VZCZCXRO6401
PP RUEHPA
DE RUEHUJA #0217/01 0331330
ZNY CCCCC ZZH
P 021330Z FEB 07
FM AMEMBASSY ABUJA
TO RUEHC/SECSTATE WASHDC PRIORITY 8505
RUEHZK/ECOWAS COLLECTIVE PRIORITY
RUEHOS/AMCONSUL LAGOS PRIORITY 6061
INFO RUEHBJ/AMEMBASSY BEIJING 0039
RUEHWR/AMEMBASSY WARSAW 0105
RUEHCD/AMCONSUL CIUDAD JUAREZ 0103
RUEHIT/AMCONSUL ISTANBUL 0003
RUEHSO/AMCONSUL SAO PAULO 0025
RUFOADA/JAC RAF MOLESWORTH UK
RUEKJCS/SECDEF WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHDC
RHEBAAA/DEPT OF ENERGY WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHDC
RUEAIIA/CIA WASHINGTON DC
RUEKJCS/DIA WASHINGTON DC

C O N F I D E N T I A L SECTION 01 OF 02 ABUJA 000217 
 
SIPDIS 
 
SIPDIS 
 
DOE FOR GPERSON, CGAY 
TREASURY FOR ASEVERENS, SRENENDER, DFIELDS 
COMMERCE FOR KBURRESS 
STATE PASS USTR FOR ASST USTR FLISER 
STATE PASS TRANSPORTATION FOR MARAD 
STATE PASS OPIC FOR ZHAN AND MSTUCKART 
STATE PASS TDA FOR NCABOT 
STATE PASS EXIM FOR JRICHTER 
STATE PASS USAID FOR GWEYNAND AND SLAWAETZ 
 
E.O. 12958: DECL: 01/26/2016 
TAGS: EPET ENERG ASEC PTER NI
SUBJECT: NIGERIA: SHELL PETROLEUM DEVELOPMENT CORPORATION 
BANKRUPT 
 
REF: LAGOS 60 
 
ABUJA 00000217  001.2 OF 002 
 
 
Classified By: Ambassador John Campbell for Reasons 1.4 
(B,D) 
 
¶1.  (C) Shell Managing Director Ann Pickard telephoned the 
Ambassador on February 2 to report that the Shell Petroleum 
Development Corporation (SPDC) is bankrupt because of the 
failure of the Nigerian National Petroleum Corporation 
(NNPC) to pay arrears that Shell believes it is owed from 
their joint venture arrangements.  (Note:  SPDC is the 
joint venture between Shell and NNPC which is the largest 
private sector oil and gas producer in Nigeria.  However, 
it has been plagued by shut-in production amounting to 
almost 500,000 barrels per day since January 2006.  End 
Note)  Pickard said that Shell has traced the flow of some 
USD 2 billion from the Central Bank to the NNPC over the 
past few days; it is clear the funding is available to 
NNPC, if the political will is there, to settle with SPDC. 
However, Pickard cautioned, current NNPC arrears to Shell 
are running at such a high rate that even if the current 
arrears are retired, SPDC will again risk bankruptcy by 
April.  She and senior Shell management from The Hague 
anticipate seeing President Obasanjo on February 7. 
However, if no payments toward the arrears owed SPDC are 
received by February 5, SPDC will begin an orderly 
shutdown, starting first with large projects and concluding 
with laying off employees by the end of the fourth week. 
"This is brinksmanship," Pickard said. 
 
¶2.  (C)  Pickard also commented on the Government of 
Nigeria's (GON) transfer of an oil block from Shell to a 
Nigerian company, Malabu, owned by Dauzia Loya Etete, 
despite Shell having already made substantial investments 
in it (see Reftel).  She estimated that the worth of the 
block was USD 2-4 billion.  Etete, she continued, is said 
to be close to President Obasanjo, supported the President 
against Vice President Atiku, and plays a major role in 
"neutralizing" former Chief of State Ibrahim Babangida. 
She said that Shell will fight the transfer of the oil 
block in the Nigeria courts, a process that will last 
beyond the April elections when the current "politics" of 
the transfer will no longer apply.  (Note:  A press account 
from 2003 posted on Forbes.com suggests that Eteke, former 
Minister of Petroleum during the military regime of General 
Sani Abacha, awarded the license on the block to Malabu, a 
company he set up for that purpose.  The article goes on to 
say that Malabu, in 1999, offered a Shell subsidiary 40 
percent of the profits in exchange for bearing the cost of 
exploration and production in the block.  Etete claimed 
that Vice President Atiku demanded a stake in the venture 
as a condition for not revoking Malabu's license. 
Nevertheless, in July 2001, the GON revoked the block, and 
later invited new bids, which Shell won.  Eteke filed suit, 
alleging that the bid round was improperly conducted.  End 
Note.) 
 
¶3.   (C)  Comment:  As Pickard said, Shell, NNPC and the 
Federal Government are involved in brinksmanship.  Should 
SPDC begin a phased shutdown, it will be immediately 
obvious in the Delta.  The irony is that it will have been 
caused by SPDC's difficulties with NNPC and the GON rather 
than by the activities of the Movement for the Emancipation 
of the Niger Delta (MEND) or the other militias that have 
threatened to shut down Nigeria?s oil/gas industry. 
However, we suspect that something will be cobbled together 
next week to prevent SPDC?s shutdown. 
 
ABUJA 00000217  002.2 OF 002 
 
 
 
¶4.  (C)  Pickard's assessment of Etete tracks with 
Mission's own.  He was Minister of Petroleum during the 
Abacha regime and, subsequently, fled the country.  On the 
run for several years, he is said to be under indictment in 
France for money laundering.  After the GON seized one of 
his oil blocks and basically put Malabu out of business, 
Etete is said to have come to an "understanding" with 
President Obasanjo.  In return for his support of 
third-term efforts, he was to be rewarded with a 
resuscitated business.  While he did make several 
noteworthy comments during the third-term debate, as far as 
post is aware, he has yet to return to Nigeria.End comment. 
 
¶5.  (U)  CG Lagos contributed to, and cleared, this 
message. 
 
CAMPBELL