Nigeria: NaijaLeaks and why China is bad for Africa

The cables are still coming

The need to continue to mine the WikiLeaks diplomatic cables must not wane even after the spotlights have moved on, there is much to be seen in those cables and this one must be highlighted.

NaijaLeaks, the Nigerian side of the things in this cable [1] presents a very interesting perspective to governance, leadership and accountability issues in Nigeria.

Playing one off the other

At the end of 2009, the Nigerian legislature was busy debating versions of the Petroleum Industry Bill (PIB) which many International Oil Companies (IOCs) thought was not structural or strategic but about asserting greater ownership of our national resources, in ways, this was a disincentive for new investment by IOCs but an opportunity for negotiation for the Government of Nigeria (GON).

Shell Nigeria had brashly suggested to the National Assembly that if the PIB were passed, the “Nigerian oil industry would be dead”, so the GON brought in the Chinese. Considering Shell has the best deal in the Nigerian oil industry they felt they could use that leverage to thwart a legislative process.

For those who advocate Chinese investment in Africa and sing the highest praises of China, this is one cable you should read and comprehend.

Introducing the Chinese in Africa

This is what they did, “The Chinese are very aggressive because they need the oil. They came in with big money, and they were ready with large loans with low interest rates.”

I have to give Nigerians credit for this, playing competing interests against each other whilst keeping control of the process, "We know what had happened in the Sudan and Chad and we know enough about them to know where we want them and where we don't." Then, the person goes on to say, "No one really desires to see the IOCs go when we have worked with them so long. Long-term friendships develop, a lot is learned from them, and we know how they do business.”

However, what was most revealing was because the Chinese oil companies are run, by which I think they mean owned by the Chinese government, their representatives in the oil industry do not know how to deal with democratic governments.

The Nigerian democratic experiment can be flawed but the core elements of it are working, efficient, functional and aggressive too in protecting Nigerian interests.

It is not for sale in Mandarin?

The Chinese because of their incentive of cash and softer loans had come to cherry-pick the oil fields and many of those fields were already allocated to other partners in the Nigerian oil industry. The cable says the Chinese acted dumbfounded and I think what was intended was dumb and of the fields already operated by other interests the Chinese said, “You mean we can’t have it?”

Therein lays the reason for the Petroleum Industry Bill, to create partnerships and binding contracts where interlopers cannot with their money make us rescind agreements in their favour and the punch line to this episode is, “We are lucky we have a democratic government, under the military, the Chinese and Russians would be here.”

If the Chinese had gotten their way, they would have successfully jettisoned the PIB and abridged our democratic process which is by no means perfect, this crucial bill showed that Nigeria had to keep its nerve and resist the incentives offered to pervert due process whilst protecting partnerships that have existed for decades.

Apparently, the Russians through Gazprom had tried similar tactics and the Nigerians did not like it at all, in fact, it appears Nigerians were more comfortable with the devil they know in the existing IOCs than the moneybag Russians and Chinese along with a willingness to maintain business agreements regardless of alternative business incentive.

Rotten command structure

Interestingly, the labour unions also did not want the Chinese in the Nigerian oil industry, with China featuring in the list of the five worst countries to work for; they do not have industrial relations representatives or formal human resources processes. The immediate supervisor exercises all power without being accountable to anyone and most of the Chinese officials are non-English speaking hindering constructive interaction, according to the cable.

Zambia is another African country that had suffered at the hands of the Chinese and if I recall, the writer of Dead Aid, Dambisa Moyo [2] is from Zambia and I do wonder what she has to say about the unions chasing the Chinese out of Zambia.

The issue of corruption is probably moot as well as it is global, but this is a very cautionary note, “The Chinese have no respect for local laws, and they compromise a lot of things, including safety.” According to the cable, “the Chinese were the first to bribe local officials to win contracts and get around local laws.”

This sets a very dangerous precedent in any setup that the Chinese seek to have influence, especially in Africa, if this kind of business practice is norm, we should not be blinded by the idea that the presence of money is the solution to development at the expense of other rather more established capitalist business practices which include the whole spectrum of management, accountability, industrial relations, human resources and more recently corporate social responsibility.

Know how to handle the Chinese

Therefore, it is, “The poor image of the Chinese helps to explain why they never seriously threatened renewal of the IOCs' oil mining licenses.”

Nigerians were playing the diplomacy game with relish and offered this statement from the minister in charge in which he said, “There was never any consideration of selling or trading one firm for (I think he meant against) another. NNPC has a right to relinquish any part of its equity to any third party that expresses interest and it is in that regard that the discussions with the Chinese have been carrying on.”

Nigerians have signed agreements with the Chinese and Shell get 45% of joint venture deals with the GON compared with other IOCs that get 40% and I would suppose the Chinese might be offered a lot less whilst doing well to keep a rein on their activities within Nigeria.

Sources

[1] Viewing cable 09ABUJA2170, Chinese oil companies not so welcome in Nigeria’s oil patch

[2] Dead Aid - Review

Newswatch Magazine - The Draft Petroleum Industry Bill 2009

What’s the Fuss about the Nigerian Petroleum Industry Bill?

The Nigerian Petroleum Industry Bill - Part 2

The Cable – With interesting highlighted bits

E.o. 12958: decl: 11/28/2019

Tags: econ, epet, enrg, einv, pgov, prel, ni, ch

Subject: Chinese oil companies not so welcome in Nigeria’s oil patch

Ref: Abuja 2100

Classified By: Ambassador Robin R. Sanders for Reasons in Sections 1.4 (b) and (d).

Summary

¶1. (C) Two xxxxxxxxxxxx officials recently volunteered that Chinese oil companies had made a lot of mistakes in Nigeria and neither official welcomed their presence. Nigeria National Petroleum Company (NNPC) xxxxxxxxxxxx said on xxxxxxxxxxxx the NNPC is aware of how the Chinese have behaved in the Sudan and Chad and that the Chinese do not know how to deal with a democratic government.

xxxxxxxxxxxx complained on November 11 that there is no recourse when dealing with the Chinese and that the Chinese do not respect local laws. The poor image of the Chinese helps to explain why they were never a serious threat to the renewal of the international oil companies' (IOCs) oil mining licenses (OMLs).

END SUMMARY.

Ruffled feathers...

¶2. (C) Nigeria National Petroleum Company (NNPC) xxxxxxxxxxxx discussed the Chinese oil companies' recent attempts to obtain deep water oil mining leases (OMLs) with Economic Counselor and Trade and Investment Specialist on November 13.

xxxxxxxxxxxx said that Shell Nigeria had opened the door for the Chinese by resisting GON efforts to pass the proposed Petroleum Industry Bill (PIB) and telling the National Assembly that the "Nigerian oil industry would be dead" if the PIB passed. "So they brought in the Chinese," xxxxxxxxxxxx said.

¶3. (C) Asked about how the Chinese handled themselves in Nigeria, xxxxxxxxxxxx said, "The Chinese are very aggressive because they need the oil." "They came in with big money," he said, "and they were ready with large loans with low interest rates."

But the Chinese also made some mistakes. First, xxxxxxxxxxxx said, "We know what had happened in the Sudan and Chad and we know enough about them to know where we want them and where we don't." At the same time, xxxxxxxxxxxx said, "No one really desires to see the IOCs go when we have worked with them so long. Long-term friendships develop, a lot is learned from them, and we know how they do business."

¶4. (C) Second, xxxxxxxxxxxx said, "Their oil companies are run by the Chinese government and they do not know how to deal with Qthe Chinese government and they do not know how to deal with a democratic government. For example, the Chinese told the NNPC officials which fields they wanted and the NNPC officials had to say, 'No, this field is operated by someone.'" The Chinese acted dumbfounded and said, "You mean we can't have it?"

"The PIB did not come from nowhere," xxxxxxxxxxxx explained. Much consultation occurred before the GON presented the PIB to the National Assembly and all that was not going to be undone because of a Chinese official. "The Chinese caused the problem," he summarized, "and they ruffled a lot of feathers." Xxxxxxxxxxxx added that Gazprom of Russia had used a similar approach. "We are lucky we have a democratic government" he said, "Under the military, the Chinese and Russians would be here."

...and no forwarding address

¶5. (C) xxxxxxxxxxxx colleagues also told visiting Coordinator for International Energy Affairs (S/CIEA) David Goldwyn and his delegation on November 11 that he and his union colleagues did not want the Chinese in the Nigerian oil sector. Goldwyn was asking about the problems faced by xxxxxxxxxxxx said, "The Chinese are here and that is a huge problem!"

"xxxxxxxxxxxx have a list of the worst five countries to work for," xxxxxxxxxxxx said, "and they are on that list." xxxxxxxxxxxx explained that xxxxxxxxxxxx had experienced a problem with ExxonMobil when they "wrongfully fired a worker." xxxxxxxxxxxx applied pressure through the U.S. steel workers and the worker in question was given a choice of being re-hired or compensated and xxxxxxxxxxxx chose the latter. "If xxxxxxxxxxxx a problem with a Chinese company," xxxxxxxxxxxx complained, "who can xxxxxxxxxxxx to?"

(COMMENT: Nigerian xxxxxxxxxxxx have complained to Labor Officer that the Chinese do not have industrial relations representatives or any formal human resources process other than the immediate supervisor who does the hiring and firing. Dealing with non-English-speaking Chinese officials also hinders constructive interaction.

END COMMENT).

¶6. (C) xxxxxxxxxxxx later elaborated by alleging that Chinese labor practices were not good so no one wants to be part of it. "Look at the Chinese mining companies in Zambia," xxxxxxxxxxxx said, "the labor unions there had to chase them out." xxxxxxxxxxxx noted that corrupt people in China were put to death, but overseas they quickly adapt to the local environment, including adopting corrupt practices.

"The Chinese have no respect for local laws," xxxxxxxxxxxx said, "and they compromise a lot of things, including safety."

¶7. (C) Petroleum and Natural Gas Senior Staff Association of Q7. (C) Petroleum and Natural Gas Senior Staff Association of Nigeria (PENGASSAN) xxxxxxxxxxxx said the Chinese were the first to bribe local officials to win contracts and get around local laws.

By contrast, xxxxxxxxxxxx said xxxxxxxxxxxx played by the rules and was above-board. "xxxxxxxxxxxx proud of xxxxxxxxxxxx company in that respect," xxxxxxxxxxxx said. (See reftel for additional background on Goldwyn's meeting with the xxxxxxxxxxxx).

Comment

¶8. (C) The poor image of the Chinese helps to explain why they never seriously threatened renewal of the IOCs' oil mining licenses (OMLs), the first of which the GON signed with ExxonMobil on November 20. Most of the remainder will be signed in the coming weeks.

Minister of State for Petroleum Resources Odein Ajumogobia told the joint GON-ExxonMobil press conference on the same day that, "There was never any consideration of selling or trading one firm for (against?) another." But he also said that, "NNPC has a right to relinquish any part of its equity to any third party that expresses interest and it is in that regard that the discussions with the Chinese have been carrying on."

The GON owns 60 percent of all the joint ventures with the IOCs (55 percent in the case of Shell). So, the NNPC and the IOCs could still end up having minority Chinese partners -- whether they like it or not.

¶9. (U) Embassy coordinated this telegram with ConGen Lagos.

Sanders

Nigeria: NaijaLeaks and Shell deep within our shell

Deep inside our shell

The third NaijaLeaks cable [1] contains information that might be termed sensationalist but concentrating on that particular part of the infiltration of key Nigerian ministries does not begin to address the matters that should seriously concern us.

Ms. Ann Pickard [2] fully appreciates the political ramifications of her corporate brief being the head of an oil company in the largest oil-producing nation in Africa. As the Executive Vice President for Shell companies in Africa I would suppose all oil and gas producing countries in Africa would have felt her presence.

As an American, I suppose it made it easier to have senior consular staff to air her views and seek assistance part of which including trying to understand the inclinations of the Speaker of the House of Representatives.

Teasing information out of ego trips

The art of patronage is perfected in Nigeria by the tradition of paying courtesy visits to important personalities, this process of massaging egos probably allows for the visitors to tease our pertinent information from their hosts who might well be unguarded in the glow of adulation.

It would inform why Shell felt they could help out the General Managing Director of NNPC who she thought was spread so thin that an oil-producing company with a not too stellar record in Nigeria was going to help him prepare the material to present at the climate change summit in Copenhagen, Denmark.

One can only wonder what Dr. Barkindo would done in gratitude for saving his profession, academic and prestigious bacon by presenting a flash climate change lecture from the perspective of an oil and gas conglomerate.

A government fully exposed

Shell’s interest in the passage of the Petroleum Industry Bill seems to have been converged with that of other companies operating in Nigeria; the sources at the bottom of this blog give a general overview of the contents and import of the bill.

The government of Nigeria appears to have been trading information of oil-industry companies in Nigeria with other countries as Russia and China which might have offered companies in those countries undue advantage in contractual negotiations and whilst the government had denied involvement in facilitating corporate espionage Shell moles in relevant ministries had reported back to mother-ship of clandestine government activities.

Shell did not hold much store for the amnesty programme and whilst the Joint Task Force of Nigerian military personnel appeared to have been gaining more control of the militancy Israeli security experts seemed to helping the security situation in Bayelsa State but not in Rivers State.

If the Petroleum Industry Bill at ratification did appear to contain negative elements the companies felt they could use the services of the embassy to inject the changes they would like to see.

The difficult questions

Besides all this there are questions, very difficult questions that need to be asked and ones that have no ready answers because one begins to wonder if we do still have our country anymore.

The issue here is not how many moles are being paid by Shell in our key ministries but how many other organisations have Nigeria by the balls whose interests are protected by having Nigerians “seconded” to high positions to inform of government, corporate, economic, legal and political activities?

Highly placed people in the Nigerian establishment now commit treason and espionage with impunity it is no doubt the state of affairs and how do we purge our whole system of this cancer?

Fearfully, one serious question is how do the activities of Nigerians in high places affect the ability for Nigeria to make progress if the enemy is amongst us?

A battle lost?

If the government has to militate against low-level espionage like the Russians presenting full transcripts to rivals - how much politicking, blackmailing, strong-arming goes on behind the scenes away from the corridors of power but really change the power dynamic and decision making process in Nigeria?

For each bill being debated in our legislature how many moles are in the system and how many are part of the drafting exercise in ministries covering for conflicts of interest and vested interests; in the legislature and in the Presidency? Even more pertinently, how much money is changing hands to these ulterior ends?

With the kind of access and power that legislators have, who is in the pay of Nigerians and who is a double-agent?

These questions are hardly exhaustive but they begin to give a perspective on how the NaijaLeaks cables might just reveal how we have been sold out by our people and are being used as pawns in international conglomerate games for the capitalist benefit – Nigerians in charge does not necessarily protect Nigerian interests and that is the most scary part of this situation.

Sources

[1] Viewing cable 09ABUJA1907, C) SHELL MD DISCUSSES THE STATUS OF THE PROPOSED PETROLEUM

[2] Shell in Australia Directors – Australia

Newswatch Magazine - The Draft Petroleum Industry Bill 2009

What’s the Fuss about the Nigerian Petroleum Industry Bill?

The Nigerian Petroleum Industry Bill - Part 2

The cable

Tuesday, 20 October 2009, 06:17

C O N F I D E N T I A L SECTION 01 OF 04 ABUJA 001907

NOFORN

SIPDIS

DEPT PASS USAID/AFR/SD FOR CURTIS, ATWOOD AND SCHLAGENHAUF

DEPT PASS TO USTDA-PAUL MARIN, EXIM-JRICHTER

DEPT PASS TO OPIC FOR BARBARA GIBIAN AND STEVEN SMITH

DEPT PASS USTR FOR AGAMA

JOHANNESBURG FOR NAGY

USDOE FOR GEORGE PERSON

TREASURY FOR TONY IERONIMO, ADAM BARCAN, SOLOMAN AND RITTERHOFF

EO 12958 DECL: 02/04/2029

TAGS EPET, ENRG, EINV, ECON, ETRD, PGOV, NI

SUBJECT: (C) SHELL MD DISCUSSES THE STATUS OF THE PROPOSED PETROLEUM

INDUSTRY BILL

Classified By: Deputy Chief of Mission Dundas McCullough for reasons 1.4. (b & d).

Ref: Abuja 1836

SUMMARY

¶1. (C) Shell EVP for Shell Companies in Africa met with the Ambassador on October 13 to discuss the status of the proposed Petroleum Industry Bill. She said the GON wanted the National Assembly to pass the bill by November 17 and that the international oil companies would have to move quickly if the House passed the bill in the coming weeks. She said there was “total alignment” among the IOCs and with the Nigerian oil companies.

She said it would be helpful if the Embassy would continue to deliver low-level messages of concern and call on the Speaker of the House to see where he stood on the bill. She expected the situation in the Niger Delta to be “quiet” until the end of the year but would get “out-of-hand” when the election cycle starts up at the end of the year. Shell’s views of the PIB track closely with ExxonMobil’s views as reported in reftel. END SUMMARY.

CURRENT STATUS OF THE PIB

¶2. (C) Shell EVP for Shell Companies in Africa Ann Pickard met with the Ambassador at the Embassy on October 13. The DCM and Economic Counselor joined the Ambassador, and XXXXXXXXXXXX accompanied Pickard. The Ambassador asked Pickard for her views about the status of the Petroleum Industry Bill (PIB). Pickard said the GON wanted the National Assembly to pass the bill by November 17 in order for the GON to be able to announce it at the upcoming CWC Gulf of Guinea Conference in London November 17-19.

She said that if the House passes the PIB in the coming weeks, “we need to move quickly” to obtain any necessary changes before it becomes law. Fortunately, she added, “We are working with the House and the House appears to want to work with us.” She continued that if the Senate passes the PIB, “We aren’t worried.” Unfortunately, she explained, “We think the Senate will pass a bad bill” but it won’t really matter. She added that she would be at the Nigerian House and Senate later that day and would let the Embassy know if there were any unexpected developments.

¶3. (C) The Ambassador asked if Shell had had engagements with the GON outside the National Assembly, such as with the Ministry of Finance and the Central Bank of Nigeria. Pickard said, “We are meeting with them at all levels.” She noted that an IMF team headed by Charles McPherson was in Abuja to look at the PIB and that Shell would be meeting with them as well. In contrast, she said, “We are worried about the World Bank’s political agenda and it is not clear what their agenda is.” She said the World Bank was working on how to make the IJVs “bankable” so that they would be able to go to international and domestic banks for financing.

GAS FLARING AND CLIMATE CHANGE

¶4. (C) Pickard said the PIB requires an end to gas flaring by 2010. She said the industry won’t be able to do that due to the lack of QShe said the industry won’t be able to do that due to the lack of investment and security. Shell is ahead of the other IOCs and could be ready by 2011. Shell would have to spend $4 billion to do this, but the GON would also have to fund its part and that is a risk. Shell would shut in oil production in fields where it is uneconomic to end gas flaring, and it would let others have the gas for free where it is economic to do so.

¶5. (C) Pickard continued that NNPC General Managing Director Dr. Mohammed Barkindo was interested in doing something on climate change in preparation for the climate change summit in Copenhagen December 6-18. Barkindo was spread pretty thin so Shell will ask him how they can help him prepare for the summit. She added that Shell had recently told the oil producing countries that coal will squeeze out oil as a result of the CO2 footprint issue if the oil producing countries and IOCs do not do more to address the issue.

POTENTIAL BENEFITS

¶6. (C) Pickard summarized the PIB’s potential benefits. The creation of fully integrated and independently functioning international joint ventures (IJVs) would solve the oil and gas industry’s longstanding funding problems if the proposed IJVs are done right. The Nigerian National Petroleum Company (NNPC) was previously forced to reduce its ownership of some existing joint ventures to 49 percent to make them profitable enough to obtain financing. The proposed division of responsibilities between the NNPC and the Directorate of Petroleum Resources also would be good. The IOCs currently do not know if the NNPC is their partner or regulator.

COHESION WITHIN THE INDUSTRY

¶7. (C) The Ambassador asked if the industry was united in its approach to the PIB. Pickard replied that there was “total alignment with the international oil companies at every level.” She acknowledged that Shell had more exposure to the loss of acreage than any other company. “We could lose 80 percent of our acreage,” she said. The problem comes from the fact that the PIB will redefine how a company can hold on to its exploration and production blocks, limiting what can be kept to two kilometers around each well.

“Everyone offshore loses a lot,” she continued. “We will have to bring satellites on fast or we will lose the blocks.” However, the problem with that is that the companies have to be able to pass things through to the blocks quickly and it takes years to get a rig in due to delays in the Nigerian approval process. (NOTE: Pickard told Econoff in Lagos that Shell “sent away” three platforms in late September. END NOTE.)

ALIGNMENT WITH NIGERIAN OIL COMPANIES

¶8. (C) The Ambassador asked about the IOCs’ alignment with the Nigerian oil companies. Pickard replied that “the Nigerian companies are with us” because they will be taxed at the same rate in the current version of the PIB. The IOCs are starting to see what the Nigerian companies want to do.

THE USG’S ROLE

¶9. (C) The Ambassador asked what the Embassy could do to help with the Joint House Committee on Petroleum Upstream and Downstream and Justice that is working on the PIB. Pickard said she hoped the current level of dialogue between the GON and the IOCs continues. Unfortunately, “We have not been able to meet with President Yar’Adua for nine months,” she said. “They have him protected.”

She said it would be helpful if the Embassy would continue to deliver low-level messages of concern. In particular, she thought it would be helpful for the Embassy to call on Speaker of the House Dimeji Bankoke to see where he stood on the bill. Beyond that, she would like to keep the Embassy in reserve and use it as a “silver bullet” if the PIB passes the House. The Ambassador noted that the U.S., U.K., Dutch and Qthe House. The Ambassador noted that the U.S., U.K., Dutch and French Embassies had already made a joint call on NNPC General Managing Director Dr. Mohammed Barkindo.

CHINA’S INTEREST IN NIGERIA’S OIL BLOCKS

¶10. (C) Pickard mentioned China’s recently reported interest in Nigeria’s oil blocks. She said Shell had received a copy of the letter that Special Advisor to the President on Petroleum Matters Dr. Emmanuel Egbogah had sent to the Chinese which said that their offer for oil exploration blocks was not good enough. Minister of State for Petroleum Resources Odein Ajumogobia had denied that the letter had been sent, but later conceded that the GON was only “benchmarking” to see what the IOCs should pay for shallow-water licenses.

Pickard said Shell had good sources to show that their data had been sent to both China and Russia. She said the GON had forgotten that Shell had seconded people to all the relevant ministries and that Shell consequently had access to everything that was being done in those ministries.

CHANGING RESPONSIBILITIES WITHIN THE GON’S TEAM

¶11. (C) Pickard observed that there might be changes with how the GON management of the petroleum sector is organized. Minister of Petroleum Resources Rilwanu Lukman may be given the responsibility for implementing the PIB, while Minister of State for Petroleum Resources Ajumogobia may get the Directorate of Petroleum Resources and ongoing business. The problem with these changes is that the GON could still get “unempowered people” who are not able to address the issues.

The question is whether Ajumogobia would be able to step up. (NOTE: Press reports on October 17 reported that Lukman will be given overall responsibility for the formulation of policy, and oversee the implementation of the PIB, the Integrated Joint Venture negotiation and rollout, the fiscal terms transition and implementation, the new organization implementation, and stakeholder management.

We will also supervise the NNPC and its subsidiaries, the Organization of Petroleum Exporting Countries, the African Petroleum Producers Association, and the University of Petroleum. Ajumogobia will be in charge of the Gas Master Plan Transition Implementation, the Gas Exporting Countries Forum, the Nigerian Liquefied Natural Gas, the alternative fuels, and the Petroleum Equalization Fund. He will also oversee the Directorate of Petroleum Resources, the Petroleum Training Institute and the Pricing Regulatory Agency. END NOTE.)

SHELL’S CURRENT PRODUCTION

¶12. (C) The Ambassador asked about the level of Shell’s current operations. Pickard said Shell was producing 663,000 barrels per day as of October 13, including the Bonga field. Approximately 80,000 barrels per day had been brought back from the Forcados field on the previous day. Some 900,000 barrels per day of capacity was still shut in. Of that, Shell could bring back 600,000 barrels per day, while the remaining 300,000 barrels per day is “too unreachable.”

AMNESTY IN THE NIGER DELTA

¶13. (C) The Ambassador asked Pickard what she thought about the future of the GON’s amnesty offer to militants in the Niger Delta. She responded that Shell expected the situation in the Niger Delta to be “quiet” until the end of the year.

It will then get “out-of-hand” when the election cycle starts up in December, January and February. She expressed particular concern about Bayelsa State, home to Shell’s 500,000 barrel-per-day capacity Bonny field. Pickard also noted that Q500,000 barrel-per-day capacity Bonny field. Pickard also noted that Shell saw Israeli security experts in Bayelsa, but not in the Delta, and that there had been “a big drop in kidnapping” as a result.

Looking Ahead

¶14. (C) XXXXXXXXXXXX

COMMENT

¶15. (C) Shell’s views of the PIB and the alignment among the IOCs and with the Nigerian oil companies track closely with the views of ExxonMobil, as reported in reftel. The main difference is that Shell tends to minimize the different tax concerns and financial vulnerabilities of the individual IOCs.

Shell is much more vulnerable than the other IOCs because its operations are concentrated in less favorable JV concessions that are located in the violence-prone Niger Delta. ExxonMobil and Chevron’s operations are concentrated in more favorable production sharing contracts (PSC) in the relatively violence-free offshore areas. In the event that the PIB retains negative terms or violence returns to the Delta, Shell can be expected to hurt the most and cry the loudest.

¶16. (U) Embassy Abuja coordinated this telegram with ConGen Lagos.

SANDERS