Two Approaches to Safety

Tim Worstall makes the following remark in response to a column by Polly Toynbee:

There was significant regulation here. What there wasn’t was responsibility. And a little more of the second can be very much more important than the first. Whether we call it the Clerk of Works, or professional responsibility, whatever, that one individual–and yes, making it one person does concentrate minds wonderfully–owns a project, the benefits and failures of it in that liability sense, tends to make things safer. On the very sensible basis that someone with their knackers potentially in the vice tends to pay attention. Box ticking doesn’t have quite the same effect.

This is absolutely correct.

In the wake of Piper Alpha, the regulations governing North Sea oil and gas operations were completely overhauled to address the many, many shortcomings that had led to the world’s worst oilfield disaster. One of them was to adopt what is known in the industry as a risk-based approach to safety, and put the responsibility to implement it on the shoulders of the operating companies.

What this means in practice is this. Each company must demonstrate, to the satisfaction of the UK HSE and – God forbid – a tribunal or court in the event of an accident, that the residual risks have been minimised to a degree which is As Low As Reasonable Practicable (ALARP). Residual risk is the term used to described the risks associated with a facility or operation which remain once mitigation and prevention measures have been implemented. This is important: playing around with highly volatile hydrocarbons is an inherently dangerous business, and there will always be risks associated with it. The requirement is not to eliminate risks entirely, as that would entail leaving the hydrocarbons in the ground, but to minimise the risks that remain once you’ve done all you can.

This is the principle of ALARP: “reasonably practicable” is an open term with no strict definition, but is well understood in the risk management industry. It recognises the fact that money spent on safety and minimising risks is a scarce resource and must be properly targetted. If open-ended safety obligations are demanded of an oil company, commercial operations will cease.

Most important is the word demonstrate, which is why I emboldened it. How a company demonstrates that it has minimised the risks associated with its operations is largely up to them, but the North Sea has developed a standard process (with associated tools and techniques) which all operators now follow. In short, it consists of:

1. Identifying potential hazards and the events they could lead to.

2. Identifying the consequences of such events should they occur, in terms of effects on humans, the environment, the asset, and the company reputation.

3. Identifying what can be done to prevent the event (preventative measures).

4.Identifying what can be done to mitigate the impact of the event, should it occur (mitigation measures).

5. How the company intends to manage the residual risks of their operations once 3 and 4 have been implemented.

This process focuses the minds of those charged with designing, building, and operating the installations to ensure the residual risks are ALARP, and can indeed be demonstrated to the satisfaction of anyone who may ask (e.g. regulatory bodies). I am heavily involved in this entire process as my day-job, and have been for years. I take the approach that if I find myself hauled in front of a court facing twenty to thirty years in an African prison for manslaughter, can I demonstrate that I did everything I could do minimise the risks associated with the installation? I am not exaggerating, I really do think this. In Nigeria I was responsible for signing off designs. Gulp.

By telling companies that they have to demonstrate their facilities and operations are as safe as they can be, and all potentially catastrophic scenarios have been thought of and addressed, it forces them to take responsibility for the complete design and operation. Moreover, it forces them to consider the installation as a whole, i.e. how the different systems interact with one another, and address the unique complexities of their particular situation.

The alternative system is one whereby clever people draw up a set of rules and regulations that must be followed, and if a company does then – in theory – the installation will be safe. This is called a prescriptive-based approach to safety. In effect it’s a giant box-ticking exercise, which involves little actual thinking on the part of the design engineers and allows them to shift responsibility to those who drafted the regulations if something goes wrong. As far as I am aware, this is how most industries are regulated: companies obtain a set of prescriptive rules and regulations and if they follow them to the letter, they are covered. Indeed, this is how the American Occupational Safety and Health Administration (OSHA) works, and this approach is applied to their own oilfields.

The shortcomings of the prescriptive-based approach are obvious, but a risk-based approach is more complicated and expensive to implement. However, the lessons from Piper Alpha might well be dusted off and re-learned in the wake of the Grenfell Tower fire. I highly doubt that the British building regulatory regime allowed banned cladding to be installed: I am reasonably certain that it was quite legal. However, they were clearly not suitable for the application, because nobody considered the cladding system as a whole as it was installed on that particular tower, and what might happen in the event of a fire. All they did was select a panel type that was approved by the regulations, comply with all the other regulations, and assume they were safe.

The problem with prescriptive regulations is that they cannot anticipate every scenario, and it only takes one unique application of a certain product or system to leave the whole thing prone to a catastrophe. Or course lessons will be learned from the Grenfell Tower fire and that particular gap will be closed, but others will remain so long as we insist on a prescriptive-based approach to safety. The irony is that all those people calling for companies to take greater responsibility for the works they carry out are likely to be the same people calling for greater regulation, which will inevitably be of the prescriptive type. The two demands are not compatible: either we tell companies to follow the regulations, or we tell them to proceed as they see fit but demonstrate to the regulators that they’ve done the job properly and take full responsibility if it later proves they haven’t.

My guess is we’ll end up with an unhealthy mess of both: companies told to follow regulations but also carry the can when those regulations prove to be inadequate, leading to increased prices, a lack of transparency, and yet more cosy partnerships and conflicts of interest between private businesses and those writing the regulations. None of this will make the public any safer.


Further thoughts on the Grenfell Tower

Over the past 24 hours social media seems to have been inundated with experts on structural engineering and fire protection. I am no expert in either, but I know a bit about the latter – a career in oil and gas will leave you with more knowledge on fires and explosions than most. I probably know more about structural engineering than most people, too.

When I was involved in the construction of a residential unit in Sakhalin, I was told the fire protection was not there to protect the asset, it was to buy enough time for everyone to evacuate. Once everyone is out – well, let it burn, claim the insurance, and build another one. Of course, it was designed not to burn, but if it did the priority was to get everyone out ASAP. Being owned by an oil company, the unit we built had alarms and a full evacuation plan.

I have no idea what the philosophy was in the Grenfell Tower, but it should have been to get everyone out ASAP in the event of a fire: you hear the alarm, everyone evacuates, the firemen turn up to see what’s what. From what I’m hearing, people believed they should stay in their apartments because the flats were designed to contain fires, or something like that. Even if they were designed to contain fires, you should still evacuate. Yes, it’s a pain in the arse standing in the carpark in your pyjamas at 1am, but it’s better than burning to death.

Back when I worked for a Shell-affiliated company, an email went around about two Shell employees who were staying in a hotel in (I think) India. When you work for a major oil company, particularly Shell, safety is dinned into you from day one to the point that it becomes second-nature even outside your workplace. Next time you see Rex Tillerson boarding or disembarking from a plane, notice how he always holds the handrail: he got that from ExxonMobil. Anyway, these two guys were in their hotel rooms when the fire alarm went off. Most people would have just thought “sod it” and stayed in bed, but these boys were good little soldiers and grabbed their passports and left via the fire escape. They got outside and found the whole building was alight, and some people died. Shell saw fit to circulate this in an email, and it made an impression on me. If you hear an alarm, get the hell out of there. Better to look a fool than be dead.

Anyway, my point is that fire protection is usually installed to slow down the spread of a fire, and give people enough time to get out. A lot of people are asking why sprinkler systems weren’t installed in the Grenfell Tower. Contrary to what most people think, sprinkler systems are not supposed to extinguish fires: they are activated by heat and designed to keep surfaces cool, thus preventing the fire from spreading. You know when you see the firemen spraying water at a fire? Most of the time they’re not aiming it at the flames, they’re soaking the areas around it. They don’t have enough water to put the fire out, so the best they can do is try to keep the surrounding surfaces cool enough so it won’t spread. Eventually the fire will spread, if it’s hot enough and there is enough fuel, but it will take more time and hopefully everyone will be out by then. All the firemen do from then is to try to stop the building collapsing and the fire spreading to other properties.

I doubt there are many residential buildings in the world which have the sort of evacuation procedures you see in offices and hotels. Perhaps this will change, or at the very least people will be advised to evacuate rather than stay in their apartments. There is not much point installing sprinkler systems which buy people time to evacuate if everyone is staying put.

I confess I was surprised that the cladding was flammable. This is a rather colossal failure of the building regulations, and raises the question how much of this stuff has been installed already. Quite a bit, would be my guess. It is possible to get cladding which has insulating properties and is also fireproof, and we use it extensively on oil and gas facilities. It is usually a form of mineral wool, but it is probably too expensive for large-scale residential use. You also need to keep the stuff dry: it isn’t much good when sopping wet, meaning the external cladding needs to be watertight, i.e. properly designed and installed.

I have heard reports that £9m was spent refurbishing the Grenfell Tower recently. What isn’t clear is how much of that went on purchasing certified materials and paying qualified, experienced tradesmen and how much went on kickbacks, admin fees, consultancy, fees, and audits to ensure the companies involved had diverse management teams and recycled their office waste properly. As I learned in Russia, spending $50m on a building doesn’t always give you $50m worth of building.

Finally, Twitter user Old Holborn has discovered that the monthly rent in the Grenfell Tower was £1,625 per month. It might be slightly less now, but this is London so perhaps not. I’m wondering why this tower, sitting in one of the most expensive boroughs in the country and consisting mainly of social housing, was occupied almost exclusively by immigrants from the poorest parts of the world. Actually, I know the answer to that.

This whole incident raises so many questions it’s hard to know where to begin.

And this:

On Thursday, the first victim of the fire was named as Syrian refugee Mohammed Alhajali, 23.

In a statement, the Syria Solidarity Campaign said Mr Alhajali, a civil engineering student, had been in a flat on the 14th floor when the fire broke out, and had spent two hours on the phone to a friend in Syria.

He had been trying to get through to his family while he was waiting to be rescued.

“Mohammed came to this country for safety and the UK failed to protect him,” the group said.

Speaks volumes.


Why NHS Food Is Crap

One of the things you notice if you work long enough for large companies is that the quality of any given support service suddenly becomes a lot better if the people managing it are themselves users of that service.

When I worked in Africa, the senior management had their own company-supplied vehicles and drivers to take them to and from the airport; everyone else used a shuttle bus. With no senior management ever having to see what taking the shuttle bus was like, you can imagine the state of it.

You sometimes see a similar thing with travel departments. The administrative staff who work in them are usually local employees who generally don’t have to go on business trips in far-flung cities taking flights that leave at 7am. When you come to deal with them, this becomes painfully obvious.

Last week I saw somebody on Twitter complaining about the food in the NHS, and naturally somebody leaped in underneath to claim that this was a result of the catering being outsourced to private companies. There exists a mindset among some people that private companies cannot possibly provide a better service than public bodies because of the profit factor, the veritable planet of evidence to the contrary notwithstanding. But in the case of the NHS the food really is terrible, at least from what I’ve seen and heard.

Thanks to a decade or so traipsing around oil and gas offices, installations, and construction sites I’ve seen a lot of mass-catering and it ranges from extremely good to absolute shite. In most cases the catering has been outsourced to one of two companies: Eurest (a subsidiary of Compass, which is British) and Sodexo (which is French). I don’t know if they supply the NHS with catering services, but I’d be surprised if they don’t. What I found is that the quality of food is dependent on two things:

1. Budget

2. Whether the management or the management’s close colleagues eat it.

One the first point, the budget is the difference between reasonable food and very good food. With the oil industry swimming in money until fairly recently, the food in the canteens was generally pretty good, and offshore it could be outstanding (the food on the Safe Astoria was superb, thanks to a Singaporean chef).

But it is the second point that makes the real difference. The one place in the whole Sakhalin II construction project where the food was absolutely woeful was at the transit camp in Nogliki, halfway up Sakhalin Island. As the name suggests, it was a camp set up for people to spend a night or two in transit between Nogliki, where the train from Yuzhno-Sakhalinsk terminated, and the various construction camps that lay further to the north. Aside from a few poor bastards who were based there permanently, people were only supposed to be there for one or two nights, and it showed. I spent a night there between coming off the Lun-A platform and going to inspect the Piltun lighthouse.  The beds had been bought second-hand from the folk who dismantled the barracks at Auschwitz and fitted with dark brown sheets that were supposed to be that colour. Dinner consisted of a slab of grey meat and watery gravy by an Indian who told me that’s all there was. By contrast, the grub on the actual sites was excellent. Senior managers never, ever stayed at the transit camp.

The reason why the NHS food is crap is not because private companies are providing it, but because the people who administer the catering contract do not eat it. I’d be surprised if even the NHS staff eat it; if they do, they are low-level staff who don’t have much clout with the people in charge. Or perhaps the staff are fed in separate canteens? I don’t know, but the reason it is crap is because those who eat it have no influence over those who pay for it, and those who pay for it don’t eat it. If people want the food in the NHS to improve they should insist that the middle management eat it as well. It would improve overnight at no additional cost.

Of course, this is a long-winded version of Milton Friedman’s four ways to spend money, but it’s fun to spot examples of it in the wild.


The Fate of the Transocean Winner

Credit where it is due, Tom Lamont writing for The Guardian has done some splendid reporting here covering the fate of the semisubmersible drilling vessel Transocean Winner, which ran aground on the Hebrides last year. It is very long, but well worth a read.

I was pleased to see that, while the author reasonably writes about the environmental and societal issues surrounding shipbreaking, he resists any temptation to go off on a rant about fossil fuels or global warming. It is refreshing. It’s how journalism should be done.


Obama’s Arctic Ban Overturned

Donald Trump has signed an executive order aimed at reducing restrictions on oil drilling in the Arctic and Atlantic in order to “unleash American energy”.

reports the BBC.

It could undo a ban put in place by Barack Obama in order to protect swathes of the ocean from development.

A ban put in place via executive order in December 2016 is one of many pieces of legislation Obama petulantly signed in his last hours in office mainly to hamstring his successor. In other words, reversing the ban will take us back to the end of last year. Was America a vast wasteland where any human peaking out of the ash piles would be picked off by giant, mutant pterodactyls? No.

It is debatable how much income might be generated by a reversal of Mr Obama’s order. Worldwide prices for oil have dropped in recent years, with a review by news agency Reuters finding the amount of money oil companies spent in the central Gulf of Mexico’s annual lease sale dropped by more than 75% between 2012 and 2017.

Perhaps Trump, unlike Reuters and BBC journalists, is aware that the oil industry is cyclic and the period in question mostly covers a downturn.

David Jenkins, president of Conservatives for Responsible Stewardship, a non-profit conservation group, said: “The Trump administration’s hasty move today toward expanding offshore oil drilling … defies market realities and is as reckless as it is unnecessary.”

If it defies market realities, i.e. nobody is going to drill in these waters anyway, then what’s the problem? How can it be both reckless and unnecessary? Alas, thanks to the BBC’s policy of quoting environmental groups’ press releases without scrutiny, we don’t get to find out.


ExxonMobil’s Lobbying Efforts

This is a rather good tweet from ExxonMobil, presumably posted to set straight the dimwitted journalists who reported on Rex Tillerson’s confirmation hearing yesterday:

This is something ExxonMobil has long claimed, and was reported in Steve Coll’s Private Empire: ExxonMobil and American Power: their efforts in Washington D.C. are aimed less at trying to change government policy than 1) trying to figure out how government policy will impact ExxonMobil, and 2) inform lawmakers what impact those policies will actually have.

The difference might be too subtle for some, but this is different from ExxonMobil lobbying the US government to implement (or not) policies in order to benefit the corporation at the expense of everyone else.


Fracking Idiots

Via Tim Worstall, The Daily Telegraph dishes up some quality journalism on the subject of fracking:

Plans are being made for fracking to take place under Sherwood Forest where an ancient oak stands where according to legend Robin Hood and his merry men rested.

Ineos, one of the world’s biggest chemicals company, is poised to start looking for gas under Sherwood Forest, Nottinghamshire, in a move which could lead to it seeking permission to frack the area.

So are plans being made to start fracking, or is Ineos looking for gas?  Which is it?

Fracking is the process of drilling down into the earth before a high-pressure water mixture is directed at the rock to release the gas inside.

The Government has committed to fast tracking permissions for exploratory work amid forecasts that trillions of cubic feet of shale gas may be recoverable from underneath parts of the UK.

Fracking is not the same as exploratory work, which takes the form (at this stage) of seismic surveys which do not involve drilling.

Documents show Ineos – via their land surveyors, Fisher German – have been in correspondence with the Forestry Commission since August 2016, regarding access to their land.

Access in order to drill?  No.

If these plans progress, Ineos’ seismic surveys would pass within a few hundred yards of the Major Oak, a 1,000-year-old tree near the village of Edwinstowe.

Pass within?  These people have no idea what form a seismic survey takes, do they?

According to local folklore, it was Robin Hood’s shelter where he and his merry men slept and hid from the Sheriff of Nottingham in the 15th century.

In a 2002 survey, it was voted “Britain’s favourite tree”.

Information The Daily Telegraph considers more important to impart to its readers than the differences between carrying out a seismic survey and drilling a well.

Guy Shrubsole, a Friends of the Earth campaigner, said: “Is nothing sacred? By hunting for shale gas in Sherwood Forest, Ineos is sticking two fingers up at England’s green heritage, all in the pursuit of profit.

“The public wants to protect their English countryside and prefers renewable energy, not dirty shale gas, which will only add to climate change.”

And on the last day of 2016 a self-appointed expert declared what the public wanted, a practice which hitherto seemed doomed following high-level episodes of catastrophic wrongness regarding Brexit and Donald Trump.

Ineos confirmed that it was looking to start work in Sherwood Forest but insisted that great care would be taken to protect the Major Oak.

Tom Pickering, Ineos’s Shale operations director, said: “Any decision to position a well site will take into account environmental features such as the Major Oak and the planning process would also consider those issues.”

No decision on fracking under Sherwood Forest had yet been taken, he said, adding that Ineos would “undertake an extensive exploratory programme of seismic data acquisition across our wider licence area to better understand the subsurface geology including the fracture systems”.

Asked how Ineos would protect the trees of Sherwood Forest, Mr Pickering added: “When we do drill a vertical ‘coring’ well in the area, there are many general and specific environmental protections in place and we will of course abide by them.”

There was a time when journalists asked difficult questions that forced companies to reveal information that had hitherto been kept hidden.  Nowadays, journalists ask questions which can be answered by a cursory ready of a company’s website.


More Ruling by Decree from Barack Obama

Apparently Barack Obama doesn’t think America resembles a banana republic quite enough, and is keen to do something about that before he leaves office.  From the BBC:

Outgoing US President Barack Obama has permanently banned offshore oil and gas drilling in the “vast majority” of US-owned northern waters.

Permanently?  Just like that?

Mr Obama designated areas in the Arctic and Atlantic oceans as “indefinitely off limits” to future leasing.

The move is widely seen as an attempt to protect the region before Mr Obama leaves office in January.

Apparently eight years in office wasn’t long enough.

Supporters of president-elect Donald Trump could find it difficult to reverse the decision.

I imagine Trump’s supporters would find reversing Obama’s decisions difficult, yes.  Trump himself?  Maybe not so much.

Canada also committed to a similar measure in its own Arctic waters, in a joint announcement with Washington.

The White House said the decision was for “a strong, sustainable and viable Arctic economy and ecosystem.” It cited native cultural needs, wildlife concerns, and the “vulnerability” of the region to oil spills as some of the reasons for the ban.

Counterarguments such as jobs and energy independence from the rapidly imploding Middle East were presumably not considered.

But while Canada will review the move every five years, the White House insists Mr Obama’s declaration is permanent.

Read that again – “Mr Obama’s declaration is permament” – and remind yourself this is the USA and not Venezuela or Zimbabwe.

The decision relies on a 1953 law which allows the president to ban leasing of offshore resources indefinitely.

Really?  Which law?  The BBC doesn’t tell us, I suspect because this law allows for no such thing.

During the election campaign, Donald Trump said he would take advantage of existing US oil reserves, prompting concern from environmental groups.

But supporters have already suggested that any attempt to reverse the “permanent” decision outlined by the law would be open to a legal challenge.

Leave aside the idiotic belief that an administration can bind its successors and that a mechanism exists which allows Obama to declare something into law but doesn’t allow the next president to reverse it.  Let’s look at the fact that these idiots never learn.  If indeed Obama is allowed to make laws simply by issuing decrees from his office that completely bypass Congress and cannot be reversed, then Donald Trump is going to avail himself of those exact same powers in just over a month’s time, isn’t he?  Is that what everyone wants?

Reacting to the Arctic declaration, Friends of the Earth said: “No president has ever rescinded a previous president’s permanent withdrawal of offshore areas from oil and gas development.

That’s probably because no former president has been idiotic enough to do such a thing via last-minute declaration as he’s packing his bags to leave.  But I’m glad the clowns at Friends of the Earth understand the concept of precedent: they might find Trump is using this word a lot soon suffixed with the phrase “set by Obama”.

“If Donald Trump tries to reverse President Obama’s withdrawals, he will find himself in court.”

In which court?  On what charges?  Perhaps the BBC could have asked Friends of the Earth such basic questions.

However, the American Petroleum Institute said “there is no such thing as a permanent ban,” and that it hoped Mr Trump’s administration would simply reverse the decision.

Ah, finally somebody sensible.

Oil firms will still want to explore for further profits, though.

And there was me thinking oil companies explored for reserves.  Such high quality journalism is what Brits are forced to pay £3.5bn a year for.

And the next secretary of state, Exxon’s Rex Tillerson, may offer the industry a route round the ban by paving the way to an Arctic drilling deal with Russia.

What garbled rubbish is this?  Obama’s declaration – assuming it is worth anything – concerns US arctic waters.  Drilling in non-US waters is no more “getting around the ban” than drinking in a bar in Paris is “getting around” the Saudi ban on alcohol consumption.  And the “Arctic drilling deal” they refer to is an exploration pact between ExxonMobil and Rosneft, not “the industry” and “Russia”.

Very little oil drilling currently takes place in the Arctic region, as it is more expensive and difficult than other available options.

Well, yes.  It’s almost as if Obama’s declaration is mere posturing.


Shock as World Learns Rex Tillerson is an Oil Company Executive!

This is amusing:

Leak reveals Rex Tillerson was director of Bahamas-based US-Russian oil firm

screams The Guardian.

Rex Tillerson, the businessman nominated by Donald Trump to be the next US secretary of state, was the long-time director of a US-Russian oil firm based in the tax haven of the Bahamas, leaked documents show.

Tillerson – the chief executive of ExxonMobil – became a director of the oil company’s Russian subsidiary, Exxon Neftegas, in 1998. His name – RW Tillerson – appears next to other officers who are based at Houston, Texas; Moscow; and Sakhalin, in Russia’s far east.

I’m not sure what the issue is here.  Presumably the dolts at The Guardian had never heard of ExxonNeftegas, unlike pretty much everyone else in the oil industry who pays attention, and thinks it is some sort of shady shell-company set up to launder Putin’s personal cash float, or something.  The reality is a lot less interesting: ExxonNeftegas is merely the consortium set up to operate the Sakhalin I project, as its website tells us:

Sakhalin-1 is comprised of Russian, Japanese, Indian and American participants and is operated by Exxon Neftegas Limited, a subsidiary of ExxonMobil — the world’s largest non-governmental oil and gas company.

Anyone who has spent time in Yuzhno-Sakhalinsk would have seen the ExxonNeftegas building on the corner of Prospekts Mira and Kommunistichesky, and they would have encountered lots of young Russians employed by the firm each of whom had a business card with the company name and Sakhalin-1 logo printed on it.  (They may also have encountered a Canadian with more air miles under her belt than Voyager 2.  Let’s see if she’s reading this.)  Secretive it is not.

Maybe The Guardian takes issue with the fact that the information regarding Tillerson’s directorship of ExxonNeftegas had to be leaked for them to find out.  And they would have a point, were ExxonMobil not silly enough to include such top-secret information on their corporate website:

But as The Guardian tells us:

Though there is nothing untoward about this directorship, it has not been reported before and is likely to raise fresh questions over Tillerson’s relationship with Russia ahead of a potentially stormy confirmation hearing by the US senate foreign relations committee.

There is nothing untoward about this directorship, but as Guardian journalists didn’t know about it then it’s a scandal worthy of a newspaper column.

ExxonMobil’s use of offshore regimes – while legal – may also jar with Trump’s avowal to put “America first”.

Fair point, but it might be a bit of a stretch to complain that ExxonMobil isn’t insisting its Russian operations are headquartered in the United States.  The company’s registration in the Bahamas is probably new information to most: I knew about it because I have signed contracts with ExxonNeftegas Limited and their corporate address is stated in them (along with a stipulation that any arbitration will be heard in the courts of New York).  The incorporation in the Bahamas may seem odd, but it is not unusual.

ExxonNeftegas’ counterpart in that corner of Russia is Sakhalin Energy Investment Company (SEIC), which is the operator of the Sakhalin II project.  SEIC is registered in Bermuda, probably for much the same reasons ExxonNeftegas is incorporated in the Bahamas.  SEIC has been majority owned by Gazprom, the government-owned gas company, since 2007.  If there was anything untoward in these consortia being registered outside the Russian Federation on balmy island tax havens, the Russian government would likely have done something about SEIC by now given they have had control of the company for the past 9 years.  That they haven’t suggests there is nothing illegal or improper going on.  As The Guardian reports:

[ExxonMobil] said the oil firm had incorporated some of its affiliates in the Bahamas because of “simplicity and predictability”.

“It is not done to reduce tax in the country where the company operates,” Exxon said. “Incorporation of a company in the Bahamas does not decrease ExxonMobil’s tax liability in the country where the entity generates its income.”

Indeed.  Only among Guardian readers is this a story.


ExxonMobil is doomed, says the NYT

Exxon’s Next Chief Will Lead a Weakened Empire

The New York Times confidently tells us.

With Saudi Aramco hoping to take over as the world’s biggest listed oil group and rival Shell coming up fast, Exxon’s days as Big Oil’s unparalleled heavyweight are numbered.

Hmmm.  Let’s see the details of Saudi Aramco’s IPO and let it actually take place before we start writing off ExxonMobil, shall we?  Are the reserves up for sale, for instance?

And Shell?  On what measure are they catching up fast?  Sure, their purchase of BG for a vastly inflated $70bn makes them the largest gas player, but 2015 saw them make $1.94bn profit against revenues of $265bn whereas ExxonMobil made $16.2bn from revenues of $259.5bn.  ExxonMobil’s return on capital employed was 7.9%, Shell’s 1.9%.  Granted, Shell employs 93,000 people and ExxonMobil a mere 73,500 but only people who get their information from the New York Times would see that as a good thing.

Shell is a sprawling behemoth which still needs to undergo some serious restructuring, and doesn’t seem to have much of a strategy other than to become the world’s biggest oil company by biting off more than it can chew.  ExxonMobil, for all its size, remains a tightly-run ship.

The company’s market cap of around $380 billion is not much changed from a decade ago, and could soon be dwarfed by the state-owned Aramco, which analysts estimate could be worth up to $1 trillion if it goes ahead with an expected 2018 initial public offering.

Sure.  But Aramco is being forced into this IPO because despite sitting on top of the world’s largest oil reserves they are woefully short of working capital.  The privatised company might be larger than ExxonMobil, but we should remember that British Leyland was larger than Volkswagen.

Shell — now valued at more than $200 billion thanks to its 2015 acquisition of BG Group — may produce more barrels than Exxon by 2019.

Production is king?  What is this, 2012?  Perhaps the journos at the NYT have been left off the mailing list, but the majors stopped chasing production targets and switched to CAPEX reduction and profitability shortly after the oil price tanked in 2014.

Shell’s leader, Ben van Beurden, also wants to beat his larger rival in terms of total shareholder return.

Yes, we know Shell wants to “beat” ExxonMobil – that’s been their goal for years, although Lord knows why – but they’ve never been able to quite manage it.  What’s different now?

The good news for Mr. Woods is that Exxon still dominates in one key respect: return on average capital employed.

Over the last five years, Exxon’s return on that measure has bested Shell’s by nearly 7 percentage points on average. That is one imperial feature that will take time to erode.

Well yes, that is good news, isn’t it?  One is permitted to ask why the NYT is giving equal weight to the egotistical dreams of the Shell CEO versus ExxonMobil’s vastly superior financial performance.

Because those at the NYT are clueless and  don’t like ExxonMobil, that’s why.