By John Donovan of RoyalDutchShellPlc.com
A 90 year old war veteran, Alfred Donovan, created a gripe website focused on Shell which, in an extraordinary alliance with the so-called â€œKremlin attack dogâ€ Oleg Mitvol, has cost the oil giant billions of dollars and as a by-product, changed the course of history
This article tells the story of how a $4 a week website set up by a 90 year old internet warrior played a historic pivotal role in world energy politics by supplying to the Russian government crucial documentary evidence which pushed Shell out of its majority stake in the Sakhalin-2 project in Siberia.
This established a precedent which led to the same treatment being applied to BP, and in concert with events in other oil rich nations e.g. Venezuela, has changed the balance of control over energy from commercial oil giants to sovereign governments. In a world with a fast growing insatiable appetite for energy, but with finite dwindling hydrocarbon resources, this fundamental transformation has potential far reaching consequences.
A newsletter published by the One World Trust, an independent research organisation linked with the UK Houses of Parliament and the United Nations, credits the gripe website founded by Alfred Donovan and now operated jointly with his son John (the author of this article), as having a â€œprofound impactâ€ on the oil giant Royal Dutch Shell.
It correctly says that the website has cost Shell billions.
The following extracts are from the July/August 2007 issue of the One World Trust newsletter, â€œAccountability in Actionâ€.
As online publication becomes easier, through innovations such as blogs and websites such as YouTube, millions of people are finding a voice. With the right combination of luck, judgement, timing and the Internet an individual can have a great deal of influence. Yet, this individuality of the Internet means users are often acting outside of an institutional framework.
Whilst most bloggers have readers in the tens or hundreds, some have acquired followings in the hundreds of thousands. With such large readerships these bloggers are starting to challenge the dominance of traditional media outlets. Their online editorials signify a progression from the commentating on news stories reported by the mainstream media to setting the news agenda themselves.
Another example is the â€œgripe siteâ€ of www.royaldutchshellplc.com. The site has played a watchdog function on the activities of Shell, and has acted as a central point for the gathering of complaints. With the power of the internet harnessed for both whistleblowers and scandalmongers, it is clear that such great influence can be positive or negative.
Accountability in Practice: Royaldutchshellplc.com â€“ The power of a website
The website Royaldutchshellplc.com is a gripe site established by John Donovan and his father, Alfred, to stream information to the public about the Shell Group, a collection of oil, gas, and petrochemical companies. John Donovanâ€™s use of the website to blow the whistle on Shellâ€™s environmental abuses in the Sakhalin project exhibits the power an individual website can have in holding a global organisation to account.
A â€˜gripe siteâ€™ is traditionally one â€œdevoted to the critique and/or mockery of a person, place, politician, corporation, or institution.â€ However, with the right contacts, a gripe site can become much more than simply a soap box. As The Royal Dutch Shell plc website shows, a gripe site can have a profound impact on global organisations.
Donovanâ€™s battle with Shell began over breaches of contract with regards to sales promotions campaigns he and his father devised that were used to attract customers to Shell petrol stations. Shell and the Donovans settled out of court. But it was after Shell apparently made disparaging remarks about the Donovans that John set up Royaldutchshellplc.com.
Donovan â€œwanted the site to become a magnet for people who had a problem with the company.â€ The site has not only cost Shell billions of dollars in Russia, but Prospect Magazine reports that the Ogoni tribe of Nigeria also use the website to spread information about Shellâ€™s activities in the Niger Delta, and that even Shell insiders unhappy with the company use it.
Royaldutchshellplc.com is just one of many examples of how the Internet makes it possible for concerned individuals to initiate discussion about global organisations, post and share information about organisational actions and their impact, and provide a common forum for affected stakeholders. At the very least, â€˜gripe sitesâ€™ such as this have a valuable watchdog function and remind global companies of the power of public opinion â€“ thus forcing them to confront weaknesses in their own accountability.
The Accountability in Action newsletter refers to the websites profound impact on Shell. In terms of lost revenue and reputational damage, the biggest impact on Shell has undoubtedly been in respect of the Sakhalin-2 mega project in Russia. Shell was the majority stakeholder and lead partner in the consortium company running the project: Sakhalin Energy Investment Company (SEIC).
An article in the February edition of Prospect magazine tells the story of how the Donovanâ€™s passed information they obtained from Shell Sakhalin-2 insider sources to the Russian Government. Oleg Mitvol, a senior Russian environmental official branded as â€œa Kremlin attack dogâ€ by The Guardian newspaper, confirmed in unequivocal terms that the evidence on which he threatened to bring a $10 billion lawsuit against Shell for environmental violations, some of which were admitted by Shell, was supplied by the Donovanâ€™s.
After Mitvol wrote to Ian Craig, the CEO of SEIC about the evidence and announced that Russian â€œspecial servicesâ€ (the FSB formally known as the KGB) had been instructed to verify its authenticity, Shell surrendered control of the $26 billion project to Gazprom, the gas giant controlled by the Kremlin. Shell later announced a consequential downgrading of its reserves by 400,000 barrels. At a cost of say $70 dollars per barrel, that amounted to a revenue loss of $28 billion USD. If the price of oil reaches $100 dollars per barrel by Christmas, as some oil analysts predict, the loss will be $40 billion.
The following is an extract from the article: –
â€œWhat most astonished Shell was the detailed inside knowledge Mitvol had accumulated about the company’s abuses. Some in the company suspected industrial espionage. But it was actually information that the Donovans of Colchester were passing to Mitvol. The two men had received detailed material about Shell’s ecological abuses on Sakhalin: a catalogue of corner-cutting, mismanagement and efforts to cover up damaging evidence. They say they got this information from Shell insiders. Mitvol clearly trusted the material, and in December he admitted for the first time publicly that his deep throat on Sakhalin was John Donovanâ€.
The acrimony between the Russian government and Shell stretched back to 2005 when President Putin vented his anger on Jeroen van der Veer, Shellâ€™s CEO, after Shell announced a doubling of the project costs. The huge increase in costs put back by many years the date the Russians would receive any income from the Production Sharing Agreement signed in 1994, during the Boris Yeltsin era. The Donovanâ€™s contacted Putin soon after his castigation of Van der Veer and subsequently started supplying leaked Shell insider information to Mitvol, said to be a close associate of Putin.
This was at a time before the Putin regime had taken any action to seize energy projects from foreign investors. The plight of the Western Pacific gray whales, said to be in danger of extinction due to the environmental impact of Shellâ€™s project, was another consideration which persuaded the Donovanâ€™s to feed information to Mitvol, who presents himself in the media as being a man of integrity genuinely concerned about the environmental consequences of major projects, such as Sakhalin-2.
At the time of being questioned by the news media about the evidence supporting his threatened litigation against Shell, Mitvol cited no other evidence except for the documents supplied by the Donovanâ€™s. From his quoted categorical comments to the media (below) it seemed that the entire Russian case rested on that evidence. Without it, the Russian government had no legitimate grounds to threaten Shell and SEIC. With the evidence it was able to face down the protests of western countries and Japan and force Shell into becoming a junior partner in a project now led by Gazprom, an energy giant owned and ruthlessly operated by the Putin regime.
The following are quotes from Mitvol interviews: –
Extracts from Argus Energy Interview (November 2006):
Who will take Sakhalin Energy to court?
Mitvol: â€œI will take them. I have documents proving that the Sakhalin Energy management was aware that the company violated technical standards, but carried on trying to meet project deadlines and refused to stop work. I am confident of winning my case in Stockholmâ€.
What documents are these? Where are they from?
Mitvol: â€œI have email correspondence between executives in Sakhalin Energy management from 2002. I received these letters from John Donovan, owner of the anti-Shell website www.royaldutchshellplc.com. I received them on 19 October and forwarded them to Sakhalin Energy with a request for an official reply. But I have not received any reply so far. I presume that they are in shockâ€.
How could you prove that these documents are genuine?
Mitvol: â€œThey appear genuine and we have special services working to prove this. Once they have been verified, we will have enough evidence to take Sakhalin Energy to court. If we win, the Sakhalin 2 consortium should pay compensation for all the environmental damages â€” which will come to over $10bn â€” as well as compensation to the state for loss of revenues caused by the additional delaysâ€.
Where did you get the figure of $10bn from?
Mitvol: â€œThis figure was calculated by a group of experts, including Rosprirodnadzor. It is a rough figure. In November, we will set up a special commission comprising Russian and international experts to assess the cost of damagesâ€.
Do you think that environmental approval for Sakhalin 2 will be revoked?
Mitvol: â€œI do not know. Sakhalin Energy has a strong lobby in the government. The fact that Rostekhnadzor [Russiaâ€™s technical watchdog] is reluctant to sign the document to revoke the environmental approval supports this viewâ€.
Extract from an Interfax news agency report published by “Johnsonâ€™s Russia List”: 22 July 2006
“On October 19, Rosprirodnadzor deputy chief Oleg Mitvol sent a letter to Sakhalin Energy CEO Ian Craig, asking him either to confirm or deny information contained in confidential e-mails from Shell natural gas field manager Hans Bouman to Engel Van Spronsen, then Sakhalin Energy technical director in 2002. Copies of the e-mails were forwarded to Rosprirodnadzor from John Donovan, a Shell shareholder and the owner of a website providing news on Shell.”
Shell management was by now aware of the leaking of information to the Donovanâ€™s and an investigation was launched to try to stop the leaks. As previously mentioned, Russian â€œspecial servicesâ€ were also investigating.
Link to Lloyds List article: â€œI spy with my little…â€ 30 November 2006
The situation was extremely serious for Shell. As will be seen later, the efforts at stopping the leaks were not entirely successful.
Emboldened by its success in taking over the Sakhalin-2 project the Russian government soon turned the attention of Mitvol to BP, which within a matter of weeks, surrendered control of the giant Kovykta natural gas field to Gazprom.
This meant that instead of having to wait years for the SEIC and TNK-BP production sharing agreements to produce revenue for the Putin regime, the Russians were now in charge of both mega projects and the cash flow could commence quickly and at a rate determined by the Russians, not by foreign owned companies.
The whole situation was transformed for the Putin regime which has since become far more assertive in international relations, even recently laying claim to the potential hydrocarbon riches in the arctic. Fuelled by hydrocarbon income, Putin is now probably the single most powerful person in the world.
OTHER RECENT DEVELOPMENTS
Despite the best efforts of Shell Global Security led by a former senior British secret service officer, Ian Forbes McCredie OBE, the Donovanâ€™s have continued to receive leaked information from Shell SEIC insiders.
In June 2007, John Donovan passed Sakhalin-2 insider information to the Financial Times and the Moscow Times relating to David Greer, the then Deputy Chief Executive of Sakhalin Energy – a Shell managing director on secondment to the project. On 22 June Mr Greer resigned after 27 years with Shell following exposure of a scandal as a result of the leaked information, which included an internal email circulated by Greer (and allegations of corruption). Mr Greer had previously been accused of trying to bribe a Russian official.
Once again the website run by a 90 year old and his 60 year old son had a devastating impact on Shell, its reputation and its investors.
Alleged Shell $50 million bribe to Oleg Mitvol
On 8th August 2007, a Russian tabloid newspaper, â€œTvoi denâ€, published an article following an interview with Mitvol about the dramatic events leading to the Shell capitulation which allowed Gazprom to take over Sakhalin-2. It quoted Mitvol as saying that he had been approached by Shell and offered a $50 million bribe in exchange for halting environmental checks on the project.
The next day, 9 August, Mitvol backtracked on his allegation saying that â€œmiddlemenâ€ approached him to arrange a meeting in Switzerland and they had not in fact mentioned the sum of $50 million. However, some may consider this to be an unlikely figure to have simply been plucked out of thin air.
The intrigue continues.