Series of Write-Downs Leads to a Loss at BP
By STANLEY REED
Published: July 31, 2012
LONDON — BP, the British oil company, on Tuesday reported a $1.4 billion loss for the second quarter, its operating profits wiped out by $4.8 billion in write-downs on refineries, shale gas assets in the United States and a long-delayed project in Alaska.
The earnings did nothing to assuage the concerns of investors, who were already discontented with the performance of the century-old company and its first American chief executive, Robert W. Dudley. BP’s shares fell nearly 5 percent in New York trading on Tuesday.
“This is a very, very disappointing set of results,” said Peter Hutton, an oil analyst at RBC Capital Markets in London. “They missed across all fronts by a wide margin.” Stripping out the $4.8 billion in write-downs, BP’s results were still 17 percent below the consensus estimates of analysts, Mr. Hutton said.
According to Mr. Dudley, BP is writing off a combined $2.1 billion on shale gas acreage because of lower natural gas prices, as well as a project called Liberty on the North Slope in Alaska that BP recently halted because of environmental and other concerns.
The remaining $2.7 billion write-down was for the value of BP’s American refinery system. The company is trying to sell two of its United States refineries, including a giant one in Texas City, Tex., and has come to realize from other sales that they are not worth the value they had on the company’s books.
Mr. Dudley is caught between pressure from investors who want to see an improvement in the stock price, which is down about 30 percent from its level at the time of the disastrous Gulf of Mexico oil spill in April 2010, and his own determination to make BP a safer, more reliable and ultimately more profitable company.
“Managing competing priorities is always a problem,” Mr. Hutton said. “If you want to be thorough and make sure everything is right, it is a major, major exercise.”
Mr. Hutton said that to convince investors he was on the right track, Mr. Dudley needed to demonstrate that costly shutdowns in the Gulf of Mexico were nearing an end.
The gulf has been a two-edged sword for BP. The 2010 spill has already cost the company $38 billion in charges, including an additional $847 million this quarter. But BP has also been the leader in developing deepwater oil fields in the gulf, and these properties produce some of the most profitable oil in the company’s portfolio.
BP’s production in the gulf has dropped sharply in the past two years because of repairs as well as a temporary halt on drilling after the 2010 accident.
BP’s oil production in the United States was down 25 percent compared with a year earlier, to just 350,000 barrels a day.
During a telephone call with reporters on Tuesday, Mr. Dudley said that two major gulf oil fields, Mad Dog and Atlantis, had been shut for repairs. BP has been replacing the subsea infrastructure of Atlantis, which has long been the target of safety critics.
According to a spokesman, Robert Wine, 85,000 barrels a day of BP production in the gulf was offline in the quarter. Mr. Wine said that the two closed fields would be coming back in the second half of this year and that a new field, Galápagos, was ramping up.
While the gulf will soon be back to full production, repairs were to begin in the North Sea, where drilling is also lucrative.
“One of the things we are not going to do is drift off the path of focus on safety,” Mr. Dudley said. “Stepping up the accelerator of performance in place of that is not going to happen.”
Mr. Dudley is trying to use the 2010 spill as an opportunity to streamline BP into a smaller but more profitable company. He wants to focus on high-risk, high-return exploration and difficult megaprojects like those in deep water.
Since the beginning of 2010, BP has sold about $24 billion of oil fields and other assets that it deemed nonstrategic, and it planned to bring that to $38 billion by the end of 2013.
The company has cut overall production, excluding its TNK-BP Russian affiliate, to about 2.3 million barrels a day from about three million barrels a day in 2009.
“It is going to be value over volume,” Mr. Dudley said.
His most important move in this regard is his plan to sell the company’s 50 percent stake in TNK-BP, a joint venture in Russia. BP is in talks with its Russian partners and the state oil company Rosneft to sell the stake, which analysts think could bring $20 billion to $30 billion.
BP has made good money from the $8.1 billion Russian investment, agreed to in 2003, but the deal has been tarnished by frequent bouts of infighting between BP and its Russian shareholders.
Last year, the partners used a legal veto to break up a BP deal to invest in a joint venture with Rosneft to explore and develop what could be hugely productive Arctic blocks off Russia. Exxon Mobil wound up replacing BP in the deal.
BP’s share in TNK-BP accounts for about 30 percent of the British company’s oil production, but the markets and the company have come to see the Russian affiliate as a dead end. The partners block BP from other Russian investments, and BP receives little benefit in its own stock price, analysts said.
Mr. Dudley acknowledged that no matter what he did, investors would be nervous until they saw a resolution of the Russian situation and more clarity on how much BP would need to pay the United States government and other entities for the 2010 spill. A court case on those liabilities has been postponed until 2013, but Mr. Dudley said BP was amenable to a fair and reasonable settlement.
BP’s disappointing results were far from unique in the industry. The two biggest oil companies, Exxon Mobil and Royal Dutch Shell, also recently reported lower earnings compared to a year earlier.
All three companies were hit by oil prices that were down 7 percent from a year earlier and by sharply lower natural gas prices in the United States.
This article has been revised to reflect the following correction:
Correction: July 31, 2012
An earlier version of this article misstated BP’s oil production in the United States as 350 million barrels a day, rather than 350,000 barrels a day.
Labels: BP, OIL
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Firm challenges BP & Shell acquisitions
Saturday, 16 June 2012 19:44
Darlington Musarurwa
Business Editor
A local petroleum firm, Hughber Petroleum, has filed an application in the High Court seeking the nullification of the acquisition of BP & Shell assets by Masawara through its subsidiary FMI Energy Zimbabwe Limited (FMIE) and for it to be substituted as the purchaser, it has been learnt.
The company put in a competing bid for the former BP and Shell assets in 2010.
By last month, FMIE and two other respondents — the National Indigenisation and Economic Empowerment Board (Nieeb) and the Ministry of Youth Development, Indigenisation and Economic Empowerment — had been served with the papers.
However, BP Africa Limited and the Shell Petroleum Company Limited had not been served with the application by May 2.
It is understood that the ministry and the board are opposing the application.
Hughber Petroleum was formed in 1999 by Mr Hurbert Nyambuya, a former regional manager with Total Zimbabwe, and is a member of the Indigenous Petroleum Group of Zimbabwe.
On March 24 last year the AIM (Alternative Investment Market)-listed Masawara, through its wholly owned subsidiary FMI Energy Zimbabwe (Private) Limited, concluded the acquisition of BP Zimbabwe and Shell Zimbabwe for $32,7 million.
In a recent statement accompanying the company’s annual results, Masawara contended that the court application “is fundamentally flawed and has no merit, and that it will ultimately be dismissed by the court”.
“Hughber Petroleum (Private) Limited (“Hughber”), a company that put in a competing bid for the former BP and Shell assets in 2010, filed an application in the High Court of Zimbabwe in February 2012 seeking an order for, inter alia, the nullification of the acquisition of these assets by FMI Energy Zimbabwe (Private) Limited (“FMIE”) and for it to be substituted as the purchaser in place of FMIE.
“FMIE and two other respondents that have been served with papers, that is the National Indigenisation and Economic Empowerment Board and the Minister of Youth Development, Indigenisation and Economic Empowerment, are opposing the application.
“As at 3 May, 2012, the other respondents, BP Africa Limited and the Shell Petroleum Company Limited, had not yet been served with the application. The directors of the company believe that the court application is fundamentally flawed and has no merit, and that it will ultimately be dismissed by the court,” noted Masawara.
Though Nieeb is believed to be opposing the court application, earlier this year it accused Masawara in a 23-page report of misrepresenting its shareholder composition and also failure to carry out an employee shareholder scheme — a precondition for the consummation of the acquisition.
Ultimately, the board recommended the Minister of Youth Development, Indigenisation and Economic Empowerment, Mr Saviour Kasukuwere, to cancel the deal.
Said Nieeb: “We recommend revocation of the approval. The legal implication will be that the two parties will not be legally able to conclude their agreement. Both parties will revert to the status quo. The company will continue to operate under BP and Shell through local management until properly indigenised.”
The recent court application is the third hurdle faced by the Mr Shingi Mutasa-led group after the deal was also queried by Nieeb and the Competition and Tariff Commission early this year.
When the deal was conceived, three entities — Masawara Group, Masawara Mauritius Limited (MML) and FMI Zimbabwe — were central to the transaction.
FMI Zimbabwe is wholly owned by MML, which, in turn, is also owned by Masawara.
However, by the end of March last year, MML had formed a joint venture with a Mauritian-based firm, Alveir Management Limited, with the former holding 51 percent and the latter having 49 percent in the resultant entity — Masawara Energy Mauritius (MEM).
MEM, which wholly owns FMI Energy Zimbabwe, now controls BP and Shell assets.
Critics argue that MEM “has a different DNA” to FMI Energy Zimbabwe, which was the initial applicant; and, therefore, cannot be compelled to comply with the local empowerment legislation since it is based in Mauritius.
FMI Holdings, which controls the FMI group of companies, is an investment company incorporated in Zimbabwe under registration number 3181/90. Its shareholders include: Listerton Investments, owned by the Mr Shingi Mutasa Family Trust, S. Mutasa and L. Mutasa; Invesco, which is considered an inactive shareholder with a 25,5 percent; and private investors based in the UK.
Initially fears raised by Nieeb were that FMI Holdings shareholding in the Masawara group had been diluted to 26 percent, which is below the approved threshold, and there was a possibility of it to be whittled further since the company had borrowed money from an “unknown bank” on October 31 2011 and offered $50 million FMI Holdings shares as collateral.
Masawara, formed as a Zimbabwe-focused business, last year acquired 50 percent in telecommunications business Telerix Communications in January and a 15 percent stake in iWay Africa in October.
In addition, the company also shored up its stake in TA Holdings from 30 percent to 37,73 percent.
Meanwhile, in the annual report, Masawara reported that for the year ended December 31 2011 it realised a $6,7 million profit from a loss of $3,3 million buoyed by a gain on the bargain purchase of BP & Shell assets of $9,2 million.
TA holdings also performed well after recording a net profit of $6,3 million, with the group’s share of profit being $1,6 million.
iWay Africa and Telerix, however, underperformed and will be restructured during the course of the year.
In particular, Telerix incurred a loss of $3,2 million for the period due to costs related to the development and testing of the WiMAX network that is expected to be launched before the end of the year.
Joina City showed signs of growth with revenues jumping to $1,2 million in the review period from $538 000 in the same period a year ago. At the end of the period, the retail section was 90 percent occupied, while the office tower was 29 percent occupied.
As part of a comprehensive restructure of the group, more than $800 000 has since been used in the retrenchment at TA Holdings and at the Zimbabwe hotels head office.
Already, a decision has been made to divest from PG Industries and from the Zimbabwe Fertiliser Company.
Labels: BP, OIL, ROYAL DUTCH SHELL PLC
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Puma opts to maintain 75% shares in BP
By Chiwoyu Sinyangwe
Thu 23 June 2011, 09:10 CAT
PUMA is not interested in buying the listed stake of BP Zambia Plc after opting to maintain 75 per cent ownership of the country’s biggest oil marketing company.
Its sponsoring brokers, Stockbrokers Zambia Limited, said Puma Energy wanted Securities and Exchange Commission (SEC) to waiver the listing rule that demand that a company taking over a listed company extends, mandatorily, the offer to minority shareholders who did not participate in the transaction for the majority unlisted shares.
A waiver of the mandatory offer would mean that the shareholding of Puma Energy would remain fixed at 75 per cent and the balance of 25 per cent would be the public spread or free float held by minority shareholders.
“Around the BP mandatory offer, the current position is that the application for a waiver is under review with the Securities and Exchange Commission (SEC) pending conclusion of various completion formalities on the transaction,” said Jimmy Mwambazi, a key analyst at Stockbrokers Zambia Limited.
He said Puma Energy and BP Africa have not concluded the determination of the final price.
“This process is still on-going,” said Mwambazi.
Last year, BP has agreed to sell its fuels marketing businesses in Namibia, Botswana and Zambia to Puma Energy.
BP also announced that it has agreed to sell its 50 per cent interest in each of BP Malawi and BP Tanzania to Puma Energy, subject to the pre-emption rights of its co-shareholders.
The decision to divest these businesses, which was first announced by BP in March 2010, followed a strategic review of BP’s southern African refining and marketing businesses. The sales do not include BP's refining and marketing businesses in Mozambique or South Africa.
Labels: BP, OIL
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WikiLeaks: BP had gas blowout in 2008
NEW YORK, UNITED STATES Dec 16 2010 06:22
Leaked US diplomatic cables reveal BP suffered a blowout on an Azerbaijan gas platform in September 2008 and was fortunate to evacuate workers safely after a blast that preceded the one that killed 11 workers in the Gulf of Mexico in April, the Guardian newspaper reported.
Other cables leaked by the web site WikiLeaks claim Azerbaijan's president accused BP of stealing oil from his country and using "mild blackmail" to secure rights to develop vast gas reserves in the Caspian Sea region.
Also, Chevron negotiated with Tehran about developing an Iraq-Iran cross-border oilfield despite US sanctions against Iran, according to the cables leaked to the Guardian.
The leaks came as the whistleblower site's jailed founder Julian Assange prepared for a challenge in the British high court to the decision to grant him bail. Swedish authorities, who want to question Assange on allegations of sexual misconduct, say he should remain in custody as he is a flight risk.
The Guardian said the latest leaks of US diplomatic cables showed striking resemblances between BP's Gulf of Mexico disaster and a little-reported gas leak in Azerbaijan experienced by the British firm 18 months beforehand.
The cables reveal, the Guardian said, that some of BP's partners in the gas field were upset the company was so secretive about the incident that it even allegedly withheld information from them. They also say that BP was lucky that it was able to evacuate its 212 workers safely after the incident, which resulted in two fields being shut and output being cut by at least 500 000 barrels a day with production disrupted for months.
The Guardian said one leaked embassy cable reports for the first time that BP suffered a blowout in September 2008, as it did in the Gulf with devastating consequences in April, as well as the gas leak that the firm acknowledged at the time.
"Due to the blowout of a gas-injection well there was 'a lot of mud' on the platform, which BP would analyse to help find the cause of the blowout and gas leak," the cable said, according to the Guardian.
'Bad cement job'
According to another cable in January 2009, BP thought that a "bad cement job" was to blame for the gas leak in Azerbaijan. More recently, BP's former chief executive Tony Hayward also partly blamed a "bad cement job" by contractor Halliburton for the Deepwater Horizon disaster in the Gulf of Mexico.
Other leaked cables reveal President Ilham Aliyev accused BP of stealing billions of dollars of oil from Azerbaijan and using "mild blackmail" to secure the rights to develop vast gas reserves in the Caspian Sea region.
Aliyev said the oil firm tried to exploit his country's "temporary troubles" during a gas shortage in December 2006. In return for making more gas supplies available for domestic consumption that winter, BP wanted an extension of its lucrative profit-sharing contract with the government and the go-ahead to develop Caspian gas reserves, one cable from the US embassy in Baku says. Aliyev also threatened to make BP's alleged "cheating" public, the Guardian said the cables show.
The paper quoted the oil firm as saying in a statement that: "BP continues to have a successful and mutually beneficial partnership with the government of Azerbaijan."
There was no immediate response from BP officials in the United States to Reuters seeking comment.
According to other cables, Iraqi Prime Minister Nouri al-Maliki claimed that Chevron negotiated with Tehran about developing an Iraq-Iran cross-border oilfield in spite of tight US sanctions, according to the Guardian.
A Chevron spokesperson told Reuters the company had not done, and would not do, anything in violation of US law.
There was no immediate comment from the US government. - Reuters
Labels: BP, CHEVRON, CORRUPTION, WIKILEAKS
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Trafigura acquires BP’s assets in Namibia, Botswana and Zambia
By Chiwoyu Sinyangwe
Mon 08 Nov. 2010, 03:59 CAT
INTERNATIONAL oil trader Trafigura has bought BP's assets in the southern African nations of Namibia, Botswana and Zambia. Trafigura, controversial commodities conglomerate and the third-largest independent oil trader in the world, has bought BP’s assets in a deal, struck through the Trafigura subsidiary, Puma Energy International.
According to Namibia’s leading newspaper – The Namibian, that country’s mines and energy minister Isak Katali confirmed the deal.
Trafigura, accused of kickbacks in South Africa and found guilty of illegally exporting toxic waste from Amsterdam before reportedly dumping it in the Ivory Coast, has recently been named in a high-powered ploy to try and secure the contract to supply half of Namibia’s fuel.
The newspaper gave no amount for the sale, which it said had been confirmed by Katali.
BP has committed to sell up to $30 billion of non-core assets to pay for its devastating oil leak in the Gulf of Mexico this year.
A spokeswoman for BP in Johannesburg, Glenda Zvenyika, said the company was in talks to sell assets in the three countries, as well as Malawi and Tanzania, but no decision had been made.
“BP is in the process of selecting a buyer for its assets in five African countries and that's all there is at the moment. Before we make an announcement on the deal, these reports are just speculation,” said Zvenyika.
Namibian state-owned petroleum corporation Namcor had bid $93.1 million to buy BP's assets in the country, but failed to secure backing from the government.
Last March, BP Africa announced that BP Zambia Plc, the country's biggest oil marketing company (OMC), is being sold as BP Africa sells 75 per cent of its business in Botswana, Namibia, Malawi, Tanzania and Zambia while focusing on refining and marketing investment in South Africa and Mozambique.
BP Zambia Plc controls about 40 per cent of the total domestic oil marketing sector and is a key supplier of oil and lubricants to the key economic sectors like mining, manufacturing and agriculture, and controls about 75 per cent of the aviation oil segment.
Labels: BP, FUEL, OIL, TRAFIGURA LTD
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Masawara snaps up BP, Shell assets
by Gilbert Nyambabvu
12/10/2010 00:00:00
LONDON listed investment fund Masawara PLC has announced a deal to take over BP and Shell’s Zimbabwe assets subject to regulatory approvals. A statement issued by Shingi Mutasa, one of the fund's investors, on Tuesday said a deal had been agreed in principle.
The assets include 73 retail sites, storage capacity of approximately 59.5 million litres of product across ten strategic centres in the country and a total staff complement of 87 employees.
“The Company is pursuing high quality new investment opportunities in Zimbabwe to add to a portfolio of existing investments,” the statement added.
When the $100m fund launched in August it outlined plans to buy up cheap assets in Zimbabwe ahead of an anticipated upswing in the local economy as political stability returns.
"We have a great opportunity to lead the pack in bringing much needed investment capital to Zimbabwe and help the country rebuild following its recent economic difficulties,” Shingi Mutasa one of Masawara’s main investors said at the time.
Masawara was listed on London’s Alternative Investment Market (AIM) in August raising US$25 million in new funds.
Its portfolio of assets comprises an effective 40 percent interest in Joina City, the single largest commercial and retail building in Harare.
The company also retains a 30 percent interest in TA Holdings, a diversified investment company with stakes in insurance, agro-chemical and hospitality businesses across sub-Saharan Africa and is listed on the Zimbabwe Stock Exchange.
Labels: BP, INDIGENIZATION AND EMPOWERMENT ACT (ZIMBABWE), ROYAL DUTCH SHELL PLC
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BP workers ask Rupiah to ensure full benefits are paid
By Speedwell Mupuchi in Kitwe
Fri 18 June 2010, 04:01 CAT
SOME BP workers have asked President Rupiah Banda to ensure that they are paid their full benefits once the company’s shares are sold. The workers also stated that those wishing to continue with the new owner of BP should do so on a new slate.
In a statement following BP general manager Fumu Mondoloka’s summary of employee situation, the workers urged President Banda to help save their benefits at BP Zambia because the company was allegedly using deceptive and cunning tactics on employees.
The workers stated that they were at the mercy of BP Zambia as the company had made it clear that there was no legal requirement to consult with employees or their representatives upon the sale of BP’s shares.
The workers also stated that according to their company management, there was no legal requirement to compel BP Zambia to pay workers their benefits at the point of sale before being re-employed by the new buyer on equivalent or better conditions prior to the sale.
“This means that workers have no choice of either being retrenched or choosing to continue with the new owners. This can result in workers finding themselves in the cold once they are forced to continue working for the new company,” feared the workers.
“We don’t want to be forced to be sold together with the company unilaterally against our will just because your (President Banda’s) government does not protect workers like us.”
Mondoloka, in his summary on June 13, 2010, acknowledged that many employees had raised questions regarding BP’s announcement of intention to sell 75 per cent interest in its associate, BP Zambia.
He stated that because BP intends to exit all its existing businesses in Zambia, the sale would take the form of sale of BP shares in BP Zambia.
“Many of you are understandably keen to know how the sale will affect you. A recurring theme is whether, under Zambian law, the sale will result in your retrenchment and (possible) rehire by the buyer of BP’s shareholding in the associate,” reads the summary.
Mondoloka asked employees to understand that the sale process had just started and was being managed by a specialist BP team with great experience in such matters.
He also noted that the sale process would take months to complete.
“It is important to understand two things: First, the sale process is confidential. It is necessary for the process to be confidential for many good reasons. Employees need to realize this and accept that they will not have any control or influence over the process. However, I will keep you informed of material developments in the sales process as and when they occur; secondly employees are an integral part of the business. BP values the contribution we have all made to the success of BP Zambia and I very much expect the buyer of BP’s shareholding in BP Zambia to do likewise,” stated Mondoloka.
“BP intends that after the sale completes, all employees will still have jobs with BP Zambia, and these jobs will be on the same terms and conditions as now.”
Labels: BP, FUMU MONDOLOKA, LABOUR, RUPIAH BANDA
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Foreign owned "Oil Gushers" in Nigeria Dwarfs British Petroleum's "Oil Gusher" in the Gulf of Mexico
John Vidal
Published Jun 10, 2010
A ruptured pipeline burns in a Lagos suburb after an explosion in 2008 which killed at least 100 people. Photograph: George Esiri/Reuters
Editors note: The ruling class media have inundated us with misinformation concerning the irresponsible dumping of millions of gallons of oil into the Gulf of Mexico. Although this is truly an environmental castrophy, the dumping of oil and the destruction of the environment in Africa, by greedy multi national oil coporations like British Petroleum, Shell Oil, and ExonMobil, go virtually unreported by a media that acts as if it is concerned about the environment.
This disparity in “reporting” is indicative of the ruling class media’s mission; to serve without reservation or shame the interest of “big business.” The ruling class media itself is corporate “big business.” Its interest lies in not telling the truth or not telling the story at all.
On the other hand, governments in Nigeria and in the United States are also at the beck and call of imperialism. Although both governments have Africans as their Heads of State, they administer an imperialism that is white power all along the line. That is why fast talking U.S. President Barrack Hussein Obama, and pimp dressing Nigerian President Good Luck Jonathan have nothing to say on the matter. They represent imperialism’s neo colonial strategy – white power in black face.
As we struggle with the question of the destruction of the invironment by the backward forces of imperialism, organizations such as the All African People’s Development and Empowerment Project must take the lead on how we solve these problems as the Revolution defeats imperialism and everything it stands for. It will take All Power to the People to clean up the mess imperialism has made and is continuing to make.
And finally, we must not allow them to define this dumping of oil into the waterways and onto the land as “spills.” The misuse of the word “spill” gives them a psychological damage control advantage. This oil is not spilling into the ocean, it is gushing into the ocean, and onto the land.
The Deepwater Horizon disaster caused headlines around the world, yet the people who live in the Niger delta have had to live with environmental catastrophes for decades.
We reached the edge of the oil spill near the Nigerian village of Otuegwe after a long hike through cassava plantations. Ahead of us lay swamp. We waded into the warm tropical water and began swimming, cameras and notebooks held above our heads. We could smell the oil long before we saw it – the stench of garage forecourts and rotting vegetation hanging thickly in the air.
The farther we travelled, the more nauseous it became. Soon we were swimming in pools of light Nigerian crude, the best-quality oil in the world. One of the many hundreds of 40-year-old pipelines that crisscross the Niger delta had corroded and spewed oil for several months.
Forest and farmland were now covered in a sheen of greasy oil. Drinking wells were polluted and people were distraught. No one knew how much oil had leaked. "We lost our nets, huts and fishing pots," said Chief Promise, village leader of Otuegwe and our guide. "This is where we fished and farmed. We have lost our forest. We told Shell of the spill within days, but they did nothing for six months."
That was the Niger delta a few years ago, where, according to Nigerian academics, writers and environment groups, oil companies have acted with such impunity and recklessness that much of the region has been devastated by leaks.
In fact, more oil is spilled from the delta's network of terminals, pipes, pumping stations and oil platforms every year than has been lost in the Gulf of Mexico, the site of a major ecological catastrophe caused by oil that has poured from a leak triggered by the explosion that wrecked BP's Deepwater Horizon rig last month.
That disaster, which claimed the lives of 11 rig workers, has made headlines round the world. By contrast, little information has emerged about the damage inflicted on the Niger delta. Yet the destruction there provides us with a far more accurate picture of the price we have to pay for drilling oil today.
On 1 May this year a ruptured ExxonMobil pipeline in the state of Akwa Ibom spilled more than a million gallons into the delta over seven days before the leak was stopped. Local people demonstrated against the company but say they were attacked by security guards. Community leaders are now demanding $1bn in compensation for the illness and loss of livelihood they suffered. Few expect they will succeed. In the meantime, thick balls of tar are being washed up along the coast.
Within days of the Ibeno spill, thousands of barrels of oil were spilled when the nearby Shell Trans Niger pipeline was attacked by rebels. A few days after that, a large oil slick was found floating on Lake Adibawa in Bayelsa state and another in Ogoniland. "We are faced with incessant oil spills from rusty pipes, some of which are 40 years old," said Bonny Otavie, a Bayelsa MP.
This point was backed by Williams Mkpa, a community leader in Ibeno: "Oil companies do not value our life; they want us to all die. In the past two years, we have experienced 10 oil spills and fishermen can no longer sustain their families. It is not tolerable."
With 606 oilfields, the Niger delta supplies 40% of all the crude the United States imports and is the world capital of oil pollution. Life expectancy in its rural communities, half of which have no access to clean water, has fallen to little more than 40 years over the past two generations. Locals blame the oil that pollutes their land and can scarcely believe the contrast with the steps taken by BP and the US government to try to stop the Gulf oil leak and to protect the Louisiana shoreline from pollution.
"If this Gulf accident had happened in Nigeria, neither the government nor the company would have paid much attention," said the writer Ben Ikari, a member of the Ogoni people. "This kind of spill happens all the time in the delta."
"The oil companies just ignore it. The lawmakers do not care and people must live with pollution daily. The situation is now worse than it was 30 years ago. Nothing is changing. When I see the efforts that are being made in the US I feel a great sense of sadness at the double standards. What they do in the US or in Europe is very different."
"We see frantic efforts being made to stop the spill in the US," said Nnimo Bassey, Nigerian head of Friends of the Earth International. "But in Nigeria, oil companies largely ignore their spills, cover them up and destroy people's livelihood and environments. The Gulf spill can be seen as a metaphor for what is happening daily in the oilfields of Nigeria and other parts of Africa.
"This has gone on for 50 years in Nigeria. People depend completely on the environment for their drinking water and farming and fishing. They are amazed that the president of the US can be making speeches daily, because in Nigeria people there would not hear a whimper," he said.
It is impossible to know how much oil is spilled in the Niger delta each year because the companies and the government keep that secret. However, two major independent investigations over the past four years suggest that as much is spilled at sea, in the swamps and on land every year as has been lost in the Gulf of Mexico so far.
One report, compiled by WWF UK, the World Conservation Union and representatives from the Nigerian federal government and the Nigerian Conservation Foundation, calculated in 2006 that up to 1.5m tons of oil – 50 times the pollution unleashed in the Exxon Valdez tanker disaster in Alaska – has been spilled in the delta over the past half century. Last year Amnesty calculated that the equivalent of at least 9m barrels of oil was spilled and accused the oil companies of a human rights outrage.
According to Nigerian federal government figures, there were more than 7,000 spills between 1970 and 2000, and there are 2,000 official major spillages sites, many going back decades, with thousands of smaller ones still waiting to be cleared up. More than 1,000 spill cases have been filed against Shell alone.
Last month Shell admitted to spilling 14,000 tonnes of oil in 2009. The majority, said the company, was lost through two incidents – one in which the company claims that thieves damaged a wellhead at its Odidi field and another where militants bombed the Trans Escravos pipeline.
Shell, which works in partnership with the Nigerian government in the delta, says that 98% of all its oil spills are caused by vandalism, theft or sabotage by militants and only a minimal amount by deteriorating infrastructure. "We had 132 spills last year, as against 175 on average. Safety valves were vandalised; one pipe had 300 illegal taps. We found five explosive devices on one. Sometimes communities do not give us access to clean up the pollution because they can make more money from compensation," said a spokesman.
"We have a full-time oil spill response team. Last year we replaced 197 miles of pipeline and are using every known way to clean up pollution, including microbes. We are committed to cleaning up any spill as fast as possible as soon as and for whatever reason they occur."
These claims are hotly disputed by communities and environmental watchdog groups. They mostly blame the companies' vast network of rusting pipes and storage tanks, corroding pipelines, semi-derelict pumping stations and old wellheads, as well as tankers and vessels cleaning out tanks.
The scale of the pollution is mind-boggling. The government's national oil spill detection and response agency (Nosdra) says that between 1976 and 1996 alone, more than 2.4m barrels contaminated the environment. "Oil spills and the dumping of oil into waterways has been extensive, often poisoning drinking water and destroying vegetation. These incidents have become common due to the lack of laws and enforcement measures within the existing political regime," said a spokesman for Nosdra.
The sense of outrage is widespread. "There are more than 300 spills, major and minor, a year," said Bassey. "It happens all the year round. The whole environment is devastated. The latest revelations highlight the massive difference in the response to oil spills. In Nigeria, both companies and government have come to treat an extraordinary level of oil spills as the norm."
A spokesman for the Stakeholder Democracy Network in Lagos, which works to empower those in communities affected by the oil companies' activities, said: "The response to the spill in the United States should serve as a stiff reminder as to how far spill management in Nigeria has drifted from standards across the world."
Other voices of protest point out that the world has overlooked the scale of the environmental impact. Activist Ben Amunwa, of the London-based oil watch group Platform, said: "Deepwater Horizon may have exceed Exxon Valdez, but within a few years in Nigeria offshore spills from four locations dwarfed the scale of the Exxon Valdez disaster many times over. Estimates put spill volumes in the Niger delta among the worst on the planet, but they do not include the crude oil from waste water and gas flares. Companies such as Shell continue to avoid independent monitoring and keep key data secret."
Worse may be to come. One industry insider, who asked not to be named, said: "Major spills are likely to increase in the coming years as the industry strives to extract oil from increasingly remote and difficult terrains. Future supplies will be offshore, deeper and harder to work. When things go wrong, it will be harder to respond."
Judith Kimerling, a professor of law and policy at the City University of New York and author of Amazon Crude, a book about oil development in Ecuador, said: "Spills, leaks and deliberate discharges are happening in oilfields all over the world and very few people seem to care."
There is an overwhelming sense that the big oil companies act as if they are beyond the law. Bassey said: "What we conclude from the Gulf of Mexico pollution incident is that the oil companies are out of control.
"It is clear that BP has been blocking progressive legislation, both in the US and here. In Nigeria, they have been living above the law. They are now clearly a danger to the planet. The dangers of this happening again and again are high. They must be taken to the international court of justice."
Labels: BP, ENVIRONMENT, NIGERIA, OIL, POLLUTION
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Saasa counsels govt on bp exit
By Chiwoyu Sinyangwe
Tue 09 Mar. 2010, 04:01 CAT
THE government should establish an economic intelligence system on BP Zambia Plc’s exit process so that it does not lead to a fuel crisis, Lusaka economic consultant Professor Oliver Saasa has observed. And petroleum consultant Webster Nonde has observed that local entrepreneurs do not have the financial and technical capacity to take over BP operations.
Meanwhile, BP Africa which last week announced plans to quit five African countries to focus on refining and marketing investment has denied growing market intelligence data that its business will be taken over by French oil giant Total.
BP Zambia Plc, the country's biggest oil marketing company (OMC), is being sold as BP Africa sells 75 per cent of its business in Namibia, Malawi, Tanzania, Zambia and Botswana while focusing on refining and marketing investment in South Africa and Mozambique.
BP Zambia Plc controls about 40 per cent of the total domestic oil marketing sector and is a key supplier of oil and lubricants to the mining sector and controls about 75 per cent of the aviation oil segment.
BP Zambia Plc is followed by Total at 24 per cent while Chevron is at 8.8 per cent.
Others include Engen with 4.5 per cent while Petroda stands at three per cent.
The move by BP Zambia Plc to exit the local market has raised concerns among key stakeholders but energy minister Kenneth Konga has said the company’s withdrawal from Zambia would not disrupt the supply of fuel to key industries like the mines and the rest of the economy.
Konga said the government was confident another investor would take over the assets and shares of BP Zambia.
“BP has given assurance that this will be a seamless transition and as such we don’t expect any disruptions in the flow of fuel to the mines and other industries,” Konga said.
But in an interview, Prof Saasa said there was need for the government to be on top of things and ensure that BP Zambia Plc’s pullout did not disrupt the fuel supply chain in the country.
“The government must put in place an economic intelligence on the boardroom decisions of BP so that the decisions do not result in disruption of fuel supply in the country,” Prof Saasa said. “The whole essence is that due to the size of BP on the local market, if not properly managed, this transition…the process sell of majority stake of BP might lead to shortages like the way we saw when Indeni Petroleum Refinery abruptly shut. So, even if BP is not…a parastatal, the government needs to be on top of things so that we maintain macroeconomic stability as you know fuel has the potential to disturb the economic fundamentals in the country.”
Prof Saasa said there was need for the country to smoothly manage the exit of BP Zambia Plc from the local market considering its economic implications on the domestic economy.
“The government should not wait to read about the story in the newspapers… The Post. There is need for the government to be proactive,” Prof Saasa said. “This transition, if not properly handled might effect normal fuel supply in the country and that affects production…energy sector is so fundamental across the production of all goods and services...”
Prof Saasa said the Zambian economy continues to be slowed down by abrupt and sometimes unreliable fuel supply when most situations could be avoided or mitigated.
“One would only pray that this pullout would not adversely affect the economic fundamentals in the country,” said Prof Saasa. “The implication is that we have seen the turbulence in the oil sector has seriously affected our economy, disruption pushes the price of fuel and that has spiral effects on the inflation…and we are barely keeping it within the target...you saw last month.”
And separately, Nonde said the local players did not have the capacity to buy the assets dumped by BP Africa.
Nonde said it was not profitable for a large OMC to make meaningful return in small markets like Zambia as oil marketing was driven by sales volumes.
“There are two key variables you will be looking at. You will be looking at the balance between the margin and the volume… and the two should give you a point where you are just making sufficient return on your investments,” Nonde said. “Right now, because Zambia is a small market and there has been an influx of marketers in the petroleum industry, the cake has become so small such that companies which have invested heavily over the years just cannot see a return which they expect. The returns can’t allow and when they compare with other geographies like North Africa, the margins are less than here but the volumes are big, so because of the balance between the margins and the big volumes there, they are able to hang around in those markets.”
He said the weak fundamentals for the survival for large multinational oil marketing markets was not unique to Zambia but the whole of southern Africa region.
Nonde said the quitting of a large company like BP impacted negatively on the domestic economy in terms of technology transfers and ensuring the local industry catches up with global trends.
“The petroleum downstream challenges are in the region because the decision BP has taken is affecting five countries,” he said. “For Zambia, the implications are worth considering. BP will be the third out of the five original petroleum multinational companies to exit the Zambian market. We had Agip leaving the market in 1999, and then Mobil in 2005, now BP. What it means is that we will be losing something as an industry in Zambia in terms of world class operational standards. BP and Mobil are world leaders in petroleum industry and what countries like Zambia benefit is the extension of world class operation standards. For these companies to be leaving Zambia and the region generally, it means that there is something fundamental which cannot be overlooked.
Because they are leaving the sub-Saharan Africa and they are hanging around all the North African countries, and they are not exiting South Africa. From my own assessment, the marketing incentives probably are not at levels which will sustain their participation in the market in southern Africa region...it’s a regional problem. And those markets where BP has remained continue to benefit from the high operational and safety standards which are necessary in this industry.”
Nonde stressed that Zambian entrepreneurs do not have the capacity to buy BP assets.
However, he said the move by BP group to exit the local market would not result in fuel disruption in the country.
“It’s very rare that BP will unbundle into smaller units and mind you there will be international interest from other global players,” said Nonde. “The sale of BP will be seamless because whoever buys it, will buy a going concern. Normally that is what happens and they will be negotiating like that to whoever they are going to sell their assets to. And that is why it is not easy what people are saying that briefcase entrepreneurs will just rise and get it. The assets won’t be split for people to say ‘me I want the mines, me I want that station’. That is not how it is going to be done…like Agip and Mobil were sold, they were sold as complete units.
“If we go by that precedent, it will go as complete units which means if it works like that, their customers will see a seamless transition, basically it is just one supplier going and another continuing. I don’t think it will cause a disruption in fuel supply. The exit for BP may provide opportunity for local enterprises, but petroleum business is of an international nature and the standards that accompany this business are of international nature purely because of the huge financial demand in research and development. So, it’s not a simple situation of saying the big guy has left, then we will fill in with small oil marketers.”
Meanwhile, BP Africa has denied growing market intelligence information that Total was favoured to take over its assets.
Total is seen by most analysts to be only company with the financial muscle and expertise to run the infrastructure of BP.
The move would be seen by most analysts to fit into the business refocusing of Total, which recently dumped its 50 per cent stake in Indeni Petroleum Refinery.
But BP Africa director for communications and external affairs Sam Mupanemunda denied reports linking Total to BP assets.
“The project is still in its initial phase and potential buyers have not yet been identified at this point,” Mupanemunda told Business Post in an interview from Johannesburg.
Labels: BP, OLIVER SAASA
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Ex-employee sues BP Zambia for K900m
By Maluba Jere
Mon 21 Dec. 2009, 04:00 CAT
BP Zambia Plc has been sued by its former employee for over K900 million being redundancy package as per his conditions of service. In a statement of claim filed in the Lusaka High Court registry, Peter Njovu sued the company claiming alternative damages for constructive dismissal and damages for mental stress.
Njovu stated that he was employed by BP on August 1, 1995 as management accountant on a permanent and pensionable basis. He explained that he rose through the ranks from management accountant to audit manager in 1997 and senior depot manager in 1998.
Njovu stated that in 1999, he was promoted to regional cash manager and was posted by BP on secondment to its South African office in Cape Town, adding that he was still effectively an employee of the petroleum company. He also stated that whilst in South Africa, he continued to excel and was promoted to performance manager.
Njovu further claimed that in 2003, his former employer wrote to him informing him that he would be repatriated to the Zambian office where he would work in a supernumerary position with a basic salary of K6,164, 912.
He stated that he was repatriated back to Zambia on December 15, 2003 adding that between 2003 and 2005, he worked in the said supernumerary position carrying out various tasks as were addressed to him but that he was not given any substantive position contrary to the contractual promises and agreements.
Njovu averred that he was reduced to more or less a general worker status without a job and that he was later offered a redundancy package.
He also stated that the failure by BP to meet its obligations as an employer to give him substantive position as per the conditions offered and the failure not to retrench or declare him redundant was in breach of the contract and a clear demonstration of the defendant’s failure to give him a substantive position within a reasonable time or at all amounted to redundancy.
Njovu further stated that as a result of the defendant’s breach of conditions and the laisser faire attitude to his plight in the company, he became frustrated and therefore tendered his resignation letter on July 13, 2009 awaiting his redundancy package.
He added that despite his numerous demands for payment of the redundancy package, the defendant has failed, ignored or refused to pay and the amount is still outstanding.
Njovu is now claiming a sum of K926, 093, 218.00 as well as interest, costs and any other relief the court may deem fit.
Labels: BP, COURTS, LABOUR, PETER NJOVU
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Shell, BP sell Zimbabwe assets
by
14/09/2009 00:00:00
AFRICAN oil firms Engen Petroleum and KenolKobil said they plan to buy BP and Shell’s Zimbabwe assets in anticipation of growth under a unity government formed earlier this year.
The move would be the highest-profile exit by major foreign investors since President Robert Mugabe and Prime Minister Morgan Tsvangirai set up a power-sharing government in February.
Zimbabwe has asked the world for help for its devastated economy, and says it needs $10bn to rebuild dilapidated infrastructure and ease a 90 percent unemployment rate.
Western donors want political and economic reforms before aid flows to the once-prosperous southern African country. Foreign investors are also likely to remain cautious.
Engen — one of South Africa’s leading petroleum products retailers — and Kenya’s oil retailer KenolKobil said they were to acquire all the shares in Shell Zimbabwe and BP Zimbabwe.
The companies plan to acquire more than 75 service stations in a deal now under consideration by Zimbabwean authorities.
BP and Shell, whose joint Zimbabwe operations employ about 400 people and whose blending plant in Harare has a capacity of 30 million litres per year, were not available for comment.
Engen has existing operations in Zimbabwe and Jacob Segman, managing director of KenolKobil, said the joint venture would seek to benefit from the country’s reconstruction.
“While Zimbabwe’s economy has declined sharply over the last decade, it still boasts good infrastructure and we believe that this will form the basis of renewed economic growth,” Segman said in the statement on Saturday.
Labels: BP, ROYAL DUTCH SHELL PLC, ZIMBABWE
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BP Zambia loses application to control jet-fuel storage terminal
By Joan Chirwa
Friday March 07, 2008 [03:00]
BP Zambia Plc has lost its application for judicial review of the competition commission’s rejection of its plans to solely control a Jet-fuel storage terminal at Lusaka International Airport. The court case followed the ninth (9th) Special Board meeting held in September 2007 at which Commissioners of the Zambia Competition Commission (ZCC) rejected the application for the acquisition of Mobil Zambia Limited’s 50 per cent shares by BP Zambia Plc in the joint jet-fuel storage facility at the Lusaka International Airport.
In his ruling, Justice Phillip Musonda dismissed BP Zambia’s application with costs. In their assessment, the commissioners noted that the transaction was likely to substantially lessen competition in the relevant product market for jet-fuel at the Lusaka International Airport and would have had adverse effects on trade or the economy in general.
BP Zambia already owns 50 per cent shares in the jet-fuel storage facility at the Lusaka International Airport and it wanted additional 50 per cent shares of the exiting Mobil Zambia, a transaction that ZCC said would have led to uncompetitive practices in the sector.
“This was because the acquisition and eventual sole ownership (which is monopolisation) of the joint storage facility was going to entrench BP Zambia’s position in the supply of jet-fuel at the said airport, with potential for abuse of market power in relation to competitors and customers/consumers of jet-fuel at the airport,” stated the commissioners.
Commenting on the judgment, ZCC acting executive director Thula Kaira said that the ruling on BP Zambia was a landmark decision for the enforcement of competition law in Zambia.
“The Commission shall continue to exert its mandate to ensure that barriers to entry or market access in key domestic sectors such as the petroleum industry are curtailed and afford a market entry opportunity for other interested or prospecting entrepreneurs,” Kaira stated.
The Board further directed that Mobil Zambia’s shares be sold by public tender to interested third party Oil Marketing Companies (OMCs) which should exclude Total Zambia Limited or any of its affiliates.
The new parties were to come up with an agreement to ensure equitable access to and from the storage facility within three (3) months after the Commission’s decision was communicated to them.
Mobil Zambia or its affiliates were to continue to utilise the jet-fuel facility under existing arrangements until such a time when the 50 per cent shares were accordingly disposed of to other OMCs.
Meanwhile, Total Zambia has also sued ZCC over the board’s determination that the 50 per cent shares of the exiting Mobil Zambia be sold to any other interested OMCs excluding Total or any of its affiliates.
Labels: BP, FUEL
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