Article by John Donovan of RoyalDutchShellPlc.com
While the headline might at first glance appear to be an outrageous claim, it happens to be supported with independent verifiable evidence from reputable sources.
The website warrior in question is my father Alfred Donovan, who is in his 90â€™s. The website is royaldutchshellplc.com recently described by Carl Mortished, World Business Editor of The Times newspaper as â€œan independent website that monitors the companyâ€ (Shell). We operate the site jointly.
The lost revenues relate to one of the worldâ€™s biggest energy projects: Sakhalin-2 in Russia.
An article published in The Observer newspaper today predicted that tomorrow Shell will â€œslashâ€ its reserves figures from last year by more than 50%, including the loss of 1.1 billion barrels from Sakhalin-2.
The Observer article said…
â€œan estimated 1.1 billion barrels will be lost from the $20bn Sakhalin II joint venture after Shell was forced to sell part of its stake last year to Russian gas giant Gazprom.â€
We played a key role in Shellâ€™s loss of its majority holding in the Sakhalin-2 mega-project which resulted in the consequential loss of revenue from the reduced reserves.
The following are links to reports by two independent reputable news sources confirming that we supplied Shell internal documents to the so called â€œKremlin attack dogâ€, Oleg Mitvol, the high level Russian official who successfully used it to pressurise Shell into its surrender of its majority stake in Sakhalin-2.
Argus Media Group: Petroleum Argus (see page 4: Mitvol turns up the heat)
Johnson’s Russia List: Interfax Report
Mitvol was unambiguous in identifying me as being the sole source of the evidence. Thus it is an undeniable and provable fact that calculated at todays oil price, a humble blog site has cost Shell billions in lost revenues e.g. 1.1 billion x $110 = $121 billion. Even if the Observer speculation proves unfounded, we know from Shell’s own accounts that as a result of the Gazprom transaction on Sakhalin-2, Shell has admitted a loss of 400,000 barrels which, at the same oil price of $110 per barrel, results in a revenue loss of $44 billion.
According to many experts, the price of oil is likely to raise even further in future years, in which case the loss of revenue to Shell will increase even more. The calculation of loss does not take into account Shell’s loss of profits in future years as a major stakeholder in the venture.
Contact with Oleg Mitvol followed a letter we sent to President Putin. The political climate was very different at that time.
Shell’s Sakhalin surrender was not a foregone conclusion. The FT reported today that Imperial Energy has repulsed a similar campaign against their Russian energy project by Mitvol also involving Gazprom. This time Mitvol did not have the irrefutable damning evidence which we were able to provide him with in respect of Shell. The documents we supplied completely undermined Shell’s position. According to Mitvol, Sakhalin Energy management was in a state of shock when supplied with the documents.
FT: Political victory of sorts for Imperial…
We knew from our Shell insider sources that bad news was in the pipeline and published warnings several days ago to that effect but did not, until today, have the details. We were told that Shell Chief Executive Jeroen van der Veer and his head of Exploration & Production, Malcolm Brinded, have been running around like headless chickens, so we realised something very serious was afoot.
Hydrocarbon reserves are a very sensitive subject for Shell following a battering of Shellâ€™s reputation after it became apparent to a shocked world that Shell had filed false returns with the U.S. Securities & Exchange Commission claiming proven oil and gas reserves it did not have. Shell has been compelled to pay several hundred million dollars in fines and lawsuit settlements arising from the fraud. The most recent announcement of a further settlement was made only a matter of days ago.
Consequently, further dramatic news about more cuts in reserves â€“ the most important asset an oil company has, is very bad news indeed.
Jeroen van der Veer tried to soften the impending blow in an email circulated to Shell employees in January. Unfortunately for van der Veer a Shell insider supplied us with his email and we passed it on to The Times newspaper.
The leak resulted in a global scoop for The Times in an article headlined: â€œShell chief fears oil shortage in seven yearsâ€
In his email van der Veer spoke about oil shortages generally, but did not reveal the desperate state of affairs at Shell in relation to reserves cuts and replacement.
The following is an extract from the article:
â€œMr van der Veerâ€™s prediction that the oil industry would soon struggle to deliver sufficient conventional oil and gas to meet demand echoes growing concern from other oil bosses. â€œ
We now know just how much of a struggle Shell is having under his management in this regard.