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Viewing cable 09ABUJA259, C) NIGERIA: SHELL BRIEFS AMBASSADOR ON OIL GAS ISSUES,

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Reference ID Created Released Classification Origin
09ABUJA259 2009-02-10 16:04 2010-12-08 21:09 SECRET//NOFORN Embassy Abuja
VZCZCXRO7442
OO RUEHPA
DE RUEHUJA #0259/01 0411610
ZNY SSSSS ZZH
O 101610Z FEB 09
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 5253
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHOS/AMCONSUL LAGOS 0802
RHEBAAA/DEPT OF ENERGY WASHDC
S E C R E T SECTION 01 OF 03 ABUJA 000259 

NOFORN 
SIPDIS 

STATE PASS USTR FOR AGAMA 
USDOE FOR GEORGE PERSON AND CHAYLOCK 

E.O. 12958: DECL: 10/02/2028 
TAGS: EPET ENRG ELAB PINR ECON SENV PGOV NI
SUBJECT: (C) NIGERIA: SHELL BRIEFS AMBASSADOR ON OIL GAS ISSUES, 
COMMENTS ON PRESIDENT'S HEALTH AND HIGH-LEVEL CORRUPTION 

REF: ABUJA 203 

Classified By: Ambassador Robin R. Sanders for reasons 1.4. (b 
& d). 

1. (S/NF) SUMMARY: Shell's regional executive vice president for 
Africa Ann Pickard and government relations representative Peter 
Francis met with the Ambassador on January 27 in Abuja and provided 
an update on problems in the oil and gas sector. Pickard said that 
things were going from bad to worse, especially the security 
situation. She said that Nigeria now had one of the highest negative 
ratings for maritime operations, creating problems for Shell in 
hiring oil tankers to load, as tanker operators will work only under 
highly selective conditions. Last year there were about 80 piracy 
attacks on land and water combined. This year already 15 have been 
tallied, which includes 3 for Shell and 3 for Exxon. On corruption, 
Pickard said that Nigerian entities control the lifting of many oil 
cargoes and there are some "very interesting" people lifting oil. 
Oil buyers would pay NNPC GMD Yar'Adua, Chief Economic Advisor Yakubu 
and the First Lady Turai Yar'Adua large bribes to lift oil. Pickard 
also reported an instance of the Attorney General Aondoakaa allegedly 
soliciting a $20 million bribe to sign a document. The International 
Oil Companies (IOC) are quite concerned about the "very flawed" new 
petroleum sector energy bill. The IOCs will be asking U.S., Dutch, 
and U.K. COMs to convey points on the bill to GON policymakers. 
Pickard agreed that the President's health is a guessing game. She 
said that in her recent meetings with Yar'Auda he seems alert, though 
very drawn in the face, thin, and frail. Her information is that the 
President was not in danger of dying soon, but also was unlikely to 
ever fully recover from his ailments. (Note: see septel on oil/energy 
sector issues for the Ambassador's meeting with the new Minister of 
Petroleum Resources. End Note). END SUMMARY. 

2. (C) Shell's regional executive vice president for Africa Ann 
Pickard and government relations representative Peter Francis met 
with the Ambassador on January 27, 2009 in Abuja and provided an 
update on problems in the oil and gas sector. Pickard reported that 
Shell's meeting with Minister of Petroleum Resources Dr. Rilwanu 
Lukman scheduled for earlier that day had been cancelled; the third 
week in a row where key appointments had fallen through, with the 
excuse of being summoned to the Presidential Villa. (Note: Emboffs 
have observed that meetings with ministers and senior staff are 
indeed often cancelled with the explanation that they have been 
summoned to the Presidential Villa, even when the President is out of 
town. End note). Econ Counselor and Econoff (notetaker) also 
attended the discussion. 

- - - - - - - - - 
FROM BAD TO WORSE 
- - - - - - - - - 

3. (C) The Ambassador took the opportunity to share with Pickard that 
the Mission was in the midst of completing its Strategic Plan and 
asked Pickard where she thought Nigeria was headed. Pickard said that 
things were going from bad to worse, especially in terms of security. 
She said that Nigeria now had the highest negative rating for 
maritime security, creating problems for Shell in hiring oil tankers 
to load; tankers will work only under highly selective conditions. 
She also noted that late on the evening of Saturday January 17, 
Nigerian militants attacked and boarded two vessels at a Shell crude 
oil loading platform in Bonny and took eight crew members hostage. 
Standard procedure on the tanker was followed: the ship went into 
immediate lock down; there were no injuries or fatalities from the 
boarding. The eight Nigerian crew members who were taken hostage were 
later released. The pirates who went through the sections of the 
boat to which they were able to gain access, smashing and stealing 
computers, electronics, and personal items of the crew members. The 
second vessel was a tug boat towing a supply vessel from Bonny to 
Calabar. Last year there were about 80 incidents of piracy; this 
year already 15 had been tallied, which includes 3 for Shell and 3 
for Exxon. GON officials have told Shell to "hire more security." 
The price of doing business in the oil and gas sector in Nigeria 
continues to climb she concluded. [Note: The International Maritime 
Bureau (IMB), a division of the International Chamber of Commerce - 
www icc-ccs org - reports that the waters off the Gulf of Guinea 
(Nigeria) remain the second worst, with 40 incidents in 2008 to the 
Horn of Africa (Somalia) with 42 recorded incidents. The IMB notes 
that in 2009 the Horn of Africa will be more intense as Spring comes 
due to the large number of foreign warships in the region on active 
patrol to ensure the safety and security of vessels. The same 
increased security is not expected for Nigeria in 2009. End Note] 

- - - - - - - - - - - - - - - - - - - - - - - - - 
SHELL BELIEVES COUP UNLIKELY; CORRUPTION WORSENING 
- - - - - - - - - - - - - - - - - - - - - - - - - 


ABUJA 00000259 002 OF 003 


4. (S/NF) The Ambassador asked what Shell's thoughts were on any 
potential for a coup. Pickard answered that there is little 
intellectual capital to plan and execute a coup and Shell sees little 
potential for one. Pickard then went on to say that corruption in 
the oil sector was worsening by the day. The Ambassador asked for a 
few examples. Pickard said that Nigerian entities control the 
lifting of many oil cargoes and there are some "very interesting" 
people lifting oil (People, she said that were not even in the 
industry). As an example she said that oil buyers would pay Nigerian 
National Petroleum Corporation (NNPC) General Managing Director 
Yar'Adua, (Note: not related to President Yar'Adua. End Note) Chief 
Economic Advisor Yakubu, and the First Lady Turai Yar'Adua large 
bribes, millions of dollars per tanker, to lift oil. The IOCs 
control the liquefied petroleum gas (LPG) cargos, so GON actors do 
not have the same opportunity for illicit gain. Pickard also said a 
former associate of hers (protect) had told her he had been present 
when Attorney General Aondoakaa had told a visitor that he would sign 
a document only if the visitor paid $2 million immediately and 
another $18 million the next day. 

- - - - - - - 
VERY BAD BILL 
- - - - - - - 

5. (C) Pickard reported that Shell, Exxon-Mobil and Chevron all have 
big license review disputes with the GON. Shell has taken its 
dispute to court and the court is supporting Shell's position. 
According to her, Shell is stepping back for the moment, however, to 
see how the other two majors negotiation fair, but is not taking its 
case out of court yet. The IOCs are quite concerned about the "very 
flawed" new petroleum sector energy bill. The bill is silent on what 
fiscal regimes would be applied. Shell says that the bill could 
reduce the corporation's overall value in Nigeria. GON discussions 
around the bill have mentioned the possibility of moving to five-year 
licenses and prohibiting exploring both oil and gas from the same 
source, which would contradict how oil and gas extraction works in 
practice. The bill is silent on joint ventures; it just states that 
NNPC will be incorporated. Pickard said the bill was "likely to sail 
through." The IOCs will be asking U.S., Dutch and U.K. COMs to 
convey points on the bill to GON policymakers. (Note: Pickard 
mentioned that the IOCs will not share company information directly; 
they will hire consultants, like McKinsey, to produce common themes 
so the messages from the IOCs to be shared with the relevant 
Ambassadors are clear and consistent. End note). Pickard lamented 
that the expected cycle of petroleum is at least five years for the 
first oil to flow, another 10 years of production to begin to break 
even. These numbers change when oil is $40 per barrel instead of $100 
per barrel. Hence, a five year license would not be an incentive for 
investment and development. 

- - - - - - 
GAS ISSUES 
- - - - - - 

6. (C) The Ambassador said that the Mission was looking at 
performance measures for the economy, i.e. the linkage between the 
country's electricity output and gross domestic product (GDP). The 
Ambassador shared that the Mission feels strongly that gas for 
feedstock is the key to Nigeria's power production, which is only 
about 2,800 average megawatts for a country of 140 million people. 
Pickard agreed and added that the U.S. got it wrong on its domestic 
natural gas policies, which it took over 20 years to sort out. So it 
is not surprising that Nigeria has it wrong at this point. She said 
there is not adequate infrastructure for gas. Gathering plants and 
pipelines to carry the product to the power plants still have to be 
financed and built. The Nigeria Independent Power Projects (NIPP) 
were located where there is no gas and no infrastructure. In 
addition, the international oil companies were coerced into building 
a power plant each, something they have no expertise in, and they are 
scrambling to deliver gas to these plants. 

- - - - - - - - - - - - - - - - - - - - - - 
YAR'AUDA VACATION IS PERHAPS SOMETHING ELSE 
- - - - - - - - - - - - - - - - - - - - - - 

7. (S/NF) Pickard agreed that the President's health is a guessing 
game. She said that in her recent meetings with Yar'Auda he seems 
alert but drawn in the face and frail. She reported that a Julius 
Berger (protect) contact says that the President was not in danger of 
dying soon but has serious ailments from which he will never fully 
recover. Pickard shared that Berger provides transportation 
including planes for the President and has reportedly flown in 
doctors and technicians to attend the President (reftel). She said, 
for instance, that her Berger contact confided that they flew the 
President from Germany to Saudi in September 2008. Additionally, the 
Berger contact thought the President would not return to the Villa 

ABUJA 00000259 003 OF 003 


offices, as they were moving the President's personal things out of 
the Villa. (Note: What we think this means is that Yar'Adua is 
spending most of his time in the presidential residence and not in 
the Villa offices. End Note). 

- - - - - - - - - - - - - - - - - - - - - - 
HOPES THAT OIL NATIONALISM CAN BE TEMPERED 
- - - - - - - - - - - - - - - - - - - - - - 

8. (C) The Ambassador asked how comfortable Shell was with the new 
appointment of Dr. Rilwanu Lukman as Minister of Petroleum Resources, 
and the appointment of Mohammad Sanusi Barkindo as the new NNPC GMD. 
Pickard sees the nationalism card cooling with the removal of former 
NNPC GMD Yar'Adua, given that new Minister of Petroleum Lukman is 
more "pragmatic" and will hold sway over deputy Minister Ajumogobia. 
(Note: Ajumogobia's technical assistant told EconOff in a meeting on 
January 14, 2009 that the State Minister was focusing on Gas, since 
before the mass cabinet change he was State Minster of Petroleum, 
with a separate State Minster for Gas.) End Note. She said she was 
also okay with NNPC chief Barkindo. She has worked with Barkindo 
several times over the past few decades, especially when they were 
both working climate change. She said Barkindo led Nigeria's 
technical delegation to climate change negotiations that produced the 
United Nations Framework Convention on Climate Change (UNFCCC)and the 
Kyoto protocol to UNFCCC during while he served on its Bureau at 
various times. She indicated that although his undergraduate studies 
were in political science, he obtained his MBA from Southeastern 
University in Washington DC and did postgraduate work in petroleum 
economics and management at Oxford University. Although she also said 
terms like nationalistic and Chavez she however said that she thought 
he could be steered in the right direction on the petroleum sector. 

- - - - 
COMMENT 
- - - - 

9. (C) Although Pickard clearly seems frustrated with the way things 
are going in the maritime security, oil sector legislation, and 
corruption which affects Shell's bottom line, it was useful to hear 
that she has hopes for the new Petroleum Minister and NNPC chief. 
Septel on the Ambassador's meeting with new Petroleum Minister Lukman 
will address many of these same issues. 

10. (U) This cable was coordinated with Consulate Lagos. 

SANDERS