ShellNews.net: THE SHELL SAKHALIN-2 DEBACLE: Credibility concerns over Royal Dutch/Shell Executives, Jeroen van der Veer and Malcolm Brinded following the Salhalin2 $10 billion cost overrun scandal.: "The only thing which has saved the hangover management at Shell is the one element over which they have no influence - the high oil price. In every other respect they are an unmitigated disaster. They should be sent packing.": Monday 18 July 2005
By Alfred Donovan
News of the latest Shell shocker – the $10 BILLION capital expenditure overrun in the Sakhalin-2 project in Russia is understandably making headlines around the globe. It is surely the biggest management oversight blunder in corporate history (if we leave the Royal Dutch/Shell reserves scandal to one side).
According to a report published yesterday in Mosnews, Royal Dutch/Shell CEO Jeroen van der Veer is claiming that he only learnt about this latest financial disaster last Wednesday and informed Gazprom on Thursday (Read the article). This implies that no Shell director was aware of the £10 BILLION OVERSPEND SURPRISE at the time of the unification AGM’s on 28 June, just 20 days ago! That is simply incredible.
No wonder that Mr Van der Veer has had to telephone the Russians at Gazprom in a panic to try to explain the dramatically changed financial landscape for the project in which they had just become partners as a result of a swap deal with Shell. Naturally Gazprom wants under the changed circumstances to renegotiate the deal. They must feel cheated and deceived. Gazprom said on Friday it considered Shell’s assets on Sakhalin-2 to be worth less after Shell doubled the project’s cost estimates to $20 billion, Reuters news agency reported. The renegotiation puts the Gazprom/Shell deal in jeopardy. That in turn puts Shell's recovery plan in peril.
As it states in a recent Daily Mail article about the Sakhalin-2 debacle: "If a national government were to admit an error on such a scale the finance minister would almost certainly pay with their job.": "Daily Mail: Sakhalin shock": 17 July 2005: Read the article
Mr Van der Veer, who has all the charisma of a piece of wet lettuce and all too often speaks in unintelligible jargon, has acknowledged in a recent interview with the Financial Times that Shell's reputation has once again be severely damaged. He is quoted as saying: "I fully realise it has an impact on our reputation - certainly for this project, and then of course I'm concerned it will carry over to other things that we do..."
Van der Veer and the CEO of Royal Dutch/Shell E & P, Malcolm Brinded, are already named defendants in a billion dollar US Class Action lawsuit brought against them in respect of the reserves scandal. It is a mystery why executives tainted by that scandal were allowed to remain at Shell and be falsely presented as a "new management team". They were in fact key members of the previous thoroughly discredited management. Shell has already agreed to pay almost a quarter of a BILLION dollars ($240 million) in regulatory fines and settlements in respect of the reserves scandal which involved alleged fraudulent information personally certified by Van der Veer and Brinded on 20F forms supplied to the US Security & Exchange Commission. The information was false. That is an undisputed fact. Hence the fines from the SEC and the FSA.
Lets face another fact. The only thing which has saved the hangover management at Shell is the one element over which they have no influence - the high oil price. In every other respect they are an unmitigated disaster. I warned Shell directors last year that these were the wrong men. They should both be sent packing.
Finally I would like to remind Shell lawyers that the "group" has placed on record its acknowledgement of my freedom to air my opinions about Shell n this website. I did of course already have rights under various freedom of expression conventions and declarations but its nice to know that Shell, one of the multinational rulers of our planet, recognises this fact. It remains a mystery why they take an entirely different view in respect of the former Shell geologist Dr John Huong, the well-known Shell whistle-blower, in relation to postings under his name elsewhere on this same website (accessible via the link below). Eight companies within the Royal Dutch Shell Group have collectively obtained a High Court Injunction to silence him.
Related articles
THE WALL STREET JOURNAL: Shell: “Royal Dutch/Shell Group has been hit again by the "Watts effect.": “It didn't just over-egg reserves; it also under-egged the costs of developing the giant Sakhalin gas project in Russia. Shell reckons it will now cost $20 billion, or about €16.5 billion, to develop the field”: “This does little to improve Shell's image with investors. Oil-development costs are rising everywhere, but not by this much. It will also annoy the Russian government -- and President Vladimir Putin has taken a pretty severe view lately of oil men who don't get their sums right.”: “So has Shell managed to stiff the Russian state?”: Monday 18 July 2005: Read the article
AFX Europe (Focus): Gazprom wants Shell to re-negotiate Sakhalin-2 asset swap terms: “Gazprom now demands that the deal is renegotiated after Shell was forced to admit last week that the cost of the Sakhalin-2 gas field project had overrun by an estimated 10 bln usd and could now cost 20 bln.”: Posted Monday 18 July 2005: Read the article
THE TIMES (UK): Need to Know: “Royal Dutch Shell, the Anglo-Dutch group, is being pressed to revalue its assets by Gazprom, the Russian group with whom it has agreed an asset swap, after soaring costs at Shell’s Sakhalin-2 flagship project.”: Monday 18 July 2005: Read the article
Financial Times: Oil giants count cost of seeking out new frontiers: “…Royal Dutch/Shell said its giant Sakhalin-2 liquefied natural gas project was at least eight months behind schedule and would cost $20bn - twice the original price.”: “Gazprom, Russia's state-controlled gas monopoly, is seeking to improve the terms of a swap deal signed earlier this month with Shell.”: Monday 18 July 2005: Read the article
Daily Mail: Sakhalin shock: “THE way in which the stock market shrugged off the disclosure by Shell of a $10bn cost overrun at its Sakhalin-2 gas project in Russia is astonishing. If a national government were to admit an error on such a scale the finance minister would almost certainly pay with their job.”: “Shareholders need to be assured that the oil giant is husbanding its resources well and is not squandering its oil price windfall. The Sakhalin experience does not suggest that the present management is any more skilled than its predecessor at this.”: Posted Sunday 17 July 2005: Read the article
THE SUNDAY TELEGRAPH: Gazprom leans on Shell to renegotiate: “Gazprom, the Russian gas giant, is demanding that Royal Dutch/Shell, the Anglo-Dutch oil major, renegotiates the terms of a planned asset swap because of the soaring costs of Sakhalin-2, a flagship project.”: “…Shell was forced to admit last week that the cost of the Sakhalin-2 gas field project had overrun by an estimated $10bn and could now cost a staggering $20bn.”: Sunday 17 July 2005: Read the article
The Independent On Sunday: 'Elephants' are a gamble, especially when there are hurricanes around: “Any schadenfreude felt privately at Shell over BP's discomfort will have been erased on Thursday after it admitted that a flagship of its own had run into trouble. Costs for Sakhalin Energy, a huge gas project in Siberia, had doubled to $20bn…”: Sunday 17 July 2005: Read the article
LEGAL STUFF (NO NEED TO READ UNLESS YOU ARE A SHELL LAWYER, OR SOMEONE WITH A DEEP INTEREST IN SHELL, OR FREEDOM OF EXPRESSION OR COPYRIGHT ISSUES)
LEGAL STATEMENT BY THE ROYAL DUTCH SHELL GROUP REGARDING THIS WEBSITE: I, Alfred Donovan, would like to remind Shell lawyers that the "group" has placed on record its acknowledgement of my freedom to air my opinions about Shell on ShellNews.net. I did of course already have rights under various freedom of expression conventions and declarations but its nice to know that Shell, one of the multinational rulers of our planet, recognises this fact. The Royal Dutch Shell Group made the following unusual statement in a legal document in regards to this website: - "The... Group... have been aware of the site since the beginning and whilst they would not endorse or agree with many of the comments made by the Respondent on the website, they have taken the view that the Respondent is entitled to express his opinions and to use the Internet as a medium for doing so." This statement drafted by Shell lawyers and authorised by the "Group", amounts to tacit approval/acceptance/recognition of this website by Shell. It was submitted to The World Intellectual Property Organisation in May 2005 by Shell International Petroleum Company Limited on behalf of the Royal Dutch Shell Group in proceedings against me, Alfred Donovan, as the "Respondent" (owner) of three domain names, including www.royaldutchshellplc.com. It remains a mystery why Shell has taken an entirely different view regarding the fundamental human right to freedom of expression in respect of the former Shell geologist Dr John Huong, the well-known Shell whistle-blower, in relation to postings under his name elsewhere on this same website. Eight companies within the Royal Dutch Shell Group collectively obtained a High Court Injunction to silence him. The Injunction remains in force.
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