns Maple Cross, sent samples of the firewater to labs in Cardiff, Leeds and Hampshire to look for more than 40 contaminants they feared might be there. Many tested positive. “We know enough to say we cannot allow this to get into the environment, either the ground or the water,” said Mr Chiverton.
Officials are most concerned about a toxic substance called PFOS or perfluorooctane sulphonate, a chemical used in some firefighting foams that does not break down in the environment. Instead, it accumulates in organisms and works its way up the food chain, where it can become a serious problem. Following an Environment Agency report on PFOS, the Department for Environment, Food and Rural Affairs (Defra) moved to phase it out, but so much foam was needed at Buncefield that fire brigades were forced to bring their old PFOS-containing stocks as well. The lab tests revealed other toxic substances too, including zinc, which is toxic to aquatic animals, and Pahs or polyaromatic hydrocarbons. Another substance, MTBE, was also picked up. Before the lab tests were complete it was clear that disposing of the firewater was going to be fraught with difficulty. Government officials were initially keen to see if it could be made safe by running it through the sewage treatment works, but the plan was quickly ruled out.
“If we try and pump it from the settlement tanks into the treatment works it will immediately foam up like bubble bath. Our pumps like pumping liquids and if they try to pump foam, they will destroy themselves,” said Dave Wiltshire of Thames Water. The problem became apparent when tankers arrived from Buncefield: as they released firewater into the tanks they brimmed with a head of foam one metre high.
Simply adding an antifoaming agent to flatten the froth is a non-starter. Antifoaming chemicals are made from oils, the one substance the foam is specifically designed to be resilient to. The lab results showed that even if the firewater could be safely pumped into the sewage treatment process, doing so could be catastrophic. The problem lies with what is called the chemical oxygen demand of the firewater – the amount of oxygen a substance consumes as it breaks down. Tests showed that the firewater was so full of organic chemicals that it would suck up nearly 500 times as much oxygen as the normal household effluent the treatment works is designed to handle. The vast tanks of bacteria used to digest waste into harmless byproducts would quickly suffocate and die through lack of oxygen.
“If the beds of bacteria go and die on us, we won't have a working treatment facility and that would be a major problem. We deal with waste from hundreds of thousands of homes from Hemel Hempstead to Watford and St Albans,” said Mr Wiltshire. “If you released this into a river, it would use up so much oxygen, it would knock it out. Nothing could cope with a shock like that, not even our treatment works.”
The biggest problem remains the PFOS. The huge tanks of bacteria at Maple Cross cannot break it down, so passing it through the treatment works will not remove it from the firewater. Since the treated sewage from Maple Cross runs into the River Colne, a tributary of the Thames which several water companies extract from downstream, it is a risk neither the Environment Agency or Thames Water will take.
Efforts are concentrating on ways of either extracting the PFOS from the firewater, or finding a more radical solution. One surefire way of disposing of PFOS is high temperature incineration, available at two sites in Britain, Ellesmere Port in Cheshire and Fawley in Hampshire. “The only problem is that water doesn't incinerate very well,” said Nick Cartwright of the Environment Agency.
For now, it is up to specialised consultants brought in by the oil companies based at Buncefield to work out what to do. The firms – Texaco, Total, Shell and BP – will foot the bill for disposing of the firewater, which is expected to run into many millions. “It's a case of polluter pays,” said Andy de Bell, another team member with Thames Water.
With luck, the consultants will come up with plans to deal with the Buncefield foam in the next few weeks, after which the combined forces of the Environment Agency, Thames Water, Defra, the Food Standards Agency, the Drinking Water Inspectorate and the Health and Safety Executive will be asked to agree on a way forward. It is likely the foam will be sat at Maple Cross for some time. “If there was a magic solution tomorrow, it would take around five weeks to tanker it off site, but in reality, we're probably looking at a few months before this is solved,” said Mr Wiltshire.
“We've done the difficult bit. We've got it here, we've contained it and it's not going anywhere until we're sure what the best option is. We're certainly not going to come this far and do something stupid with it now.”
PFOS Perfluorooctane sulphonate was used in older firefighting foams and is particularly effective against oil fires. It makes the foam spread out into a thin layer on top of the burning oil, smothering the flames. An Environment Agency risk assessment in 2004 recommended PFOS be phased out because of its toxicity. If released into watercourses it builds up in fish and organisms that feed on them. In 2001 3M, the major manufacturer of PFOs, voluntarily stopped production of the chemical.
Pahs Polyaromatic hydrocarbons. They are byproducts of the burning process and are also found in cigarette smoke and vehicle exhaust fumes. Many contain the toxic chemical benzene and most are carcinogenic to humans.
MTBE Methyl tertiary butyl ether is added to unleaded fuel to make it burn more efficiently and cut down on noxious emissions. It dissolves easily in water, so spillages can rapidly get into groundwater or watercourses. Very little is known about ingesting MTBE, but animals have developed cancers after inhaling large quantities. It makes water taste and smell awful at very low levels: at 20-40 parts per billion, contaminated water tastes similar to turpentine. read more

This website and sisters,,,, and, are owned by John Donovan. There is also a Wikipedia segment.

Lloyds List: Attacks a threat to Gulf of Guinea installations

Incidents of piracy in the region tend to be connected to the illegal trade in oil, writes Helen Symonds
Feb 07, 2006
A MAJOR armed attack on a supply ship in Nigerian waters in January has highlighted the continuing threat to vessels and installations in the Gulf of Guinea.
Incidences of marine piracy in the region in the last year have centred primarily on Nigeria: attacks in Nigeria's territorial waters are focused on the Niger Delta and are connected to the illegal trade in oil.
Incidences of piracy have capitalised on the nation's political unrest and have more recently been masterminded in order to draw attention to political and ethnic causes. The effective deployment of the Nigerian Navy is becoming key to marine security in the wider Gulf of Guinea.
While focusing on the overall reduction in incidences of piracy including in Nigeria, a recently published International Maritime Bureau piracy report highlighted the concurrent increase in hostage-taking.
This is true of Nigeria: during the most recent piracy incident on January 11, rebels from the Movement for the Emancipation of the Nile Delta, boarded the Sea Eagle, a supply ship operating 8 miles southwest of the Dodo river, off the Shell EA field. Forty persons armed with guns in three canoes boarded the vessel, proceeding to vandalise the ship's equipment and kidnapping four foreign personnel. The gang failed to demand a ransom, instead calling for the release of two Ijaw leaders. The hostages were released 19 days later.
If Nigeria descends into further political unrest, attacks against foreign oil companies like the recent attack against Agip facilities in Port Harcourt will increase and may be manifested as marine piracy. In Somalia, it is clear that there is a direct connection between the political stability and rates of marine piracy: the anarchy onshore is mirrored by a state of lawlessness surrounding the Somali coast.
Incidences of piracy in Nigerian waters have also become more violent, notably at the Escravos anchorage in September where two crew members of the Oragreen were shot, mirroring a similarly violent incident at the same location, again involving firearms, a year earlier.
Operation Igbochi a Nigerian naval security operation was launched in December specifically targeting marine crime and potential terrorism in the Niger Delta region and the Gulf of Guinea and is the first operation of this type for 10 years.
To date, more than 500 naval personnel have been deployed to the area in a display of capability. Chief of naval staff, vice-admiral Ganiyu Adekeye has expressed the need for constant patrols, insisting that the nation's multi-billion dollar Bonga project must not be left unprotected.
This latest campaign follows similar unsuccessful initiatives instigated by Adekeye in 2003, which focused on state and federal co-operation in updating facilities and co-ordinating security. It is unclear whether the latest plans to develop a response team focusing on the Port Harcourt area will be effective in impacting on the 450 nautical mile area that makes up the Eastern Naval Command area of operation.
While priority has been placed on the Bonga oil field and eastern coastline around Port Harcourt and Onne, the most successful incidences of piracy, numbering around eight in the past year, have involved containerships anchored in Lagos.
The October attack on a bulk carrier anchored at Lagos by 10 robbers armed with knives typifies attacks of this type during which the ship's stores were stolen. Although the effects of attacks on the oil industry are most widely publicised, the increase in marine piracy has also had a significant impact on the fishing industry, disrupting the operation of trawlers.
MIG's Piracy Threat Assessment is a tool designed to assist its clients in the marine and insurance industries in understanding the risks posed to their shipping'marine operations.
It is one of a variety of bespoke services that MIG provides to facilitate the identification, understanding and minimisation of risk exposure across a number of industries world-wide.
Helen Symonds is an analyst at The Merchant International Group Ltd, specialists in strategic research and corporate intelligence. Contact: +44 (0)20 7259 5060, email: [email protected], web: read more

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Canberra Times – Australasia: Bush edict on US oil addiction runs on emptily

Feb 07, 2006
AMERICA is addicted to oil, which is often imported from unstable parts of the world,'' President George W.Bush said in his State of the Union speech last week.
And his solution? He's going to cut United States oil imports from the Middle East by 75 per cent, and replace the missing oil with ethanol made from fermented plant waste. He said that if ''being dependent upon oil is a problem for the long term, why don't we figure out how to drive our cars using a different type of fuel?'' Not a word from Bush about attacking the demand side of the equation by burning less oil (although after the 1973-74 oil embargo the US managed to cut its oil consumption by almost 30 per cent strictly by energy conservation).
Not a word about the consequences for climate change of burning so much oil, or about the implications of soaring oil demand in the emerging Asian giants, China and India, for prices and supply.
Just a promise to cut US oil imports from the Middle East by three-quarters by 2025.
As so often with Bush, it's hard to tell whether he is trying to fool us, or is just fooling himself.
Sixty per cent of the oil that the US consumes is imported (up from 53 per cent when Bush came into office).
Last year, less than one-fifth of that imported oil came from the Middle East, so achieving Bush's stated goal would only bring the share of imported oil in US consumption back to the level of 2001.
And much of it would still come from ''unstable parts of the world''. Actually, Bush is being unfair to the Middle East, which is the most stable part of the planet in terms of the longevity of its regimes.
Perhaps he is afraid that his vaunted democratic revolutions will actually come to pass, for free elections almost anywhere in the region would produce governments much more hostile to the US presence than the current regimes. (For example, see Hamas's recent victory in the Palestinian occupied territories.) But he is also barking up the wrong tree: the real vulnerabilities of the US lie elsewhere.
The three largest sources of US oil imports are Canada, Venezuela and Nigeria.
Canada is stable, but Venezuela is definitely not, mainly because the US keeps trying to destabilise it.
The Bush administration loathes President Hugo Chavez for his socialism and his closeness to Cuba's leader Fidel Castro, and has already been implicated in one attempted coup against him in 2002.
If there were to be another attempt, and Chavez suspected US involvement, an embargo on Venezuelan oil exports to the US would be pretty much a certainty.
As for Nigeria: ''It must be clear that the Nigerian Government cannot protect your workers or assets,'' the Movement for the Emancipation of the Niger Delta or MEND said in an email last month to oil companies working in the region. ''Leave our land while you can, or die in it. Our aim is to totally destroy the capacity of the Nigerian Government to export oil.'' Since mid-December: two major pipelines have been blown up in the Niger Delta, home to all of Nigeria's oil; nine people were killed in an attack on the Italian oil company Agip; four foreigners were kidnapped from an offshore rig (and later released, presumably on payment of a large ransom); and at least 17 people died in a motorboat raid on a Shell flow station in the swamps around Warri, the major port city in south-western Nigeria.
MEND is the latest expression of the seething dissatisfaction of the region's 20million people with the fact that all the oil has brought them little prosperity.
In fact, all of Nigeria's 129million people have a legitimate grievance, for most of the $US350billion that the country has earned from oil exports in the past 50 years has been stolen by a narrow politico-military elite, but only the people of the Delta live amid the pollution that the oil causes, and only they can take direct action. Moreover, the protest groups and the guerrillas are often tangled up with the criminal gangs who siphon off oil from the pipelines (or ''bunkering'', as it is known).
The major foreign oil companies operating in the Delta (Royal Dutch Shell, Chevron, ENI and Exxon) have long turned a blind eye to the bunkering in return for being left alone to get on with their operations, and the gangs restricted their stealing to about 10 per cent of Nigeria's oil. But with the passage of time they have got richer, more heavily armed, and greedier.
The Nigerian Government seems helpless to do anything about the security situation in the Delta (as it is about most things).
The double threat of political guerrillas and criminal gangs has got so severe that Stakeholder Democracy Network, an anti- corruption group active in the area, suggested in a report last month that ''Shell and [other] foreign oil operators may have to go offshore altogether by 2008 as security and public order deteriorate.'' And who would then buy the onshore oil facilities, assuming that MEND had not destroyed them? Probably China, which is willing to accept higher levels of risk than strictly commercial companies so it can have secure long-term oil supplies.

If Bush insists on treating oil as a supply rather than a demand problem, he should at least find the right trees to bark up. read more

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Lloyds List: Windfarms next target for alternative energy arm

Feb 07, 2006
ROYAL Dutch Shell is building a renewable and alternative energy division with investments in biofuels, wind, solar and hydrogen plants, writes Martyn Wingrove.
The Anglo-Dutch oil major has already invested $1bn in developing alternative energies and has become the leading marketer of biofuels.
Its next moves will be in offshore windfarms, where it has several projects ready to move forward and it is also developing new solar technology to take advantage of new markets.
Shell's moves are not new, but its focus has been magnified by the latest drive in the US for developing alternative energies and by the initiatives of its main rival BP.
'We aim to develop at least one alternative energy such as wind, hydrogen of advanced solar technology into a substantial business,' said chief executive Jeroen van der Veer.
'In addition, we continue our efforts to further expand our position as the largest marketer of biofuels, consistent with our long term vision.'
Shell already is a producer of 350 megawatts of electric power from wind farms in the US and Europe so it is about to make a splash in the Asian market.
Last week, it signed a memorandum of understanding with Shenhua Group's subsidiary Guohua Energy to invest in Chinese wind energy projects.
Shell expects to be producing 500 MW by 2007 with new projects, including the Netherlands' first offshore windfarm at Egmond aan Zee, where it has a 50% stake.
Full construction of this 108 MW capacity development will begin in March and Shell expects first power generation by the end of this year.
Shell also has a third stake in one of the world's largest wind farm developments, the London Array offshore project in the Thames Estuary, which could have the capacity to produce 1,000 MW of power.
Wind farm projects in the US are in Texas, Wyoming, Idaho, West Virginia, California and Hawaii.
In the solar sector, Shell is developing the next generation of generators that use non-silicon materials for turning the sun's energy into electricity. It has signed a MoU with glass manufacturer Saint Gobain to further explore this technology and consider a joint venture.
Shell as a supplier of biofuels blends some of its petroleum with ethanol in some markets, especially the US, France and the Netherlands.
It has partnered Iogen to develop a business in Canada, plus Choren and Volkswagen to build one in Germany. read more

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AFX Asia (Focus): Philippines' First Gas, Malampaya Group still in talks to settle gas dispute

Feb 07, 2006
MANILA (AFX) – First Gen Corp said unit First Gas Power Corp and the Malampaya Gas consortium are still negotiating a settlement of their dispute over contracted but unused natural gas from the Malampaya gas field in the western Philippines.
First Gen said so in response to a newspaper article that reported that the parties have concluded a 148 mln-usd settlement agreement.
“Please be advised that the Malampaya Gas consortium, led by Shell Philippines Exploration BV and First Gas, are still in the process of negotiating a final resolution,” First Gen told the stock exchange in a disclosure.
Apart from the Shell unit, the Malampaya Gas consortium comprises Chevron Texaco and Philippine National Oil Co.
First Gas supplies electricity to affiliate Manila Electric Co, the country's largest electricity distributor.
(1 usd = 51.62 pesos)
[email protected]
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Lloyds List: Shell hails a year of discovery as its big cats roar on

Oil major replaces more reserves than it produced in 2005 and enjoys a 72% success rate with the drill bit
Feb 07, 2006

ROYAL Dutch Shell had a successful year of exploration in 2005 replacing more reserves than it produced and gaining a good discovery rate, writes Martyn Wingrove .

The Anglo-Dutch oil major found 2bn barrels of oil equivalent in 2005 and had a 72% success rate with the exploratory drill bit.
These are likely to be the backbone of the group's production growth after 2008, while its near-term investments will provide the basis of keeping production growing at a steady rate.
Some of its numerous discoveries were its 'big cat' targets where reserves are more than 100m boe net to Shell.
'We drilled 15 big cat wells in 2005, three are still drilling and we evaluated the other 12,' Shell's chief executive Jeroen van der Veer said.
'Seven of these were successful in Australia, Malaysia, Norway and four in Nigeria.'
In Malaysia, Shell found one big cat with its Ubah well off the northern Borneo coast and in Norway it drilled the Onyx SW discovery in the Norwegian Sea. Two of the four big cat discoveries in Nigeria were named as Etan and Bobo.
Each of these big cat discoveries could become stand-alone developments in the next five years involving subsea systems and floating production units.
In the fourth quarter, Shell made 20 discoveries in Australia, Brazil, Brunei, Egypt, Germany, Malaysia, the Netherlands, Nigeria, Oman, UK and the US. Most of these are on the smaller size, but still can act as satellite developments.
The London-listed group has plenty of projects under way to boost its near-term production to the top of its target of 3.8m barrels per day.
Last year, its output was around 3.5m bpd, after operations were hit by hurricanes and due to the impact of divestments and the end of a production sharing contract in Oman.
This year, Shell expects to be producing in the lower half of this target, mostly because of the shutdown of the Mars tension leg platform until the summer due to damage inflicted by hurricanes last year.
Its long-term aim is to be producing between 4.5m and 5m bpd by 2015, Mr van der Veer said.
'We have many projects under way with important ones in Sakhalin and Australia.'
'There are continued developments in Malaysia and Brunei. We are active in Brazil, the Gulf of Mexico and Canada.
'In Nigeria, the Bonga project just started and there are more start-ups to come and in Norway we are working on Ormen Lange.'
In the fourth quarter, Shell started gas production from its Shallow Clastics and E11 hub project in Malaysia and the Bonga field started pumping up to 150,000 bpd through a newbuild FPSO.
Shell entered into the Ukrainian exploration sector, gained more leases in Canada and Brazil, plus it saw the start up of Nigerian liquefied natural gas train four. read more

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The New York Times: BP Profit Jumps on High Oil Price

Published: February 7, 2006
Filed at 2:37 a.m. ET
LONDON (Reuters) – BP Plc (BP.L) reported a 26 percent surge in fourth-quarter replacement cost profit to $4.432 billion on Tuesday thanks to high oil prices.
The world's second-largest listed oil firm by market value said in a statement the replacement cost profit, which excludes changes in inventory values, would have been higher but for a $553 million charge for non-operating items, mainly due to a notional, non-cash loss on North Sea gas contracts.
Excluding such one-offs, BP's underlying profit was $4.985 billion, versus $4.765 billion for the last quarter of 2004.
A Reuters poll of eight analysts gave an average forecast of $5.75 billion for BP's fourth quarter replacement cost profit excluding exceptional items.
BP's replacement cost profit for 2005 rose 25 percent to $19.314 billion. This was short of the $23 billion profit, calculated on a similar basis, that Royal Dutch Shell Plc (RDSa.L) reported for 2005, last week.
Europe's biggest company by market value said it had replenished reserves by 100 percent on a UK reporting basis and 95 percent under SEC rules which take account of year-end prices, giving it a proven reserve base of over 18 billion barrels of oil and gas equivalent at end-2005.
On top of proven reserves, BP also added nearly 2 billion new barrels to its non-proven resource base last year, taking it to a total of 41 billion barrels, of which the company expects to convert some 11 billion barrels into proven reserves by 2010.
BP said that assuming an oil price of $40 a barrel, output this year would be between 4.1 million and 4.2 million barrels a day.
At a similar price, BP said it should be able to distribute around $50 billion to shareholders between 2006 and 2008, and that this would rise to around $65 billion if the oil price was around $60 a barrel. read more

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Metro Briefing
Published: February 7, 2006
NEWARK: OIL COMPANY SETTLES GOUGING SUIT Sunoco Inc. became the second oil company to settle a price-gouging lawsuit brought by New Jersey authorities, agreeing to pay $325,000 but acknowledging no wrongdoing.
Last September, the state sued Sunoco, Amerada Hess, Motiva Shell and several operators of independent gasoline stations, alleging they violated the State Motor Fuels Act and Consumer Fraud Act in the aftermath of Hurricane Katrina, when prices shot up for oil and gas.
In November, Amerada Hess settled, also without acknowledging wrongdoing, by agreeing to pay $372,391 to reimburse state and local governments for investigative and legal costs.
Most of the $325,000 in the Sunoco suit will also go to repay such costs, but $50,000 will go to the state's Low Income Home Energy Assistance program to help low-income residents pay their heating bills.
Motiva Enterprises is a company controlled by Shell and Saudi Refining. (AP) read more

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Lloyds List: Shell and Sonatrach in link-up

Feb 07, 2006

Oil major Shell and Sonatrach, the Algerian national energy company, have signed a wide-ranging co-operation pact that includes the possibility of developing a liquefied natural gas project, writes Tony Gray.

The memorandum of understanding covers multiple business initiatives, both in Algeria and internationally.
Areas of co-operation will include investigating the commercial and technical feasibility for joint developments in Algeria, including upstream development projects, LNG, products and marketing.
The two parties said they would evaluate possible asset swap transactions for upstream exploration, development and appraisal projects. read more

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Vanguard (Nigeria): Shell unveils $1bn developments in alternative energy

ROYAL Dutch Shell Plc has invested over US$1 billion (about N130billion) in alternative energies including Bio-fuels, Wind, Solar and Hydrogen, making it one of the world’s leading companies in the sector as the world grapples with spiraling crude oil prices.
“In Shell, we aim to develop at least one alternative energy such as wind, hydrogen or advanced solar technology, into a substantial business,” Shell CEO, Jeroen van der Veer pointed out.
“In addition, we continue our efforts to further expand our position as the largest marketer of Biofuels. The actions announced today are consistent with this long-term vision.”
Shell has an established position as the world’s largest marketer of Biofuels, as well as a leading developer of advanced Biofuels technologies. Biofuels are fuels derived from biomass such as plant crops like oil seed, or plant wastes like straw. They can be used either pure or blended with standard automotive fuels dispensed at today’s filling stations with the potential for much lower CO2 emissions.
In partnership with Iogen of Canada, cellulose ethanol Biofuels are being successfully produced from plant waste. By producing Biofuels from plant waste instead of food crops, the potential stress on the food chain is alleviated.
The Iogen process produces a fuel which can be used in today’s cars, cutting CO2 life cycle emissions by 90 per cent compared with conventional fuels. Shell recently announced a Memorandum of Understanding with Volkswagen and Iogen to explore the economic feasibility of producing cellulose ethanol in Germany. Shell Canada has been working with Iogen to develop a viable commercial framework for a facility in Canada.
These projects complement Shell’s existing partnership with CHOREN Industries of Germany. CHOREN have a patented Biomass-gasification process that converts biomass such as wood chips into ultra-clean synthetic gas that can then be converted for use in diesel through Shell’s Gas-to-Liquids technology.
CHOREN is preparing construction of the world’s first commercial biomass-to-liquids facility in Freiberg, Germany.
Wind is currently one of the most promising sources of renewable energy. Shell’s share of wind energy capacity is currently greater than 350MW, and is expected to reach approximately 500MW in 2007. Included in this growth is the first Dutch offshore wind project, the 108MW Offshore Windpark Egmond aan Zee (Shell share: 50%).
Full construction is expected to begin on this project in March 2006, and first electricity production is expected around the end of the year. Progress has also been made with the development of the London Array offshore project in the UK (Shell share: 33.3%). This project has a potential capacity of 1,000MW, making it one of the world’s largest planned wind farms.
In the United States, Shell is already one of the largest wind energy developers, and is actively progressing projects in Texas, Wyoming, Idaho, West Virginia, California, and Hawaii. Shell recently acquired the development rights to Mount Storm, a 300MW wind park (Shell share: 50%) in West Virginia – potentially one of the largest new projects in the USA. Progress has also been made in permitting the 200MW Cotterel Mountain wind project (Shell share: 50%) in Idaho.
Shell has also announced a Memorandum of Understanding outlining plans to explore the potential for wind energy developments in China in partnership with Guohua Energy Investment Corporation of the China Shenhua Group, a leading national energy supplier.
In the area of Solar energy, Shell has been progressing the next generation of technologies, including CIS ‘thin-film.’ Shell believes that non-silicon-based technologies such as CIS are more likely to become competitive with retail electricity in the coming years.
Shell’s CIS technology is supported by four years of manufacturing and marketing experience. The technology recently achieved a 13.5% world record efficiency for thin-film products, and is supported by International Electrotechnical Commission certification.
Shell has also announced the signing of a Memorandum of Understanding with Saint-Gobain, one of the world’s leading producers of glass and other building materials, to further explore the Shell CIS technology and consider joint development. Saint-Gobain’s expertise in glass processing and building material manufacturing provides an excellent fit for joint exploration of this technology.
In line with its focus on CIS ‘thin-film’ technology, Shell decided to divest its crystalline silicon solar business activities to Solar World AG. Shell’s silicon-based business has an annual production of approximately 80MW.
Manufacturing facilities, sales and marketing, and silicon research and development activities in Germany and the United States (Washington State and California) will transfer to Solar World, including all 579 staff currently involved in silicon PV.
Shell will continue to provide solar energy to the developing world, and has signed a Letter of Intent with Good Energies Inc. with a view to further expanding the business.
Shell is also set open at least two new Hydrogen stations in the U.S.A. in 2006, supporting continued efforts to demonstrate the viability of a future hydrogen economy. Shell is also active in this area in Asia, and is supporting the recently announced Hydrogen station at Tongji University in Shanghai.
Shell Hydrogen continues to take a leading role in joint government/industry discussions and partnerships to plan and develop hydrogen and fuel cell activities, including the EU Hydrogen & Fuel Cell Technology Platform, the California Fuel Cell Partnership and the Japan Hydrogen and Fuel Cell Demonstration Project. read more

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St. Petersburg Times: Shell Chief Identifies Next Generation of Investments

By Marcel Bard
Special to St. Petersburg Times
It is only recently that Chris Finlayson and his wife completed their move to Moscow, though Finlayson was appointed head of Shell Russia in November of 2005. They came not from their motherland, the UK, as one might have assumed, but directly from Lagos, Nigeria, where Finlayson had been CEO of Shell Africa’s Exploration and Production since 2004.
So the Finlaysons face yet another major cultural and climatic change – Chris Finlayson has already worked for Shell in countries as diverse as the Netherlands, Turkey, the UK, Brunei and Nigeria. A similarly dramatic change is waiting for Finlayson in his new management responsibilities – up until now he had been administering ‘developed portfolios’ of Shell’s business activities, whereas now he is participating in the ‘portfolio-creation process,’ i.e. bringing in new investment.
Finlayson was born in 1956 in Devon, southwest England, studied physics and geology at Manchester University and graduated with a First. On completing his studies he received offers from various different major energy companies, but in 1977 picked Shell as the better employer, not least because they would send him to work abroad. Moreover, the son of a school teacher was attracted by the company’s “high ethical and environmental standards,” and by the possibilities of career development.
“Long term commitments to one company back in the 70s were quite common in Europe,” he said. And so it is that 29 years since leaving university Finlayson is still with Shell. He started as a petroleum engineer in the UK, then worked abroad before becoming in 1998 vice-managing director of Shell UK, in 2000 managing director of Shell Brunei, in 2003 managing director of Shell Nigeria, in 2004 CEO with Shell Africa, and now “country chairman with extended responsibilities” with Shell Russia. His experiences from working on different continents and in countries with different religions and cultures not only enriched his personality, as he mentioned, but also acquainted him with his future wife in 1982, a Scot who was then also working with Shell Brunei.
He left his latest post as head of Shell Africa after only one year in order to face the new challenges associated with his job in Russia. Because of the growing importance of Russia to Shell, the company restructured its business in the CIS, leaving the new chairman with much larger responsibilities than his predecessor. He will be representing Shell Russia across its whole range of business activities, from exploration to retail.
“In the last nine to ten years I have been working in places where we have been the biggest operator, where we have already had an extremely strong and established position – the North Sea, Brunei, Nigeria,” he said.
“Coming to Russia the challenge is different…we have some massive investments going on in Salym and Sakhalin – immediate challenges – but at the same time, we want more activities in Russia, we want more investments, we want more opportunities.”
If the company’s main sources of income remain Europe and America — Russia, along with the Middle East, are very much the focus of Shell’s growth in the future. Russia is going to play a bigger part in Shell’s portfolio of assets and Chris Finlayson came here also to “be responsible for identifying the next generation of investments.”
“The mother of all projects,” as Shell managers refer to the Sakhalin-2-project, is by far the largest foreign direct investment into Russia, and one of the largest integrated oil- and gas-developments in the world.
“This is the biggest single project certainly that Shell and, by most measures, that anybody has [undertaken],” said Finlayson, adding that “Sakhalin comprises five to six single world-class projects”. Offshore oil reserves on the Sakhalin sites of Piltun Astokh and Lunskoe are equivalent to more than a year of Russia’s current crude oil exports. At its current level global LNG-demand could be satisfied for the next four years by the 15-storey high and football-field large buildings, built off the cost of Sakhalin Island.
Big projects such as Sakhalin are crucial if Shell is to develop more of the resources it has acquired in the northern territories.
“This is what the big oil companies have to get right, because these are the opportunities of the future,” said also Ian Craig, CEO of the operating subsidiary Sakhalin Energy in which Shell holds a 55 percent stake, adding that “a lot of the key opportunities going forward are going to be in these sorts of environments.”
Looking at such environments, problems become manifest: the initial estimated cost of $10 billion is set to double, causing a reaction in Russia against the Production Sharing Agreement (PSA) under which the project runs.
“I would say that this is based on an incomplete understanding of the purposes and challenges of PSAs in Russia,” said Finlayson. In a PSA companies make all the investments, and therefore are allowed to make long-term investments over between 10 to 15 years without being affected by changes in tax. After a period of production in which the costs are recovered more revenue goes to the state – the higher the cost of investment, however, the longer the government will have to wait for its revenue.
“PSAs were introduced by countries who wished to assert their sovereignty over their natural resource base on a stronger way.”
“I am confident that if we could sit in this room and look back in 25 years time, and ask ‘Has Sakhalin-2 been good for the Russian federation?’ that we would not even have a conversation about it – of course it has been. We could all see that”.
“The Russian government has indicated that it will stand by the PSA, but we will have to justify the increases in cost.”
While working for Shell Nigeria, the company openly admitted that it inadvertently fed conflict, poverty and corruption through its oil activities. “We made that statement as a part of a report when I was in Nigeria,” but “we changed our practices [which had been applied for many years before] to try and get funds better distributed.”
Referring to Russian corruption, Finlayson added that “we believe that we can get our job done, without any suggestion that we will compromise on our business principles. It’s very clear: anybody who is found to be indulged in bribery or political payments will be fired.”
As well as the Sakhalin-project, Shell Russia has been operating the Salym oil-fields for 10 years now with its Russian partner, and is now negotiating entry into the Zapoljarnoe-gas-field, currently owned by Gazprom.
As for his ambitions at Shell in general and especially in Russia, Finlayson plans to fulfil his 3-year assignment in Moscow, making Shell the number one foreign energy company in Russia. Nevertheless he expects that his stay in Russia will be more depending on “the time of the Sakhalin project going” than on formal assignments. Being a loyal Shell-soldier for almost 30 years he does not openly admit any higher ambitions saying instead that he intends to “fulfil his job, and if they give me a higher one, fine – do it with the same energy and commitment.”
For relaxation Finlayson enjoys playing golf and going downhill-skiing with his wife and daughter. He is currently looking out for golfing possibilities around Moscow. read more

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