Thursday, 31 July 2014

Afren Non-Shock - Rilwanu Lukman dies and then the stories come out.

Afren has had to suspend its CEO on account of 'unauthroised payments' - this is taking bribes to us more ordinary folk.

Afren Plc is a large listed UK company which was worth about £1.7 billion. On the high risk side though, given that its operational subsidiaries are almost entirely in Nigeria and also in Kurdistan. It makes my old favourite GKP look like a widows and orphans investment by comparison.

The company has a challenging history one of the key founders was Rilwanu Lukman, known for being the Head of OPEC and also Nigerian Oil minister. Suffice to say he followed Dr Subroto of Indonesia into the OPEC job. His reputation is somewhat colourful, a nice edit to Wiki does this no justice. Wikileaks perhaps does a better job.

Poor Mr. Luckman died last week. He only ever had a 3% holding in Afren and brought in Osman Shahenshah to be the front many CEO for the company, likely because they wanted plenty of Western institutions as their investors which would have been difficult with Lukman as the CEO.

With Lukman dying, there are plenty of knives out in Nigeria and so perhaps it should not be that surprising that an internal investigation has quickly revealed payments to Shahenshah and meant that he has been suspended.

It's a murky world in Nigerian oil to say the least!

Tuesday, 29 July 2014

Fracking & A Rare Example of Political Will

Fracking has the hallmarks of an issue best left until after the election, like Blair studiously did with Nuclear before 2005.  Swampy doesn't vote, so let him fester in his damp hole and get mistaken for a badger: but actual middle class people are known to take fright at the prospect of a drilling rig in their back yard.  In the likely scheme of any UK shale developments what practical difference does a year make?  I'm as big an enthusiast on shale as anyone, and a great believer in Political Will: and still my answer would be: not a jot.  The gas ain't going anywhere; and there's a good chance there may be nothing to show for any exploration conducted between now and next May.  But there could be some messy headlines.

Nonetheless, the government has got religion on this, and has been plugging on rather purposefully for a good few months.  Do they actually fancy running battles with Greens down country lanes  ? (I'm quite sure PC Plod does ...)  Is this part of the great Crosby playbook ?

For what its worth, I'd say the shale policy is being pursued fairly intelligently (everything is relative, mind) with a 50:50 chance of positive political outcome.  The most recent announcement (full steam ahead but careful of the National Parks) is sensibly cast.  There's a section of the population that likes the smack of firm government; energy security-of-supply is a well-known refuge for political scoundrels (and little Putin is certainly playing his part); and there's another part of the population that generally knuckles down to the inevitable, so long as it is mildly sugar-coated - which this one is.  Even the Guardian's critique is qualified, and resigned to the inevitable.

I can also tell you (from the front line, first hand) that the drilling companies have taken the signal and are intent on playing hardball: not Henry Ford-style, but with serious determination, based on the understanding the government has their backs.  Local councils will generally play along with a determined developer, particularly when there's that bit of sugar-coating on offer; so persistence will win out.  And the academics - who some assume are greens to a man - are in fact pragmatists to a man, always on the look-out for sponsored research opportunities.  They will largely be onside too, with a whole new industry in prospect. 

Yes, 95% go with whichever way the wind is blowing, and the government has decided to blow.  Of course, they're showing the same steely resolve with nuclear and all manner of 'renewables' lunacy too, so it may be viewed as all of a piece*.   Energy policy, misguided or otherwise, seems to have that effect on people.  You don't get forgiven for letting the lights go on the blink.


* Funnily enough, all of this - the fracking and the faffing - is undermined by falling gas prices, happening across Europe and Asia without any help from UK shale !

Monday, 28 July 2014

Hague rules against Putin

No, not William Hague, off to be as near as he can to Angelina Jolie, but the International Court of the Hague.

Many moons ago Putin seized a private company after accusing it for tax fraud, Yukos, which had grown to control much of Russia's oil and gas through likely dubious means after privatisation in 1993, was broken up and its CEO - the politically active Michael Khordokovsky, put in prison. The bits of the company were then sold to finance groups, who miraculously then sold it on shortly thereafter to Rosneft - controlled by Putin's ally.

So much, so murky, the numbers involved are fantastic. Yukos controlled 20% of Russia's oil and gas sector. The tax claim alone was for $27 billion!

Whilst there is not tax treaty for shareholders, meaning all Western claims are effectively defunct, the management have been appealing over the years at the various international courts. Today's ruling comes as a milestone and leave Russia with just one last appeal (so a few more years then....).

The timing for Russia could not really be worse, after the shooting down on MH17 and the proxy war it is sponsoring in the Ukraine. Little could it afford in its budget the $50 billion repayments sanctioned - all to oligarchs too, of all people.

It will be interesting to see if Russia ignores the court when push comes to shove, as it will set a dangerous precedent for any Russian company wishing to operate abroad as it will have abrogated key international treaties.