VZCZCXRO8001
OO RUEHPA
DE RUEHUJA #1263/01 1690905
ZNY CCCCC ZZH
O 180905Z JUN 07
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC IMMEDIATE 9904
INFO RUEHZK/ECOWAS COLLECTIVE
RUEHWR/AMEMBASSY WARSAW 0374
RUEHCD/AMCONSUL CIUDAD JUAREZ 0375
RUEHOS/AMCONSUL LAGOS 7158
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RHEHNSC/NSC WASHINGTON DC
RUEAIIA/CIA WASHINGTON DC
RUEKDIA/DIA WASHDC
RHMFISS/HQ USEUCOM VAIHINGEN GE
RUFOADA/JAC MOLESWORTH RAF MOLESWORTH UK

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 001263 
 
SIPDIS 
 
SIPDIS 
 
DOE FOR CAROLYN GAY 
 
E.O. 12958: DECL: 06/17/2017 
TAGS: ECON ENGR EPET PREL PGOV PTER NI
SUBJECT: NIGERIA: SEN. NELSON MEETS WITH OIL EXECS 
 
ABUJA 00001263  001.2 OF 002 
 
 
Classified By: Ambassador John Campbell for reasons 1.4 (b & d). 
 
¶1. (C) SUMMARY.  During Senator Nelson's June 1 meeting with 
John Chaplin, Managing Director of ExxonMobil in Nigeria (EM) 
and Anne Pickard, Regional Executive Vice President for Shell 
Exploration and Production in Africa, the executives lamented 
that criminal gangs have slowed oil production and recent 
state elections worsened the political climate.  They 
maintained, however, that Nigeria holds major potential in 
oil and gas production. Also present was the Ambassador and 
EconOff. END SUMMARY. 
 
OIL EXECS SEE PROGRESS 
---------------------- 
 
¶2. (C) In a June 1 meeting with oil executives, Senator 
Nelson asked how the major oil companies see the situation in 
the Niger Delta unfolding.  EM's Chaplin and Shell's Pickard 
agreed that the current period is a "honeymoon of sorts" in 
the Niger Delta.  (COMMENT: Although 16 hostages were taken 
over the weekend, recent attacks were not focused on 
destroying oil production infrastructure. END COMMENT) 
Chaplin noted that the oil production infrastructure in the 
Niger Delta is fragile and that several well-placed rocket 
propelled grenades could bring all oil production to a halt. 
Both concurred that recent violence has moved from attacking 
infrastructure to criminals seeking money for hostages. 
Pickard reported that expats are evaluated by kidnappers on 
potential-for-payment scale, with hostages from the U.S. or 
western Europe garnering the highest ransoms and Russian, 
Indian and Asians the least.  Pickard said the last amount 
she knows that was paid for a hostage was $120,000. 
 
LOCAL ELECTIONS FAIL TO ADDRESS PROBLEMS 
---------------------------------------- 
 
¶3. (C) Regarding the elections, both concurred that the state 
elections were more important and volatile compared to the 
presidential election.  Chaplin commented that the governors 
in the oil-producing states were worse than before and 
Pickard particularly singled out the new Delta state 
governor, Emmanuel Uduaghan.  Chaplin commented that oil 
bunkering is a major problem and that the Navy, Army, state 
governors and others must be complicit for it to occur 
because of its scale and level of sophistication. 
 
¶4. (C) Pickard opined that the core problem in the Niger 
Delta was not lack of resources but fiscal integrity to carry 
out development.  She said improving primary education or 
health care will not be addressed because of the corruption 
associated with the current patronage system.  Pickard 
complained that the only positive actors in the Niger Delta 
were major oil companies, and yet 94-95% of the profits go to 
the GON.  She estimated that if a barrel of oil is selling at 
$60, Shell recoups a $1.60 profit in Nigeria, with the 
remainder going into GON pockets.  Regarding Shell's 
production, Pickard stated that 600,000 barrels per day are 
shut-in and another 40,000-60,000 are siphoned by oil 
bunkerers. 
 
OIL COMPANIES SEEK TRANSPARENCY 
------------------------------- 
 
¶5. (SBU) Pickard reported that Shell and others have 
advocated in the National Assembly for bills that established 
transparent mechanisms in the federal and state governments. 
They have also sought greater transparency of decision-making 
in the Niger Delta Development Commission and pushed for 
additional government spending for social and economic 
development.  Chaplin and Pickard encouraged the Senator to 
have the U.S. also advocate for more transparency in the 
energy sector. 
 
MILITARY NOT AN OPTION 
---------------------- 
 
¶6. (C) When asked about whether the Nigerian military was a 
good option in the Niger Delta to stop the violence, Chaplin 
answered that the military was not an option that ExxonMobil 
hoped for.  He believed that the military would aggravate the 
problem by antagonizing local communities.  Chaplin said the 
 
ABUJA 00001263  002.2 OF 002 
 
 
Army is weak, outgunned and outclassed and the Navy is 
"amateurish with broken boats and no fuel."  He did believe 
that a strong coast guard would be a valuable asset, if it 
existed. 
 
CHINA, INDIA AND OTHERS OFFERING TEMPTING GIFTS 
--------------------------------------------- -- 
 
¶7. (C) Chaplin and Pickard both lamented the increased 
competition from the Chinese, Indians, Koreans and others. 
Chaplin said the Chinese and Indians try to sway the GON with 
package deals, including railroads, and other infrastructure 
projects.  In addition, these countries are not afraid to pay 
special fees/bribes to conclude deals.  In the long run, he 
speculated, these special packages will collapse as they have 
done in the past.  He said the Chinese and Koreans already 
have experienced poor relations with local communities 
because of their methods. 
 
NIGERIA HOLDS VAST UNTAPPED OIL AND GAS RESOURCES 
--------------------------------------------- ---- 
 
¶8. (C) In response to Senator Nelson's question regarding the 
future of oil and gas production, Pickard said that the 
potential in Nigeria and the Gulf of Guinea is huge.  She 
stated that Shell considers the region the most immature 
deepwater area in the world.  Chaplin estimated that there is 
as much potential as that in the Gulf of Mexico and gas 
reserves could be the largest in the world. 
 
¶9. (U) Senator Nelson cleared this cable. 
CAMPBELL